In July 2013, Mastercoin held the very first ICO. Over the next few years, several other ICOs took place. However, it was not until 2017 that ICO popularity surged. By the end of 2017, nearly $4 billion had been generated in coin offerings. However, while significant funds were generated and tokens sold, many of these ICOs failed. In fact, by February 2018, nearly half of the 2017 ICOs had failed.
There are various reasons for these failures. One of the main causes, though, is a lack of quality advice. It is for this reason that ICOs should prioritize finding key advisors. The following information is for ICOs of all types. It dives into the benefits that ICO advisors bring and how to find the right advisor.
What Are The Benefits Of An ICO Advisor?
The simple fact is that in order for an ICO to succeed it takes a wide range of skills. There needs to be a solid business plan paired with the technical knowledge to create the service. In addition to this, though, there should be an outside party who can extend the reach of the founding team.
When an ICO brings on an advisor, it shows that someone believes in their work, backs it, and predicts a successful future for the startup. If that advisor is well-known in the cryptocurrency and blockchain industry, this says a lot. Alternatively, a similar type of legitimacy can be brought by advisors who either have significant experience and expertise in the service that the ICO is offering or who have past experience in advising ICOs. In short, advisors offer a sense of comfort to investors that the ICO is a promising investment—they create trust.
2. Knowledge And Experience
The cryptocurrency and blockchain industries are evolving and advancing at an ever-growing rate. For this reason, there really are no cryptocurrency or blockchain experts. There are simply too many changes on a daily basis for any single person to claim that title. However, there are individuals who have successfully launched an ICO, advised an ICO, or have a deep understanding and vast experience in a specific vertical that a particular ICO is trying to disrupt.
An advisor who falls into one of these categories can help to guide an ICO from the ideation phase to the proof-of concept phase and then into real life production. They can offer up their expertise in areas where the founders do not have experience. These advisors can connect the ICO to strategic partners and investors. They can assist with Know Your Customers compliance, the structure of the token sale, the ICO roadmap, the financial plan, the go-to-market strategy, and so much more. At their core, advisors fill in the gaps where ICO founders fall short. They make the team whole and they help to clarify vision and strategy.
How Does An ICO Find The Right Advisor
While there are serious advantages to bringing on an ICO advisor, this does not mean that anyone who touts themselves as an advisor will be able to provide quality advice. Some advisors see the position simply as a way to make money. They will offer up their name and photograph, allowing the ICO use of them for their website and investor presentations. Beyond this, though, no real advice is given.
While it may seem as if this ‘advisor’ would at least lend credibility to the project, they have likely lent this type of credibility to tens of other ICOs. Investors will notice this and see the advisor for who they are, a figurehead who has no interest in, believe in, or passion for the ICO. In order to avoid this, ICOs should take certain steps to find the advisors that will be a perfect fit.
Step 1: How To Evaluate The ICO’s Current State
ICO founders need to take a microscope to the ICO. They should identify what their current strengths are, as well as their weaknesses. They should find out what is preventing them or could potentially hold them back from success, as well as what would ensure their success. End goals should be mapped out and the steps and tools needed to achieve the goal should be determined. Once the founders know exactly where they stand and where they should be headed, they can define what they need in order to get there.
Step 2: How To Develop Advisor Personas
When the ICO understands their current situation and where the cracks are in their operations, they can start to define the type of person or people who can fill those cracks. The founders need to decide the precise places where they need help and what help would look like in those areas. They should also settle on the number of advisors they are looking for and how much involvement they would expect from advisors. A few of the considerations that should go into developing these personas include:
Just as a board of directors operates best when it is diverse, a group of advisors does as well. Diversity, though, has several facets. Each advisor should have a different strength and they should have varying backgrounds. Additionally, it is ideal to have advisors who are demographically diverse. This type of comprehensive diversity will provide the ICO with the best possible guidance. Each individual will add something unique.
A lack of diversity is the issue that has plagued ARK. Initially, ARK ignited excitement among ICO investors. It promised to transform the world of altcoins and create a bridge between blockchains. Unfortunately, the founders chose advisors who were all likeminded and had identical experiences. The lack of creative ideas, discussion, and debate led to a proof-of-concept that was never fully developed and a weak go-to-market strategy and financial plan. In the end, ARK’s token managed to climb to a value of $11 during the peak of its hype. Investors realized this was short-lived and the value quickly plummeted to $3.
Every company has their own way of doing things. They have traditions, preferred methods of communication, and shared interests across the workforce. ICOs need to take this into consideration when they are identifying potential advisors. While an advisor will not be around the office every day, interacting with employees and taking part in the startup’s business-as-usual activities, they will be around some of the time. And the more an advisor can connect with the ICO’s culture, the more committed they will be to its success. Additionally, a shared culture creates trust and comfort, which are both essential when it comes to sharing and discussing the more private financial and business details.
Failing to ensure compatibility and a shared culture was the downfall of Kibo Lottery. This ICO had a goal of decentralizing the lottery and had many investors excited. They even managed to raise 290,000 ETH. Unfortunately, they chose the wrong advisory team. Some of the team members were linked to previous scams and this created a total lack of confidence from investors.
When developing advisor personas, experience and expertise should be at the forefront. First and foremost, every ICO needs an advisor who has a history of working with ICOs—and it should be a successful history. This person will guide founders through the process from start to finish and give them an idea of what to expect and how to prepare. Alongside an ICO advisor with a strong track record is another advisor who is an expert in the industry. An ICO advisor who fits this bill will be able to provide strategic connections and valuable industry know-how.
When an ICO fails to bring advisors on board who have experience and knowledge, it can end up like Inchain. This ICO is a platform for insurance bond investments. The founders brought on two advisors who had some experience, but not enough of a reputation to interest investors. They also lacked any ICO background. This absence of skills shined through in the lack of a proof-of-concept and investor protections. In the end, the ICO was not able to raise its minimum target and had to cancel the ICO.
Step 3: Where To Find An ICO Advisor
Once an ICO has created their advisors’ personas, they need to find the real people that can fulfill these roles. The first method is to do a deep dive into Google and LinkedIn. ICO founders can research potential advisors to gain more information about their experience, international exposure, network, published content, and potential interest. They can then reach out through LinkedIn or email and discuss the collaboration further. While the process can be lengthy, it allows the ICO to puzzle together the perfect team.
Alternatively, there are firms that specialize in advising ICOs. They have pre-built advising teams. Many of these firms have strong histories with some of the most successful ICOs on the market. While this method takes away the freedom of customizing an advisory team, it is more efficient.
In closing, don’t take putting together a team of ICO advisors lightly. Founders should understand the value that the right advisors can bring and, once they have locked those advisors down, utilize their knowledge and connections. With a strong strategy, ICO founders can identify the type of advisors that will fulfill their needs, approach them effectively, and secure long-lasting partnerships.