I skipped 90% of pre-sales,LBPs ,IDOs ,KOL rounds, and ambassador programs.
They don't live up to my rating.
Here is my pre-investment research method↓
Here is a list of criteria you should evaluate, from most critical to least critical:
• Token Economics
• Marketing/Community (Hype Standard)
• Products and roadmap
• Narrative and competition
• Supporters
• Team
This topic is very broad, so in this thread, I would like to focus on one of the most critical aspects – TOKENOMICS.
Once the secondary market opens, all projects, in some form, will have various types of users who may become your competitors.
They include:
• Token sale investors (all private and public rounds, including KOL rounds)
• Ambassadors (KOLs who earn tokens in return for their contributions)
• Early adopters (airdrop recipients)
• Incentive objects (staking, liquidity mining, etc.)
• Team
Interestingly, if a project raises money from US investors, it must comply with SEC regulations. As part of this, all tokens allocated to insiders (early investors, team, advisors, etc.) must have at least a 1-year cliff period.
Source: @a16zcrypto’s article “Token Launch Playbook”
Essentially, it is critical for all parties intending to sell tokens for profit to review cliff and vesting clauses.
Ideally, all insiders should have a cliff period of at least 1 year (after all, who wants to invest in a protocol with potential regulatory issues?); this is just healthy.
For investors in the public sale, the main threat comes from airdrop recipients and KOL round investors.
Airdrops are usually not vested and are similar to public token sales in that both expect to make a profit. Typically, 30% – 50% of airdropped tokens are sold within the first month.
Things get even more interesting when it comes to the KOL round.
I receive at least one round of KOL invitations every day. These rounds are usually hidden in token economics (presented as incentives, marketing or other purposes), and most KOLs are happy to accept these invitations.
The interesting part comes when you delve into the specifics of these KOL rounds.
Many of these companies offer significant price advantages over public rounds, sometimes even comparable to seed round valuations, while also having shorter cliff and vesting periods.
In some cases, there isn't even a cliff at all.
A typical scenario is that 30% of the investment will be unlocked on the TGE (or similar) when the TGE has a 3x advantage.
This setup allows the KOL to recoup their investment on the first day, with the remainder as an added bonus for their marketing support.
It is similar to an ambassador program, where KOLs can earn tokens as support. However, KOL rounds are more lucrative for projects; they can earn both money and marketing.
It’s a fair trade, but the problem is that retail investors are unaware of the influencer selling pressure.
Therefore, we get:
• Bullish sentiment, projects launch tokens with too high FDV
• KOL rounds under the guise of token economics
• Private placement rounds are mainly conducted during bear markets (generating at least 10x price advantage)
• Airdrop Mania, Farming and Selling
After reading this article, you might consider skipping all public sale rounds and buying tokens only on the secondary market.
However, in some cases, public sales can provide perfect opportunities and excessive selling pressure can be absorbed quickly (@ether_fi is a great example).
Absorbing selling pressure is primarily accomplished through product, BD, marketing, and token use cases. This will be the central theme of my upcoming posts on this topic.
