Crypto launchpads have a broken implementation strategy | Opinion

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Crypto launchpads have missed the opportunity to make investing accessible for retail investors. Although launchpads helped standardize token sales in the post-ICO chaos and provided a better entry point compared to CEX listings, they were not designed to onboard retail. The problem is not with launchpads per se — it’s more about a flawed implementation strategy.

Summary

• Launchpads are broken for retail investors: High staking thresholds, long vesting periods, and weak due diligence make participation risky and exclusive, despite 64% of retail investors wanting in.
• Barriers hurt small investors: Complex ROI metrics, token lockups, and inflation risks leave everyday investors at a disadvantage, while failed projects amplify losses.
• Next-gen launchpads shift the model: Some platforms are ditching staking requirements, offering refundable token sales, and lowering entry thresholds so even $100 investors can join.
• Quality and inclusivity are the future: With rigorous vetting, open access, and investor-friendly terms, launchpads can finally rival VC-style opportunities while protecting retail participants.

Most launchpads have steep entry barriers for retailers with long token vesting periods, steep staking benchmarks, uncertainty of failed project investments, and weak due diligence procedures. Consequently, everyday investors, with limited capital reserves, find it difficult to participate in fundraising, despite 64% of them demonstrating eagerness to invest. 

Launchpads must reinvent themselves and undergo a complete overhaul if they want to cater to retail investors. And that will happen when the next-gen launchpads become an open, inclusive space without a long list of prerequisites for the low to mid-range investors.

Launchpads have an implementation problem

Originally, launchpads served as a platform for investors to access opportunities that were previously exclusively reserved for VC funds and angel investors. But launchpads often come with elaborate vesting requirements to ensure participants’ skin in the game.

Resultingly, a substantial chunk of purchased tokens is not available during the token generation event, or TGE. Rather, they’re distributed over a long-drawn-out schedule with complicated terms and conditions for unlocking tokens. Although staking provides some safeguard against pump-and-dump scams, high staking thresholds restrict widespread participation from retail investors. 

Compulsory staking undermines the inclusive ethos of launchpads. For low-potential projects, staking can also be a problem for investors. The gradual inflation in token supply leads to further price depreciation if the project demand doesn’t increase with time. Consequently, investors run the risk of a loss if their investments don’t generate substantial returns.

There are two parameters for investors to determine the efficacy of project launches on launchpads —  an average all-time high ROI and current ROI. But for the layman, such complicated metrics often create barriers to a seamless investment. Instead, a refundable token sale model provides a better safety net and peace of mind for retailers, even if their investment fails.

Not all projects will have a good ROI, especially those that overpromise and underdeliver. New investors may get swayed by the expectations of outsized returns, but it often doesn’t come true. This happens because the projects create hype before TGE and then fail to follow the roadmap or keep up with product launches.

Most launchpads are now onboarding projects without filters or due diligence checks. Without the necessary infrastructure and experience in incubating new projects, launchpads are bound to fail. Lack of vetting can be detrimental for investors since they lack the resources to do a full background analysis of new project launches.

Therefore, crypto launchpads need fixing — by rethinking compulsory vesting schedules, token sale models, and lowering entry barriers for retail investors.

Making crypto launchpads accessible for everyone

Some launchpads have identified the problems early on. And they’re actively trying to make crypto fundraising an open and inclusive space for everyday investors.

Future-proof launchpads won’t have native token staking-based allocation tiers. Instead of gated participation, new launchpads will have open access without requiring platform tokens.

These launchpads don’t force investors to stake collateral for participation. So, even if someone has just $100, they can own a portion of the next crypto unicorn. Lowering the investment benchmark is a critical step towards opening up the space for small and medium retailers.

Launchpads that don’t require token vesting free up liquidity. This empowers cash-strapped investors to participate without any constraints. Further, investors needn’t worry about unsuccessful or failed project tokens because they won’t remain locked out for months.

A few launchpads even offer refundable token sale models. Such refundable mechanisms give investors the freedom to redeem their investments if they’re not satisfied with a project’s token performance.

By positioning the investor at the centre of the fundraising economy, launchpads are reinventing themselves. As investors have more power over their decisions, early-stage projects will be forced to be responsible towards their roadmap and product launches.

Consequently, launchpads must also introduce rigorous checks and due diligence to ensure projects perform well. High-quality startups will provide investors with long-term revenue generation and prevent scams.

VC firms and angel investors have experienced, qualified teams that invest in promising, high-potential projects. It’s time for launchpads to also provide the same rigorous vetting for retail investors, prioritizing quality over quantity. Coupled with an easy onboarding and signup process, future launchpads must break away from complexities and high barriers, without compromising on their standards.

While a few launchpads have already started the transformation to fix existing problems, it hasn’t yet reached mass adoption. Until all launchpads start executing the solutions, retail-driven crypto fundraising will always lag.

If the crypto industry has to progress, it must bring retail capital into its fold. And thus retail-friendly launchpads will play a key role in helping crypto come of age.

Hatu Sheikh

Hatu Sheikh is the founder of Coin Terminal. He previously co-founded DAO Maker. He has been involved in web3 since 2017, having advised dozens of teams, including NEM, Injective, and MultiversX, while seed investing in over 100 projects, including Mantra, Avalanche, and Big Time Studios. In 2024, he began construction of a $100M, 250,000 sqft luxury business park for startups in Dubai.