Employees Kama Flow analyzed 269 start-UPS that, as of December 2013, attracted money through ICO, and answered the most frequently asked questions related to investing in tokens.
- ICO is a significant investment vehicle?
In recent time the world has witnessed the explosive growth of the popularity of ICO. According to the data obtained for the first three quarters of 2017 was held 18 times more ICO than for the whole of 2014 (197 ICO vs 11). Even more impressive scale in terms of money: 142 times ($2.8 billion versus $19.7 million).
- What is the platform for the ICO is the best?
To determine the most attractive for startups and investors platform, we compared them by different criteria. First of all, the frequency of use of the platform for other ICO. The graph below shows the distribution of the number of ICO carried out on various platforms in 2013. The graph shows that more than half of start-UPS raising funds on the platform Ethereum: 149 of the total sample of 259 start-UPS. Most experts believe that the popularity of this platform is its liquidity.
The next criterion is the volume of the raised funds other projects. We found out how much on average the projects are collected on different platforms. The largest amount was on the Ethereum platform: on average, $19 million on a startup.
In General, the majority of startups from the sample collected significant amounts denominated in $ millions. The more interesting question is how they achieved their original targets? The following graph shows the ratio of the funds collected to the original targets in average for the platform. Ethereum here only on the fourth place with a ratio of 284%. By comparison, on average the projects achieved 292% from its original purpose. The best platform for this indicator Counterparty with a ratio of 1013%. It is followed by platform Waves (546%).
- Financial options: what to choose and how much is the ICO?
To determine the optimal target amount of the ICO, we analyzed the distribution of all start-UPS depending on their achievement of the originally stated purposes (in the sample of 93 projects). So, 30 projects were collected from 100 to 210 percent of the original target, while 24 ICO ended with a score of 50 to 99%.
Additionally, we introduced an indicator of the success rate – the ratio raised during the ICO funds to the goal (in percent). It was interesting to see how dependent this value from the original targets. We found two local maximum when the probability to collect the necessary amount of the most high: about $5 million and $15 million.
This graph shows an interesting pattern: a chance to gather the necessary funding with ICO above, if the goal is $5 million. on the Contrary, the probability drops to 30% while trying to raise $9-10 million
As for the cost of carrying an ICO, here is a brief list of operations and documents, without which the collection of funds in this way is impossible:
– Marketing (digital, SMM, PR)
– Engineering (smart contracts, web wallets)
Strategy (white paper, roadmap)
Design (branding, UX&UI)
– Post-ICO (development, support)
Each item contains the monetary and time costs. Typically, most costs are for marketing, engineering and strategic part. According to our estimates, the investments needed for a successful ICO starting from $250 thousand and can reach $1 million it is crucial that these investments are spent effectively. In addition, according to many experts, the absence of a highly qualified team, can twice increase the costs.
Thus, the holding of ICO is not «free» funds, requiring investments of between $250 thousand to $1 million. If you are going to collect the funding through ICO, you first need to check whether these limitations to opportunities.
- Should you invest in the ICO?
To try to answer this question, we turned to the ROI (return-on-investment), characterizing the possible profitability ICO for the investor at some point in time. This indicator is calculated as the ratio of the current value of tokens of the project to their initial value at the time of issue. Examining the data of the ROI on the study sample, we found that at the moment:
– Tokens 21 companies (10%) increased more than 20 times;
– 37% of all tokens has increased by more than two times;
– 58% do not have lost value (or show growth);
More than 23% of the tokens has decreased in value 5 times or more.
These facts indicate that investing in ICO can be incredibly lucrative, while being extremely risky. For leveling the risks, the investor should check and examine the capabilities of the project team, product, and technology, customer traction, the risks (technological, competitive, political, cultural, legal, etc.).
Speaking about the choice of the platform from the standpoint of the investor, we asked the question: is there today the differences in the indicators of ROI projects on different platforms. The graph shows the average ROI since ICO for each platform:
On average, projects carried out ICO on the following platforms, are the most profitable from the perspective of ROI tokens:
– Own platform;
At the moment, the highest return (430х) show the projects carried out ICO on their own platforms. In our sample of such projects 8. In addition, the average ROI for all ICO amounted to 46x.