The power has completely shifted to founders in the ICO fundraising model, but is that a good thing? It is for founders but not always for investors.
This is a risky investment, but investors should be questioning the integrity of founders and there needs to be a structure that holds these founders accountable to actually build.
Here are the top 5 bad signals I’ve noticed when ICO raises are over:
Investing in ICOs when they have yet to build out their own project. Did they raise just so they have more money to throw into ICOs? I know it’s difficult to ignore the FOMO, but wasn’t several million enough? If the capital cuts in half during the correction, then it shows that the founders weren’t planning ahead by liquidating enough to stay safe. That’s no one’s fault but theirs.
Starting another project. Most founders do not have the discipline to stay laser focused on their main project. This space is very distracting and there are so many things to do. But if a founder is raising millions of dollars, investors should not only expect the token to rise; they should expect the founders to stay focused on their project to it’s highest potential.
Speaking and traveling 24/7. Roadshows and getting the name out there make sense during the 3–6 month period of fundraising. After founders close their sale, they should be heads down building their product and you shouldn’t see them on every panel and podcast.
Vacation. If token founders cannot handle a raise in a time where investors are throwing money left and right when some founders spent months/years to raise $2mm in traditional equity with the persistence to get working right after, then they are not a founder. Maybe it was a tight timeline of 3–6 months, but this should just be the beginning. Sleep — yes, celebration dinner — whatever. However, no founder(s) should be taking a period off right after a raise to have a lavish, tropical vacation for down time. You’ve raised — now, prove your capability as a founder to build and grow your project.
Github Commits. Not only should you be seeing frequent commits, but you should review the commits or get an engineer to make sure it’s not some BS css commit that makes it look like they are doing something.
Founders have this false sense of success after these large raises. You are not raising for your retirement.
There is a much longer road ahead. You have so much to prove. There needs to be a better model that holds founders accountable to execute and limitations of what they can do so investors do not get screwed over by founders who get lazy and easily distracted by the market volatility.
Early investors bringing in smart money need to do a much better job of setting the tone for founder expectations post ICO.
Most founders in this space have done shady things unintentionally. It’s too easy to get away with. As an investor who has thrown in money, don’t be afraid to ask questions and push back even if the token is rising.