Four months – that’s about how long over half of cryptocurrency startups last after their ICO, a recent study found. With entrepreneurs raking in millions before even delivering a valuable service, and little to no governance, it’s no surprise the majority are never more than a flash-in-the-pan failure.
Dr. Hermann Liu and Haydar Haba—serial entrepreneurs and blockchain authorities with experience raising millions in VC funding for technologies with billions in revenue—are managing partners at Andra Capital, a new growth fund backed by top tier late-stage tech company investments that democratizes investment using blockchain. They explain below why so many cryptocurrency startups fail.
Tiger Legatus Master Fund was up 0.1% net for the second quarter, compared to the MSCI World Index's 7.9% return and the S&P 500's 8.5% gain. For the first half of the year, Tiger Legatus is up 9%, while the MSCI World Index has gained 13.3%, and the S&P has returned 15.3%. Q2 2021 hedge Read More
Hermann: “Most crypto startups have not passed the risk stages of technology, products, marketing, etc. We have seen many startups in this category establish their founding team immediately prior to their ICO. The quick success of raising significant funding by an ICO for a very young company could be another reason to fail. What would drive entrepreneurs to continue working hard if they have suddenly received millions of dollars? In their respective seed rounds with a functioning product and existing operation, Uber and Airbnb only raised a fraction of what an average ICO can raise today.”
Haydar: “Furthermore, most of the ICO startups have little governance, no board, no auditors and no oversight nor outside elected board members to represent token holders or shareholders. A board’s mandate is to establish policies for corporate management and oversight, making decisions on major company issues. Every ICO company must have a board of directors or things can run ungoverned.”
Hermann: “I would like to draw a parallel between ICOs and the Internet rollercoaster in the year 2000. The market could be irrational in the short term, but eventually it will self-correct. Even with the pain we experienced, today no one would deny the power and impact of Internet. The complexity in technology startups is increasing and it demands more domain knowledge and experience from the potential investors. These stats also indicate the reality that the retail investors, who have a strong presence in ICOs, are underserved because they don’t have access to the technology startups through traditional channels except ICOs.”