Direct Raise Value vs Token Holdings

An ICO fundraising campaign is geared toward raising capital to build value and grow a business with sufficient runway to sustain operations over a period of time.

In the traditional era of fundraising companies would survive on a far smaller runway, and look to establish sufficient revenues to sustain operations through implemented business models as quickly as possible.

With the advent of ICO fundraising, however, there is the opportunity to capitalise on a far greater fundraise amount to extend your runway significantly further than the traditional methods. In most part this appears to be an excellent methodology to provide companies with a far greater opportunity for success over a longer lead time. However, this methodology has been taken for granted and most companies are looking to raise far more capital than is necessary at the expense of their community’s loyalty, as opposed to instilling confidence in the community through a more reasonable approach.

The fundamentals of an ICO fundraise come in two parts, and are two-fold, bringing an expanded prospect for deriving financial / capital value from the campaign. These are:

• Direct funding from ICO investors throughout the ICO Campaign (This capital is from investors looking to use your token within the ecosystem created by your company, or alternatively to trade on exchanges at an increased market value).
• Reserved Token Holdings for the company, based on your token design/tokenomics, which increase in value due to company activities and actions in the dedicated growth of your offering where these tokens are utilised.

In general, the Hardcap set in current ICO’s does not take into account the increase of the token value and only represents the direct capital raise value – this does not instill direct confidence in the companies desire to increase the token price post ICO, which in essence should be a key focus given the nature of the cryptocurrency utilitarian landscape.

Substantiation:

As the market progresses and continuously churns out new ICOs rolling out ego-centric hard cap values, we believe in reconfiguring the mentality to accommodate for future success as opposed to instant gratification to the company and not the community of investors.

Our view is that it is imperative to consider both sides of the raise, direct and token value, to be of fundamental importance to not only the longevity of the business but also the loyalty of the communities built to validate the company’s objectives and products.

The Hard Caps’ purpose has been blurred and increased to act more as a marketing spin-off as opposed to a realistic portrayal of company need, and in most circumstances acting against the loyalty of the community (as most fail).

Proposition:

Based on our market analysis, and the trends of current ICO raises, we are noticing that very few companies are hitting their Hard Cap. Furthermore, as suggested, the listing price for the ICO token often dips below the ICO price thus indicating the raise value to be more important than the token price value in many situations (due to token design by fund requirement as opposed to increase token holding value).

For this reason, we propose the token value becoming a direct impact in order to consolidate the raise (and Hard Cap requirement).

For example:

If the company needs $20,000,000 (USD) runway in order to build a product and sustain the business operations, the split of direct raise and token value should be 50/50 or 60/40.

In other words, Achievable Hard Cap of $10,000,000 and a market-price token reserve of X to the value of the $10,000,000 (USD) (or part-thereof with future value contingencies) differential to make up the $20,000,000 total Hardcap requirement and runway over Y time period.

The benefits:

1. Successful Hard Cap raise, and therefore market validation and a huge marketing spin-off for success.
2. Community Loyalty in the fact that you have offset your raise with the promise to grow the value of your token to gain the token value difference for the REQUIREMENT long-term hardcap / runway.
3. Motivating ongoing pursuit to grow and expand the business offering in order to unlock the raise differential to further expand the opportunity for not only the business but the token holders who loyalty maintained their position(s).

Conclusion

What’s important to note is the difficulty of ICOs hitting their hardcap. Month on month as we slowly creep further into a, what at least seems like, a stagnant market with 82% of ICOs listing below their ICO price we need to reassess how we choose to hit our targets. As displayed above in the ICOs trends, we have 3 options which will greatly assist us in hitting the hardcap.

1. Extend the period of the ICO
2. Raise sufficient capital in the private rounds
3. Re-assess the value-ratio of raise versus token holdings

These 2 tactics will assist in facilitating how many users we can target by either raising more marketing capital in the private presale, or extending our timeline with less marketing capital by:

1. Allowing the market to slowly recover and drive more capital into ICOs
2. Allowing us to spend more time building our community and carefully building a unique game-changing strategy that we can slowly rollout over a longer period, having a longer lasting impact on the communities with a great deal of conversation surrounding the brand.

Our goal at CoinBeat is to protect the interests of our readers as well as the community at large. In finding new and improved methodologies that create a more appropriate pathway to the success we are slowly building a better and healthier ecosystem with genuine Tokenized Fundraising at its core.

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