It seems that every other week there is news of a crowd-sale for the latest startup, cryptocurrency or project. In a crowded marketplace, businesses are developing innovative features to differentiate their offers from the rest, and attract the investment vital to their success.
Some of the rapid innovation in this space is even encouraging regular users to become stakeholders, while showing the potential investor that the product is less likely to drop in value immediately following the ICO (Initial Crowdfunding/Crypto/Coin Offering).
Inherent Value of In-system Tokens
One option is to provide an inherent value to the investment, by offering a product which will be used as an in-system token when the product launches. This then becomes more than a simple investment which can be bought and sold, as the resource will be required to spend within the ecosystem on launch.
Ethereum investors bought US$18.4M worth of the “crypofuel” Ether, which will be essential for operating the decentralised application platform when it launches. Anyone wanting to use the platform will need to obtain Ether, creating demand for the resource outside of purely investment spheres.
GetGems sold US$780K of their GEMZ tokens during their successful Koinify ICO. These can be easily sent between users of the social messaging app, and also collected to purchase rewards.
And Lamb&Cooper has raised US$200K value of investment in their ProsperityCoin so far. The funds are used to market the hotly anticipated upcoming game, Full Metal Wars, and the ProsperityCoins will be exchangeable for in-game tokens at a set rate upon release. They can of course, also be freely traded and held outside of the game.
Miklos Kadar, Chief Advisor at Lamb&Cooper, hoped that this will encourage micro investments from the crypto-community. He told Cointelegraph:
“We want the gamer- and the crypto community to benefit more from this project [...] it would be great to see more micro investments from the 50-100 ProsperityCoin region. Don't get me wrong I have no problem with our angel investors making profits but this project must be more about the profit of micro investors of gamers and crypto enthusiasts.”
Another avenue being explored is the creation of cryptographic shareholders through the payment of dividends based on currency holdings.
Swarm is launching a decentralised crowdfunding platform allowing startups to easily issue such shares in the form of their own digital currencies. Swarm is issuing its own currency, swarmcoin, to raise initial capital. Its investors will receive dividends of the coins launched by future startups using the platform.
SuperNET, a platform bringing together multiple cryptocurrencies, raised over 2,000 bitcoins in just 2 hours during their ICO. The technology will allow users to benefit from any feature of any participating coin. Investors will be receiving dividends from its click revenues, meaning more revenue as more services are added.
And holders of ProsperityCoin don't need to miss out on revenue based earnings either. 10% of revenues produced by the game will be distributed between investors.
“Once you are the owner of some ProsperityCoins you can either hold them and wait to receive the proportionate monthly 10% revenue share, you can always sell them just the way you bought them or at any time you can convert them to in-game credits at a fixed price,” adds Kadar.
‘Revolt of the masses'
Crypto-crowdfunding is clearly here to stay, and to remain ahead of the game it will become increasingly important to offer something with added value. Product-backed crypto assets have already started to outperform idle cryptocurrencies backed only by the promise of future popularity, and it is easy to understand why.
Kadar sees crypto-crowdfunding as “Venture Capital 2.0” or “the 'revolt of the masses' in micro investments.” He explains:
“Lamb&Cooper built its business model on crypto underwriting [...] to provide detailed info “for micro investors [which] was only available for VC firms and angels in the past. Often our micro investors spend more time analyzing info about our coin than many angels do.”
An influx of micro-investors, enabled by blockchain technologies, can only be a good thing. But to attract their investment will require well-presented offers with tangible value above that of a simple currency.