If you’ve been watching the crypto startup industry closely, in the last year, you may have noticed a striking theme among many of the newly launched projects — a large chunk of them are launchpads designed to launch other new projects!
As you might expect, this has caused somewhat a recursive series of events, where the vast majority of newly launched launchpads then start launching other launchpads (try saying that quickly!)
Indeed, by simply scrolling through the CoinMarketCap ICO calendar, you'll likely notice at least a couple of new upcoming launchpad projects being added to the already endless hordes. Each of these vying for an increasingly limited pool of genuinely high-quality startups, while some of the less successful launchpads are left launching the projects rejected elsewhere.
With this in mind, here’s what you need to know before investing in launchpads.
Not All Launchpads Are Built Equal
There are two reasons why you might want to invest in a launchpad project. The first, and most common, is because you want to gain access to the projects launched via the platform. The second is because you believe that the launchpad’s native token will appreciate in value — or sometimes both.
However, there are considerable differences in the quality of launchpads and the projects they host. This is mostly evidenced by the average return offered by some launchpads compared to others. This can be measured in both average all-time high ROI (the maximum value tokens reached) and average current ROI (the current return compared to the IDO price).
When measured based on these factors, Polkastarter, DAO Maker, and BSCPad currently stand heads and shoulders above the rest in terms of all-time-high ROIs, whereas TRONPad leads the way for current ROI. Comparatively, many newer IDO launchpads frequently struggle to produce a positive return for investors, due to the low quality projects they often host.
Beyond this, both DAO Maker and DuckDAO stand apart from the competition due to their refundable token sale models, known as the refundable strong holder offering (rSHO) and refundable IDO (R-IDO) respectively. These provide users with a safety net, in case their investment turns out to be a dud.
Performance Can Vary Wildly
Though you may be pulled in by expectations of staggering returns — and this is sometimes possible — not all projects will achieve an impressive ROI.
Because of this, it is important to approach IDO launchpads with reasonable expectations and a keen eye for fundamentals. This is because some projects may immediately launch with massive demand and generate strong growth right out of the gate, while others might be slow burners that are best-held long-term.
Many of the more transparent launchpads will provide a clear overview of the performances of their projects. DAO Maker is one such example. This can be used as a rough indicator of the quality of the projects launched by the platform, but by no means promises that future projects will perform similarly well.
In general, some of the most established names in the launchpad space, including Polkastarter, DAO Maker, BSCPad, and PAID Ignition tend to secure higher quality projects and have the network and resources to help them launch successfully. Some of the newer launchpads are less likely to have developed the infrastructure necessary to support projects through their launch — particularly if they launched through another platform.
Because of this, we recommend exercising caution when participating in IDOs hosted by launchpads with little to no prior experience in selecting, incubating, or launching new projects. Always perform your due diligence before investing in a project, since not all will generate profits, while some will struggle to break even.
Remember, past performance isn’t always an indicator of future success.
The Importance of Vesting
Launchpads are a way for regular investors to gain access to opportunities that were previously only accessible to venture funds and other large-scale investors.
But what many users don’t know, is that there are often vesting requirements associated with IDOs — that is, a large chunk of the tokens purchased may not be unlocked at the token generation event (TGE). Instead, these could be distributed under a vesting schedule (e.g. 20% unlocked every three months), potentially with a cliff too (i.e. a delayed distribution after TGE).
DuckDAO, for example, operates both a public sale branch through its DuckSTARTER platform, as well as a private/pre-sale branch through its DuckDaoDime (DDIM) gated Telegram communities.
This can have mixed effects on a project’s token price and can be a boon or a burden depending on the project. For those with limited upside potential, vesting can be a problem, since gradual supply inflation can suppress a market when demand doesn’t increase in tow.
But on the flip side, it can also force users to hold on to tokens long-term, which can be the right decision when projects need some time to launch their product and generate momentum. This can be a life-saver for those with “weak hands” since they can end up securing far more profit than they would have had they exited their position right away.
Take Lithium Finance (LITH) as an example. Had DuckDAO participants had access to their tokens right away, they may have been inclined to take profits instantly. However, vesting forced them to continue holding — leading to far greater returns.
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