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Research: For every ICO that raises over $1M, there’s one that doesn’t raise a dime

ICOs are a fickle beast

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New research suggests that blockchain fundraising is often a hit or miss game. It appears that initial coin offerings (ICOs) either raise tons of money – or none at all.

Research from intelligence firm GreySpark has uncovered that 46 percent of ICOs fail to raise any funds at all. At the same time, the study also found that 40 percent of companies that pursued an ICO succeeded at raising more than $1 million.

It would seem that ICOs have a split personality, either they are wildly successful or they struggle to make an impact at all. For every ICO that raises over $1 million there is one that doesn’t raise a cent.

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However, just because ICOs are able to raise money does not mean they are guaranteed to succeed.

GreySpark also examined the financial returns from ICOs over a six-week period. It appears that the more time passes, the less likely you are to make a return on an ICO investment.

The left hand side of the graph below shows the percentage of ICOs that have a positive return from one week to six weeks after the ICO. The takeaway here is that if you’re investing in ICOs, at best don’t expect a return within six weeks.

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The right hand side of this graph plots the average returns after one week through to six weeks. It shows that six weeks after a public ICO has closed is where the greatest returns on investment are delivered. This suggests that returns tend to increase over time.

This might sound a bit confusing, but bear with me. The first set of ratios show that positive returns decrease over time, while the second set shows an increase in average returns over time. However, the two rations are different for one crucial reason. The right hand side of the graph concerns “successful” ICOs, where as the left considers all ICOs.

Basically, if you invest in an ICO and it is actually able to deliver on its promises you are likely in for a positive return.

However, there is a huge risk that you won’t invest in a successful ICO, as many struggle to make it any point of maturity. GreySpark claims this is because of “lack of traction, disappointing product advancements, scam, difficulties in execution, no market and poor marketing or go-to-market strategy.”

This is perhaps not surprising given that research conducted earlier this year pointed out that exit scams have conned over $100 million out of investors through illegitimate ICOs, which had no intention of ever offering a product.

Again, given that most of the top 100 cryptocurrencies don’t actually have a working product it’s not entirely surprising to see that the more time progresses the less likely it is that returns will ever be obtained.

If you invested in an ICO and you’re still waiting to see any return for your investment, with every week that passes it grows more likely that you never will see that return. Sorry.

Published September 10, 2018 — 13:57 UTC