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Crypto has devolved into buzzwords such as:
STO/ICO. Blockchain. Tokenized assets. Airdrop.
My Linkedin messages look like this:
“Andy, I am an advisor for X token.”
“Here’s my whitepaper for Y blockchain.”
“We are going to disrupt the medical industry with our crowdsourced/cyborg hybrid STO.”
Stop the STO/ICO madness!
Don’t buy tokens just to buy tokens
There are good companies and good ideas in crypto. What I am saying is don’t buy tokens just to buy tokens. Stop evaluating businesses solely on their token and tech. Tokens are only as good as the companies behind them. Tokenizing a business idea isn’t a magic incantation. It doesn’t make revenue suddenly appear. It doesn’t spawn a great team.
Would I look at this business if there wasn’t a token attached?
Answer 99% of the time is no. Separate the token/blockchain/tech claims from the actual business behind it.
Here are the questions you should be asking when investing
Are they trying to disrupt a complex market?
Agriculture. Medicine. Finance. IT. Giant industries. You don’t issue a token and take over these industries. It’s not that simple. Revolutionizing an enormous industry is nearly impossible especially in the short term. A company has to have special sauce in their business model to do so. So that special sauce isn’t a token.
What experience does the team have disrupting that particular market?
Does the team behind the token have experience disrupting their particular market? If they are not working in and not doing well in that sector. Disrupting, revolutionizing, leading that market. If they haven’t done it before, how are the proceeds from a token sale or STO going to help? If someone hasn’t scaled Mt. Everest previously, why would you hire them to take you up a similar mountain? A company run by inexperienced opportunity seekers will not succeed.
How are they going to get customers/adoption?
Platitudinal answers like PR, referral campaigns, Facebook ads, and funnels don’t count. How are they going to get customers? What are their angles? USP? Their show-stopping ‘I have to drop everything I am doing to invest in this company’ offer?
David Ogilvy has a great saying, “You can’t save souls in an empty church.”
Your token is of no use if your company can’t get adoption for the token. A detailed marketing plan makes or breaks any company, especially in the cutthroat world of crypto.
How much does it cost for them to get a customer/user (CAC)? What is the lifetime value of that customer (LCV)? Basic math. If they can’t quantify that information, how is the company going to survive? Are the CACs and LCVs realistic for the market they are going into?
How does it make money?
I know. What a rude question. How does the business make money? Please don’t give me demographic math. “Well there are 200,000 farmers in Canada and if we just get 1% to use our token….”
Demographic math is crap. How many customers do you need to break even? Does the company have a source of recurring revenue? Will the company survive if costs double and income halves?
Eventually, you run out of invested money and the business has to stand on its own two feet.
What’s the sub-niche within the niche that you are going to tackle?
Mentor of mine has a saying, “You can’t invade Afghanistan in a pickup truck.”
Instead of tackling agriculture with your token, why not disrupt the Northwestern US raspberry market first? Become the best agriculture tech company in that space. If you succeed, you now have proof and can scale into other markets. Companies set themselves up for failure by tackling large niches off the bat.
How do people solve their problems currently without the token?
What problem is being solved in the market? How are people currently solving that problem? Why will the token make it better?
What idea does the business ride on?
What core assumption (if wrong) kills the company?
What’s their plan B?
Plan A doesn’t work, what’s their pivot?
Step by step use of proceeds
How are they going to use the money they raise? Not general budget items. Detailed spending plans. Ferraris for the owners are not a good use of proceeds.
How much is being spent on growing the biz/building tech?
Crypto companies love to spend money on programmers/tech. How much is spent on advertising? Operations? The stuff that goes into running the business. The goal isn’t to create a place for programmers to work. It’s to create a functioning company that makes much money.
How many other people are launching tokens in this specific space?
Frequently there are nearly identical concepts already in the market. Why should someone choose your token over all the competitors out there? Tokens don’t live in a vacuum.
Would grandma understand this idea?
This is my most straightforward question, but it never seems to fail me. If you were to explain this token/STO/ICO to your grandma, would she get it? I don’t mean the tech part of it. The big picture part. The concept.
Most tokens fail this test miserably. If grandma doesn’t get the idea, most of the general public won’t either. You are setting yourself up for failure.
If you are thinking of investing in a token/STO/whatever acronym comes next, refer back to these questions.
If you are launching an STO, run your idea through these questions and save yourself much hassle.
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