Catherine Zverkova on Why You Don’t Need an ICO at the Blockchain Venture Summit
$500,000 minimum investment, 47% probability of failure and more.....
Catherine Zverkova at the Blockchain Venture Summit
At the Blockchain Venture Summit hosted by Bitrazzi (a subsidiary of Turkey’s Webrazzi) today, Catherine Zverkova from ICO Bench, and Business Development Director at Eberhard Lindfordt, deliberated on the need for an ICO (Initial Coin Offering). ICO Bench is a rating platform for ICOs. The platform currently has over 1000 projects that have been reviewed. Having served as an advisor to multiple successful ICOs and being part of ICO Bench, Catherine enlightened her audience and the thousands that were tuned into the live stream during her session, titled Why you don’t need an ICO. The session focused on the several aspects relating to ICOs, including (but not limited to) the key purpose, necessity, and the risks involved in an ICO.
Unregulated Remains the Keyword
Zverkova defined an ICO as a fundraising tool that trades future cryptocoins in exchange for cryptocurrencies of immediate, liquid value. The Financial Times’ definition of an ICO begins with the word unregulated, which is indeed a keyword that one must keep in mind when looking at an ICO. Investors in ICOs must realize that there are no rules in this market.
Investors who invest in ICOs hope that the tokens’ value will rise, said Zverkova. So, this adds one of the key risk factors to ICO investing – uncertainty about the ICO token’s value rising in the future. Now, while ICOs do gain popularity by word of mouth, marketing, publicity and community practices, to be actually successful (in the sense that they’re able to deliver a rise in the value of the investment), they need to be listed on exchanges.
An ICO is essentially necessitated by “an innovative idea wanting money to implement the idea,” Zverkova told her audience at the Blockchain Venture Summit. She identified three key stakeholders to an ICO:
- The team behind the project
- The pool of investors (who believe in the idea)
- Traders who trade the tokens
The above three parties are also the direct beneficiaries of a successful ICO.
On ICO Campaigns
For Zverkova, the most important question that the team should deliberate on when conducting an ICO campaign is: “How are the investors going to get their money back?” A lot of ICOs these days are focused more on innovation and technology while investor return takes a back seat. Whereas, investor returns should be and remain the key focus area for teams when they conduct an ICO, more so because there are no regulators to guarantee that investors don’t lose money.
Key ICO Risks – the Probability of Failure and Minimum Investment
There are a number of reputational risks and financial risks to consider when investing in an ICO. Reputational risks include scam projects, general incompetence, and lack of technology, finance, and legal background. From a financial perspective, an ICO poses a massive risk due to the cost involved. The cost involved in conducting an ICO starts at $500,000, claimed Zverkova.
The growth in the number of scam ICO projects has given rise to another key reputational risk to the ICO industry.
“In 2017, 47% of ICOs failed”
– Catherine Zverkova
Almost half of all ICO projects (in 2017) failed to either:
- Raise money
- Implement the technology
- Keep their obligation to investors.
General incompetence arises on account of inexperienced people with inadequate knowledge jumping on the ICO bandwagon. This happens to about 20% of ICOs, said Zverkova.
“About 20% of ICOs fail on account of general incompetence”
– Catherine Zverkova.
Another reputational risk associated with ICOs comes from history. Since cryptocurrencies started with the Silk Road scam, which was associated with illegal activities, token offerings (an offspring of cryptocurrencies) via ICOs are often looked upon with suspicion.
Advice to Investors
From an investor’s perspective, Zverkova’s advice is: “Buy into an ICO only if you have a massive appetite for risk, zero fear of losing your capital and are willing to take a flying chance on an idea that could flop.
Moreover, you should strive to get as much information about the project as you can, and invest only if you personally believe in the idea.