My ICO Failed to Reach Its Softcap…..What Now?
One of the most popular methods of raising finance for new projects at the moment is to take to the blockchain and run an ICO (Initial Coin Offering). They are often hoping to get a piece of the same pie which has seen billions of dollars raised so far in 2018.
Part of the appeal for some of the projects is the lack of regulation and oversight within the sector. This can mean that many ideas which simply wouldn’t be financed through traditional means such as VC, can chance their luck with an ICO.
Most ICOs will set a softcap. This is the minimum amount of investment required for the project to succeed. Unfortunately though, many of these projects fail to reach that amount for the same reasons they would be rejected for traditional funding. It could be anything from a lack of preparation to a lack of trust.
The question for many of these failed projects which have really not even gotten off the start line is, what to do next?
Running an ICO is not a free for all, despite how some scam projects may see it as such. As project founders, you do have a fiduciary responsibility to your investors. This is that, once you have accepted some investment capital, you have an obligation to these investors. Therefore, the first thing you need to do is refund these investments in full if the project is not proceeding.
Extend the Sale?
All may not be lost. You could be close to reaching your target, or any number of things outside your control, such as market drops and volatility could have placed the project in an unusually rare situation. In these cases, you could consider altering the sale period to give yourself more time. This would need to be communicated to investors, reflected in your roadmap and altered in your smart contracts, but it is doable. If it is a genuinely understandable situation, most of your investors will also agree as they too want to set the best conditions for the success of the project.
Back to the Drawing Board
If you feel your project has truly failed for now, it may be back to the drawing board. Here you can analyze the areas where you made errors or the reasons why you failed to reach your goals and hopefully plan your next attempts. Analyzing and understanding why you failed is an important step in the developmental phase of any company.