If there is one thing that blockchain project developers who set up an ICO are looking for, it’s investors. Everyone is asking who they are… and where to find them. When it comes to investments in cryptocurrencies, there are three main categories of investor.
These are people who bought bitcoins or ethers when these cryptocurrencies were worthless. These are the people who were the first to adopt the values and principles of blockchain and certainly they are the most expert in this technology. Like any good investor, they try to keep the risk of capital losses due to price volatility to a minimum. To do this, they invest in other cryptocurrencies and in ICOs.
This category contains four sub-categories, so let’s start with the funds that specialise in cryptocurrencies. There was a list of 226 of them last April, 167 of which were created during 2017. These crypto-funds operate like any other fund, raising funds from investors and reinvesting these in ICOs or cryptocurrencies, aiming at a maximum return on investment.
The second sub-category concerns non-specialist funds that have begun to invest in cryptocurrencies and ICOs in recent months. In the United States, for example, we have funds like Sequoia Capital and Andreessen Horowitz which have all invested in recent months in various projects which have issued major ICOs. These players moreover are starting to structure the market and to professionalise the investment mechanism.
In third position come the family offices, organisations dedicated to managing the wealth of one or more families. They are used to investing in products on the traditional financial markets but for some time now a few have been in the cryptocurrency market. Many are in Switzerland, for example, but a few French family offices are involved too.
The last sub-category, and definitely the most secretive and “underground”, is that of the pools, also known as syndicates. They are usually organised around one person or a small group of influential people who have proven their ability to analyse ICOs whilst demonstrating the ROI from these operations. They submit a project that they deem useful to their community, frequently via social media such as Telegram or Discord, and they bring together dozens or even hundreds of individual investors. Each one offers to place a minimum number of ethers, and when this involves dozens of people, the numbers can soon mount up. These pools then negotiate with startups to obtain a better price than the one offered on their websites.
Finally, the last category that everyone tries to protect, in particular, the AMF and the state, are Mr and Mrs J. Bloggs. They know little about cryptocurrencies, they heard them mentioned in the media and reckon that they could help them with their finances. Truth is, although they might know how to buy cryptocurrencies on an exchange platform, this is already asking a lot of them, and few, very few, will go on to participate in an ICO. It is evident that these are not the type of people who will be found in cryptocurrency fundraising operations.
Identifying and approaching investors for a blockchain startup is a structural problem, but it is the key issue. Whilst raising tens of millions of dollars in just a few hours might have been the standard in 2017, in 2018 it has got harder for those looking to issue an ICO to finance their project. You need to know your audience if you are to know what is needed to win them over. The success of an operation of this type resides in large part in the capacity of the project developers to find and enthuse the investors for their solution.