Hidden benefit of an ICO — Validate demand and Build a Community for Your product
You might be following the crypto-craze and considering doing an ICO for Your startup or company instead of traditional fundraising, and that might be a smart decision if You have analysed all the risks involved.
ICO’s are a relatively straightforward way to collect a round of investment much larger than early venture capital rounds if You do things right. There are many stories of startups that collected millions of dollars in seconds or minutes in ICO’s.
If You are new to ICO’s they are very simple to explain. An ICO is a bunch of small (and large) investors investing their money in a technology product or service by buying crypto-tokens or other digital assets.
What do they get in return? Well, they might get a monetary return on investment like in other investments, but they also get exclusive value unlocked via the blockchain features of a product.
However, this post will not get in-depth into ICO’s and how to think about them or how to run an ICO. Instead, I will describe a hidden benefit of ICO’s that doesn’t get too much exposure in media and articles: Validating demand and Building a Community.
ICO’s are a new type of MVP
The goal of a minimum viable product is to test a set of assumptions/hypothesis about a product and confirm demand and commitment for potential users and customers of new products. Traditional MVP techniques are things like Landing Pages and Concierge MVPs.
One way to look at ICO’s is as a super-powered MVP for Your product.
If a landing page MVP is a car, ICO’s would be a rocket, since the power to validate a set of hypothesis about your product is much higher than anything else we have ever seen in product management history, but they are also a bit dangerous and explosive. With great power comes great responsibility.
ICO’s are a massive “Moms test” for Your product if You know what I mean.
Mom test — What You should know
If you haven’t read the Moms test, You are missing out and I strongly recommend reading it:
What is this book about? It’s about selling Your startup and Your product correctly. It’s an art and a science, unknown to most developers that focus only on the technology parts of startups, and ignore marketing and sales.
One of the main learnings from this book is the importance of commitment to validate interest in Your product.
What is the best type of commitment? Willingness to pay for a product.
If people need what You are building they will give You money, even if it’s just a concept of a product.
Moms Test on steroids
When You run an ICO You are selling your product concept to millions of potential users that can crowd-fund Your business. You are validating interest by asking for money via a landing page and a white-paper.
An ICO is an MVP using crypto-funding to validate product value
However, ICO’s are much more potent than Your typical landing page or Kickstarter campaign for a simple reason: you can get much more funds, but there is also a potential return on investment for the potential users of Your product that invest in the ICO.
If I invest 100$ in a startup via Kickstarter, I might get a T-Shirt. If I spend the same 100$ in a good ICO to support a startup, I get the added benefit of getting crypto assets that might appreciate in value over time.
Making a profit is more interesting than a t-shirt.
Due to pure psychology, It turns out that users get pretty interested in products that can give them a return on investment, which unlocks extra value from the community that invests in ICO’s. They are not only interested in the product, but they also have an active investment in it hoping for short-term or long-term monetary returns and other exclusive benefits!
Leveraging the investors for feedback
What do You do if You have several thousand investors that invested in your ICO? You launch products and services to them, but that’s not all.
Why not use them as a community to validate other hypothesis related to Your products?
Your investors are Your community
Telegram channels are pretty popular in ICO’s as a way to communicate with the community. It’s not unusual to have a group chat with dozens of thousands of small investors that are a gold mine of value since You can serve content and collect feedback about products.
WePower telegram chat has ~40k members, and NagaCoin has ~15k members on this date. It’s kind of crazy that a new product can have this amount of users actively chatting about it.
Isn’t it extremely powerful to have this amount of users/customers available and ready to help You build Your product since they have a vested interest to do that?
The level of engagement is a bit crazy, and some people are online 24h, just waiting for product updates and news. ICO’s produce customer armies ready to do anything for the product to succeed.
What is really under-utilised in ICOs is recruiting these small investors to give even deeper feedback and help co-create products with the development and design teams.
The dark side of ICO communities
Even though the prospect of having a customer army interested in Your product and ready to help You build a valuable and usable product sounds amazing, there is a dark side of ICO communities.
Most investors that participate in ICOs are just interested in monetary returns and they don’t really care about the underlying products and You changing industry X.
You must find a way to sort out the early adopters from random investors that just want to make a quick buck.
ICO communities contain both early adopters of a product and plain traders looking for a ROI
If You get to the early adopters and manage to build a two-way communication channel with the better parts of Your ICO community, You might get something even more valuable than money.
The biggest value for a startup is an engaged user base ready to Help You unlock the value of Your product and build a sustainable and profitable business.