How much is the project raising? Market Cap/Valuation? Telegram, Twitter & Instagram users? Vanity metrics have spurred a plague of greed and speculation in the public markets for over a century.
In a recent interview with Tim Ferriss, Instagram co-founder Kevin Systrom cautioned against the hype around technological buzzwords – e.g. ‘Blockchain’ and ‘AI’ – being the basis of many ICO and IEO project offerings.
While these technologies may be a necessary backend feature of the project, the core focus needs to remain on developing a product that meets the target customers needs at the highest level.
It feels odd to think that during the ‘dot com’ spike that businesses would have 10 pages in their pitch decks technically detailing ‘what the internet is’ and ‘how they were going to use it’.
Slowly but surely the technical nuances disappeared and delivering great products became the core focus again.
Large early stage capital raising is simply solving the problem that isn’t.
This may sound like a paradox, but it is a simple truth. An urgent desire for money is generally a symptom of a lack of resourcefulness, especially in the early stages of the business.
Does the business need money because:
- The founding team doesn’t want to upskill themselves and cover multiple roles in the business?
- The business has not been able to secure an initial customer base?
- Your friends and family didn’t back the idea?
- The business is not remarkable and assumes that the solution is a large marketing budget?
- The business is not aware of the government support available?
- The business does not know what it is in the business of?
- A lack of execution?
- The business has not investigated strategic partnerships or searched for potential co-founders.
- The business has spent WAY too much money flying around the world trying to raise money.
“Necessity is the mother of invention” – Tony Robbins
Amid the hype that was the 2017 ICO extravaganza – and now the evolution of the mighty IEO – there are many early-stage businesses raising exorbitant amounts of money.
In fact, I find it strange that the funds accumulated are coined ‘raised funds’ rather than ‘revenue’, as the project/business is essentially selling a ‘utility’ which is effectively their product.
How many early-stage businesses generate tens to hundreds of millions of dollars of revenue in one day?
Note that this is generally before the business has developed a loyal customer base who truly want to ‘use’ their product and not just purchase the product in the hope that they can sell it for a higher price on a future date.
In the above model, businesses are missing a huge opportunity to iterate their product by dynamically responding to user feedback.
Such businesses are not given the opportunity to develop gradually through various levels of maturity and, once the spotlight is on, it becomes very difficult to experiment and – most importantly – learn through experience.
The challenge with many ICOs and IEOs was not who was managing the capital raise, but rather taking the time to understand their customers’ needs with an aim to identify a path to product market fit.
When VID first launched a test flight, the platform quickly built a community of 30,000 users.
Over the course of a few months, VID learned a lot from its initial family of users and set out to strengthen the platform by adding more value to its loyal user base.
The VID team will be selling their product (advertising token) through their website which will allow advertisers to participate in the VID ecosystem by having the ability to remunerate content creators directly.
The tokens will be sold every day over a 5-year period, an important distinction from the ICO mindset that has been adopted to date.
VID is allowing the stakeholders within its ecosystem to validate the internal value of the product daily.
Traditionally, the value of a product (utility) has been determined generally with no view of the project going live noting that most of the stock is sold in one day.
It is important to remember, a business’ job is to generate the maximum amount of revenue possible at value-aligned margins, only raising the amount of capital it NEEDS along the way.