by Jerry Witkowicz and Sayed Wayzi
ICO whitepapers vs IPO business plan
In today’s digital economy and particularly in new blockchain-based startups, significant capital is raised through an ICO (Initial Coin Offering) process. Investors buy tokens with one objective in mind, to make a profit when the company does well.
Similarly, when startup companies go public through an IPO (Initial Public Offering), and raise capital, investors buy company shares for the same reason, to make a profit.
In these two models the same objectives are present for the company and the investors. However, with the ICO process, there is a serious problem.
During an IPO, the company will have already completed its prospectus; the prospectus includes detailed information about the company’s plans, its objectives, risk factors and business models. The prospectus is afterwards reviewed by an investment bank and at the same time regulated by the country’s securities commission. Unfortunately, during an ICO, this part of the business is completely skipped.
In our recent analysis of blockchain ICO-funded companies, 93% of the companies we analyzed have completely skipped this critical segment of their business plan in any format.
Why ICO whitepapers need to change
There are arguments that business in the digital economy works differently than in the traditional businesses model. Yes, this may be true that blockchain will change how business is conducted in the future, but unless the business is a not-for-profit organization, sales and revenue are still critical success factors even in the digital economy.
Analyzing hundreds of blockchain startup whitepapers we discovered that 93% of company whitepapers have no revenue plan, no sales plan or even specific target customers. They are simply planning to build or are building a blockchain-based application. This needs to change now.
If your company is planning an ICO or has completed one already your company owes it to itself and your investors to complete the critical step and develop a sales & revenue model.
Recently, Victoria Silchenko, Phd, stated on LinkedIn “I still believe that an ICO model – whether it represents securities or not – is an effective way to raise capital in a new (digital) economy. But I also believe that we all should get back to the basics – which is developing a revenue model aka money earning strategy of the business.“
What’s at stake here
If your company already raised your capital or plans to, you owe it to your investors and your company to grow your business. It’s not sufficient to add disclaimers in the company whitepapers that the investor has no legal rights to the company or to expect to earn a profit. The investor does expect to earn a profit. No one is willingly giving money away unless they clearly understand that they are donating to the startup.
No for-profit company will succeed without revenue. Over time, company expenses will erode available funds. If your company is truly in for the long run, you need to start working on your revenue and sales plan now and not when your solution is complete. Your company will need to engage trial customers early. Without early customer engagement, at best your solution will likely meet 70% of your target customer needs. What if the missing 30% of features represents the most critical value to your customer?
How to change it
Developing a sales and revenue plan can be overwhelming but not impossible. Many of the blockchain startups that we analyzed clearly need help.
If your company is developing a revolutionary solution, there is nothing to be lost in talking to future customers now. If your solution is to revolutionize how your target customers will do business using it, you should be working with trial customers now. You need to validate your value proposition, have a sales & revenue plan. You will need to convince your target customers that your company understands their business and that they will benefit from your solution.
If you completed your ICO and have not developed your sales and revenue plan, you need to act now. If you are planning to launch an ICO, you need to include your sales and revenue plan in your whitepaper.
At BenchMrkPro we believe in the potential of blockchain technology and we want to see your company succeed. Contact us directly to have a chat. We can quickly tell you how well-prepared your company is for business success.
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As a co-founder of BenchMrkPro, I leverage more than four decades of entrepreneurial experience in helping companies put the value of their solutions to work on behalf of their balance sheet.
As a serial entrepreneur and co-founder of BenchMrkPro with 15 years of experience, I am passionate about helping companies bring value to their customers and growing their business.