Community due diligence and audits

How IDO launchpads can add further value to their stakeholders

One personal critique I have about many IDO launchpads and crypto exchanges since the early days of researching their evaluation criteria is that, as we live in a business worldmade of humans, they may onboard projects that are not necessarily sound investments, might that be because they want to list as many projects as possible and primarily care about their initial cash flow and profits, or because they ultimately think that it is not their responsibility to vet the reliability of the projects they propose, but only to propose them to their community (I’ll avoid rumbling about the connection between excellent/superior offering = gains for all, but this is ultimately what the article is about).

Either way, still to date, the sector leaders making an effort in this direction are Daomaker and Polkastarter, who truly try to add value with their initial assessment of the projects and require them to stay within their framework of listing criteria (Ed., Scaleswap, the new kid on the block, mentions they submit projects to their community for initial evaluation, so, a shoutout to them and good luck!).

This framework can be reflected in the information they publish on the research page of the projects they list. Below is a side by side comparison of the two.

Though having these pieces of information filtered, structured, and available at a glance on one single page, and a blog post praising the good traits of the project, ultimately there is no declared opinion from the launchpad on the reasoning for the selction along with what pitfalls, shortcomings, and risks the project may have.

This is understandable. Why would you, the launchpad, propose something and assign it a score or opinion that might drive investors away from that investment opportunity? I see how declaring the whole due diligence done on a project and providing this kind of thoughts might have negative implications for the launchpad.

However, I believe that a launchpad that has at heart both its profits and growth, as well as the interests of the projects and of its investors' community, needs to:

• Fully vet the projects it intends to list, and only lists those who are sound, sustainable investments.
• Inform and educate their investment community.
• If not incubating these projects, help them improve their premise and offering, before investors are able to subscribe.

(On a different note, I believe a launchpad should also protect all the stakeholders with equitable distribution and anti-dumping measures, but that is for another article!).

A proposal for improvement

Though the following proposition was initially inspired by projects requiring pre-seed/seed rounds of financing, it can easily, and should, be applied also to projects that are ready for IDO.

Surely, implementing the above adds workload to the launchpad and it might cause a longer time-to-fundraise than if it was not there. Such scrutiny might even scare off some projects from even applying to curated IDOs. FUD and spam can be dealt with easily through moderation and disincentives since participation is KYCed.

I believe it is in the best interest of all the parties that truly want to produce value for all their stakeholders, and for themselves, to take an approach that aims for quality:

For the projects, they receive free due diligence and a chance to review certain aspects of their products and operations that they might have otherwise overlooked, or to capture value where they did not make the opportune estimates;

For the Investors’ community, it is an opportunity to better understand and contribute to something they eventually really believe in; or simply as part of their own due diligence, be able to rely on a vision aimed at protecting them.

For the launchpads, they create a stronger brand with customers-reviewed propositions, that eventually convert to more business and a reliable and loyal investors’ community by its side.

What are your thoughts on this proposal? Too naive or a better way of to the status quo?

Next up: Designing a launchpad — A token engineering take on a fair, equitable, low-risk, participative, and sustainable framework.

Please feel free to share your comments, suggestions and corrections. You can reach me on Linkedin! Thank you for reading :)