I coined term "scope drunk" in response to Tezos's roadmap and their plans for when they raise hundreds of millions of dollars. Those plans stretch far beyond their core competency of software development into geopolitics, banking, and massive empire building. They want enough money to do those things before they even have a product that people are actually using or care about. Premature and reckless.
Marc Andreessen, one of a handful of VCs who can legitimately be called "legendary," shared concrete reasons why raising too much money too early can be dangerous in his article Guide to Startups Part 6: How much funding is too little? Too much?. I excerpt the meat of his points, all of which are very applicable to Tezos but also to other ICOs that are raising too much money, especially the ones that have decided to raise money on an "uncapped" basis in an environment of frothy FOMO. I would caution people to be wary of uncapped ICOs for these reasons and additinally for what making the decision to raise as much money as possible and pay themselves upfront (personal risk management) says about the character of management AND the future incentives of management.
There are downside consequences to raising too much money...The big downside consequence to too much money, though, is cultural corrosion.
You don't have to be in this industry very long before you run into the startup that has raised a ton of money and has become infected with a culture of complacency, laziness, and arrogance.
Raising a ton of money feels really good -- you feel like you've done something, that you've accomplished something, that you're successful when a lot of other people weren't.
And of course, none of those things are true.
Raising money is never an accomplishment in and of itself -- it just raises the stakes for all the hard work you would have had to do anyway: actually building your business.
Some signs of cultural corrosion caused by raising too much money:
Hiring too many people -- slows everything down and makes it much harder for you to react and change. You are almost certainly setting yourself up for layoffs in the future, even if you are successful, because you probably won't accurately allocate the hiring among functions for what you will really need as your business grows.
Lazy management culture -- it is easy for a management culture to get set where the manager's job is simply to hire people, and then every other aspect of management suffers, with potentially disastrous long-term consequences to morale and effectiveness.
Engineering team bloat -- another side effect of hiring too many people; it's very easy for engineering teams to get too large, and it happens very fast. And then the "Mythical Man Month" effect kicks in and everything slows to a crawl, your best people get frustrated and quit, and you're in huge trouble.
Note that Tezos intends to hire a huge organization and build an empire if they raise a lot of monery per the Tezos roadmap. They have no experience managing a large company and will have as much as a $1bn budget, Day 1.
Lack of focus on product and customers -- it's a lot easier to not be completely obsessed with your product and your customers when you have a lot of money in the bank and don't have to worry about your doors closing imminently.
Too many salespeople too soon -- out selling a product that isn't quite ready yet, hasn't yet achieved Product/Market Fit -- alienating early adopters and making it much harder to go back when the product does get right.
Product schedule slippage -- what's the urgency? We have all this cash! Creating a golden opportunity for a smaller, scrappier startup to come along and kick your rear.
Be careful with Tezos.
IMO:
The hype is real, will draw in millions.
Read more in my post below for elaboration:
https://steemit.com/tezos/@kyle.anderson/we-don-t-need-to-hardfork-a-questionable-story-about-tezos-ico-july-1st
I would love Tezos as a small $4 million experiment in governance. I don't buy their thesis on why their structure is necessary, but I'm willing to wait and see...but at the insane valuation they're going to have, it is hard to imagine it being a long term success.
I like QRL as a small, $4 million experiment using a new blockchain.
Experiment all you want. the game theory is pretty clear.
Research needs to be on:
PoS - nothing at stake problem and long range attacks
Sharding - the pinnacle scaling solution. Many problems hinging on unknown unknowns.
I was having the same conversation yesterday.
These folks are raising millions of dollars and only have vapourware. Plus, if you read the fine print for EOS, it basically states, If you choose to agree, we can do anything, we can take the money and run.
People are investing based on the reputation of the two lead members of the technology.
99 percent of icos are a waste
Yeah true. Go BAT, be BRAVE! That's one kind of amazing coin to be a part of an ICO. But Tezos with no cap limit, is GREED.
hope that BAT dev guys dont take too long with implementing bat into the browser, expectations were high, not much delivered yet.
This is a brilliant team who have achieved way more than most of them in the digital dimension as whole. It will definitely take time to deliver as it's gonna be a global product. Personally I can bet on these people than a project like Tezos. Patience will pay off for projects like BAT, ANT, SNGLS etc. I don't look at it as a profitable coin but a project which could give a decent returns. Have patience my friend, it's gonna pay off...
We don't know that yet. Too early to say. The hit rate in terms of returning capital on startups is higher than most people think, 60% or so. Maybe only 20% of ICOs will work out in the long run but some might work out hugely. We'll see and observe.
You are definitely right with this. Raising too much money can be counterproductive in the sense that they have all of this money, so they aren't as "careful" with their ideas they're implementing. They figure if one thing doesn't work, they'll just try the next, versus planning how they're going to spend the money. Not to mention the lack of experience in dealing with a project of that magnitude. Hiring so many people so fast before there's even a "status quo" is risky to say the least. I hope they've thought about all of the consequences and aren't just thinking about themselves and their bottom dollar.
I agree completely. It seems like this cryptospace is the only area where I have ever seen people be able to raise millions and millions of dollars without having a product to sell. That is why I changed my mindset for ICOs to "Show me your idea and I will be interested, show me your product, and I will invest.
In my opinion, most of the money flowing into these ICOs are from early adopters of bitcoin. They are sitting on a pile of bitcoins which they cannot easily convert to fiat for whatever reason. (Transfer limits etc.) So they see these icos as opportunities to diverse their investments.
What the current ICO market is like
I worry that the ICO frenzy will leave some with such bad experiences that many will shy away from crypto adoption. With an IPO though there are many inefficiencies but there is a lot of regulation and good change forced by seeking public money (voting structures, transparency in records, increased accountability on management). If each ICO results in a price bump on ethereum it is forcing the real adopters to buy at inflated prices. With ICO's it seems like many can raise money with no independent view of what the right valuation is.
Well the market is inchoate. We'll find an equilibrium after a cycle, but markets take time to get stable, and exponential growth markets more so. People acting responsibly and reasonably on both sides of ICOs (i.e. buyers and sellers) would smooth things out, but the market will sort this out in the end one way or another.
I think everyone is drunk of money,
But there are certain ways to make money.
Amazing, very interesting post you, thank you for sharing.
Many of the current ICOs....around 20+ within the last few months have actually been proven to be scams
a lot of programmers have been messaging these people behind the ICO or the new coin coming out and have never recieved any sort of response from them, its actually kind of crazy
but think about it, its all logical, these people make 10 million dollars in a matter of minutes, theres bound to be fraud
Your stats are way off, unless you are using the term "scam" inappropriately. "Scam" implies intent and "prove" implies factual evidence. Do you have any evidence to support that "20+ within the last few months have actually proven to be scams"????
Ico's are really getting crazy at the moment.. I just did 2 the last month because I heard about it... it was before i knew steemit. Now I would buy steem..
Nice post...
The expresion is very funny.. I like it.. So funny hahaha please vote me.
@eeks
this is also my concern, you see people working long hours to achieve a goal and suddenly they have a big fat bank account, how long before the hours get shorter and they realize an office in Hawaii sounds nice. Of course you'd then need a second Lamborghini to match the one on the mainland ;)
Good points, are you investing in Tezos? There are often 3 points to consider when investing. First one is the Product, second one being the people running it and the third one is the timing. I believe Tezos to have a good product and good timing, they do however lack the people with experience.
I think Tezos will do well based on
they tezos team have lot of experience in financial markets and large crypto projects
The region they'll be located has many big crypto related companies
their is a few concerns as outlined in
this reddit article but thats only a problem if fails
This isn't a very well thought out reply or thesis. I'd work on formulating your thoughts and editing.
nice post!!
Theres too much money in icos right now. Ethereum will definitely have a crash when people realize many companies will not be living up to expectations or are scams.
If Ethereum crashes so does everything else too. Calling for crashes and calling everything a scam without strong evidence gets a little boring after seeing it over and over again.
Its not hard to see at least half of these will fail. Im not saying this specific ico will fail but if people keep on investing hoping to hit the big one its inevitable that money will be lost in due time. I don;t want to spread fear but I want people to do more research before just throwing their money at new ico's.
But you're so vague, it sounds like you yourself haven't done research, you're just guessing or repeating what you've heard from other people.
Sorry to be vague but I don't have the time to look up all the failed ico's. I'll try to be less vague in fhe future though.
i will buy some but not much, im also worried of the model
Make sure you do all the research you can and make sure you understand the valuation.
Hi, thanks for always upvoting my post and I hope you actually like them. Ok, so I think this is really weird but I just wanted to say it nonetheless 😁