I recently started to work on the Launchpad world. A Launchpad is a structure that proposes crypto startups to raise funds via community investment and benefit from various development services. It is a fixed-swap pool where people can buy the token at a fixed price. These socialized VC funds are powering the crypto world and allow crypto startups to fund part of their initial seed round and beyond. Several launchpads are in the spotlight. Polkastarter, PAID network & Ignition, Launchpool, and many others. But what the fuck is happening here? I mean, crowdfunding is not new and has already existed for the past decades. Why are people getting crazy about this, and why do startups are looking to integrate one?

The golden ticket to a large return

The first detail that catches my attention is the insane returns associated with these private sales. DAO Maker shows on its website returns of launched projects from x3,9 with PlotX to x480 with Elrond. CryptoDiffer released the February performances of Polkastarter IDOs, and they are crazy.

Source

This model is attracting a lot of people. Launchpool, the young egalitarian launchpad, has seen its token holders number multiplied by ten since its TGE in February. Its community also skyrocket with growth in telegram users +290% and Twitter followers up +457%. Polkastarter has the largest community with 237,000 Twitter followers and almost 34,000 token holders.

Launchpads' business model explains the growth of the community and the number of token holders. The first model was a lottery one. To access early investment, you need to hold a certain amount of tokens and pray to be randomly whitelisted by a lottery system. It is the model chosen by Polkastarter which explains the large community of token holders. The lottery model is the most used right now, but there is a lot of development and complexification of these new financial products.

Open the venture world, create the new VCs.

If we focus on the projects that list on launchpad platforms, they are often (not to say always) at the development stage and have no product or services ready. Hence, there is a lot of speculation around these new investment opportunities, and it looks a bit like the 2017 ICO madness. So why is this time different?

Well, launchpads aim at being the structure that will help projects achieve their vision thanks to their services and community. They are offering products for both investors and projects. From the investor perspective, opportunities are in development to reduce the risks of investors. It is the case of DAO Maker, who is currently developing Venture Bonds. VB is a product that uses investors' liquidity to earn yield and send it to projects in exchange for their tokens. Benefits are multiples, control of the capital sent to the company (since the funds raised depends on the APY on the liquidity, startups receive funds over time), and long-term communities' engagement and involvement. The most impressive is that investors' risk of losing their initial investment is near zero since their funds are not sent to the project directly but yielded to fund them.

From the startup perspective, launchpads deliver incubation services and try to innovate to bring useful products. PAID Network creates a model where the community can work with projects and get paid for the deliverable.

In 2020, companies received $300bn from venture capital investment. The innovation brought by launchpads is that now retail investors can benefit from the large returns from early investment. On their side, companies can benefit from incubation services and develop their community. A critical issue would be that retail investors are not necessarily aware of the risks they are taking. Even if products are in development to avoid these risks, many retail investors try to catch to wave at the Initial Dex Offering (when the token is listed on Uniswap). However launchpad market is still nascent, and I expect it to grow dramatically over the next few years.

I hope you enjoyed the reading! See ya next time for another crypto note.

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