4 | Launchpad Due Diligence

There are many risks involved with investing in startup businesses - both traditional and crypto-based businesses alike. The risks are exacerbated when the entire industry you are investing in is novel, emerging industry which is the case for cryptocurrency. One of the main roles of launchpads is to provide a level of assurance to investors that the projects launching on their platforms are legitimate and viable in the short and long term. Launchpads accomplish this through various due diligence processes.

There are dozens, if not hundreds, of launchpads in the crypto space, each employing its own due diligence processes. Some of these launchpads have more stringent selection criteria while others may be more lenient and allow almost any project onto their platform, but overall most launchpads will examine several aspects of a crypto startup before accepting or rejecting them for launch. These variables may include:

  • Product: unique use cases and products with a competitive advantage over established products are generally preferred over something that has already been done.
  • Business model: platforms with a clear revenue stream that distributes a percentage of fees to token holders are looked upon more favorably than platforms without a clear path to long-term viability.
  • Team: a strong, experienced, well-connected team is a key deciding factor for many launchpads. Also, it helps considerably if the team is doxxed (identity known to the public).
  • Tokenomics: well-designed tokenomics of a crypto startup are vital to the both the short-term and long-term value of the token. The tokenomics should be designed for gradual increase in value as opposed to constantly dumping new tokens on the market.
  • Backers: the venture capital firms that have backed a project from an early stage are a key consideration. Backing from reputable VCs indicates a high-quality project as top-tier VCs are presumed to have performed their own due diligence before investing.
  • Partners: network effect is very important in crypto. A project with strong partners is presumed to be of higher quality and have greater reach than a project with few partners.
  • Community: a large, engaged community indicates that there is hype and intrigue around a project and that there will be sufficient demand for the token on launch.
  • Stage of development: projects that are close to launching their project or already have a usable beta are preferred over projects that are still in the ideation phase.
  • Roadmap: the future plans of a project are a strong indicator of its long-term potential and viability.

Every launchpad has its own due diligence system in place with varying degrees of stringency. However, there are some fully decentralized launchpads which are open source that any project can list on. Launchpad users are advised to always do their own research before investing in any cryptocurrency or token.

« Previous Next »
Great! Next, complete checkout for full access to University | Cherry Labs.
Welcome back! You've successfully signed in.
You've successfully subscribed to University | Cherry Labs.
Success! Your account is fully activated, you now have access to all content.
Success! Your billing info has been updated.
Your billing was not updated.