In fact, they may be detrimental to some companies: you will spend time and money on a campaign, only for it to fail in securing enough funds.
Some startup owners seem to think that ICO is a tool for any project. It allows to quickly raise money and bypass the long and costly process of registering an IPO with the regulatory agencies. While that used to be the case during the formative days of the ICO market, it’s no longer true.
Like everything else in the crypto industry, the ICO ethos is quickly shaping up. There are informal standards that now play the role of de facto requirements to having a successful campaign. The first and foremost requirement here is generating value for the users.
Authenticity and transparency are among the core pillars of the cryptocurrency community and that includes the ICO market. Due to this, an ICO whose only goal is to make the project owners rich at the expense of the contributors will not receive any positive attention.
So before deciding how to conduct a crowdsale of tokens, one ought to reflect and consider if they even should conduct it at all.
Should you conduct an ICO for your product? It depends on whether you can integrate the cryptocurrency, sold during the crowdsale, organically into your product.
Regardless of all other factors which may affect any particular ICO, there is one question every startup should ask itself before deciding to even have a campaign. That is whether the ICO digital token can be integrated into the business model in a meaningful way.
For example, the value of Ethers – the tokens which have been released during the ICO of Ethereum – is strongly secured by the fact that they are required to run the DApps in the network.
If on the other hand, the only use for your coin is being bought and sold on an exchange, it practically guarantees that the price will crash very soon after the end of the ICO. As such, the campaign will be unlikely to meet interest from the discerning users in the first place.
A fundamental problem for any digital token released during an ICO is that it’s going to come under massive speculative pressure as soon as it hits the markets. The only thing which can counteract that, and prevent the token from ending up as a useless gimmick, is a similar level of demand for it. And that demand can only be produced by real utility.
To sum it all up, if you think that the use of a decentralized token can increase the value of your product, or it is by design a fundamental part of it then ICO campaign will be suitable for your business. Otherwise, there are probably better ways to raise funds for your project, such as plain old crowdfunding or VC funding.