My old friend Matjaž Slak from stopped by to discuss with a new client about their ICO (Initial Coin Offering) readiness. For those you living under a rock, ICOs have been red hot in 2017 as an alternative funding strategy for startups.

Matjaž reports that over summer, the almost automatic 400% returns in the first weeks following an ICO have dried up and new rationality has entered the market. As of Q4-2017, here seem to be the keys to a successful ICO:

  1. You need much of the token investors to be token users. This is the only way that patience and constructive feedback can exist post ICO from token holders as liquidity drops.
  2. Tokens should provide access rather than usage. An ICO is not Kickstarter for platform services. Among other things, pre selling the platform services makes It is hard to get the coins back into the system after they are consumed. Think personal seat license fees rather than pre-sold season tickets to your favorite football club. This also has the added effect of making cashflow (after the ICO cash as been spent) better.
  3. In most cases, you still need careful token design so that it not only avoids current interpretations of a security but can withstand possible alternative definitions of a regulated security. As with any investment, uncertainty is highly damaging.
  4. The fundamental utility of the product must be strong and there must be a core, interested user community that is engaged with you.

The last point was of special interest to us at D.Labs. For us, a “community” seemed like another word for MVS (minimum viable segment) and engagement sounded like another word for MVP. As we discussed this with Matjaž, we see that clickable prototypes or even just a video/whitepaper (ie. dropbox style) might be sufficient but in other cases a working product with real users might be needed. And just like the “traditional” startup world, features can be minimal, but user experience needs to be near production quality almost immediately.

For us at D.Labs, we tend to get involved with future clients at the business design stage. In the ICO world, things are a bit too dynamic and we feel better to let the deep insiders like be a guiding force and watch the action as it unfolds into work that we know how to do great.