The Launchpad Problem
The NewField Fund Thesis: The advent of decentralized fundraising first with ICOs and now IDOs we believe to be the next iteration of venture capital and angel investing. We believe the Launchpad model for IDOs is here to stay, however, there is one major problem that must be solved first in order for this vertical of crypto to live up to the true spirit of decentralization and inclusion.
The Launchpad growth phenomena in the crypto space can both be attributed to a feature and bug in the current system. It seems that everyday, new and existing projects are creating launchpads. It goes without saying, these platforms have attracted much hype due to the asymmetric opportunity to invest in early stage projects before they go live, in a truly decentralized manner. This feature has afford investors astronomical financial returns, along with early access to the technology of tomorrow, without the red tape associated with traditional early-stage investing. However, there is an equal and opposite force at play. Eventually, every legitimate launchpad token rises to a price level which prohibits new entrants from being able to afford a “tier”, or allocation. This has caused new entrants to move onto the next launchpad, which explains the rapid proliferation of a new launchpad everyday (or so it seems).
(This phenomena is illustrated below, please ignore the handwriting)
Assuming the crypto ecosystem does not exist in a world of infinitely great projects, as time progresses, we believe the quality and risk profiles of new projects that IDO on new launchpads (A-Z) will diminish, with possible launchpad “rugs” around the corner.
In an ideal world, new entrants are not pushed so far out on the “risk curve” to the point where there is only a binary option set.
- Pay $$$$$ to receive a $ allocation in a great project
- Pay $$$ to receive a $$ allocation in a half-baked project on Launchpad (A-Z). We call this the RFB (risk it for the biscuit) Tier.
The question then becomes, how does one go about building a launchpad, and more specifically, a launchpad token which can BOTH rise in price while still affording new entrants an equal chance of receiving a decent allocation in great projects?
Without naming particular projects, we have seen three popular methods unsuccessfully attempted to solve the aforementioned problem.
- Dilute the token supply-(causes temporary price drop but eventually rebounds back to unaffordable levels).
- Lower token requirement per tier-(significantly reduces allocations for all investors).
- Conduct a lottery for non-token holders (good luck winning one of these)
In these cases, along with others, trying to solve the problem of accessibility has been a challenge, resulting in new investors moving onto the next launchpad regardless of the quality of IDO offerings. We believe this cycle will cause a fierce competition amongst launchpads to attract the select few projects which are actually creating the ground-breaking technology of tomorrow. The first launchpad to successfully attain quality offerings, accessibility ( pricing and allocations), and great investment opportunities will gain the lion’s share of the now fragmented launchpad market.
We believe we have come up with a solution to the Launchpad Problem. Stay tuned for our next article laying out an innovative approach to decentralized fundraising, and the search for a potential partner in this endeavor aiming to create accessibility, quality, and exceptional investment opportunities.
— The NewField Fund
Disclaimer: Nothing written in this research article, or any article by The NewField Fund should be considered as financial, legal, or investment advice of any kind. Investing in crypto is highly risky, do your own research. #DYOR