How Do Raises Work?
Token allocation in private sales is a hotly debated and divisive topic. Generally, investors and startup projects alike face a number of issues when engaging in private sales. At Lithium, our launches need to be fair, safe, and potentially lucrative for both sides of our launchpad marketplace. We want to reward those who are brought into the Lithium ecosystem, while simultaneously allowing fair and democratic access to launchpad projects.
The Problems with Existing Launchpads
It would be foolish to try and go about creating optimal launchpad token allocation logic, without first gaining an understanding of the issues that plague Gen 1.0 and Gen 2.0 launchpads.
We thoroughly researched and interviewed our customers to arrive at the following issues.
- 1.Investors hate lotteries. Nearly every launchpad investor we spoke to hated the idea of lotteries, finding them frustrating and unfair. Lotteries exist for a reason, namely to solve the problem of oversubscribed launchpads. At Lithium, we’ve found another way…
- 2.Investors hate ‘first come first served’. Getting your investment sniped by someone who has a better internet connection, or a slightly faster finger is not fun. Investors want to be sure that if they want tokens, they get tokens.
- 3.Investors who are involved in the launchpad want more upside. Kind of obvious, but if you hold a tonne of $IONs, you are going to want to access more tokens of a launchpad project than those who hold a smaller amount.
- 4.Startups prefer many wallets, few whales. The best way to ensure a launch with minimal volatility is to raise from many small investors rather than huge whales.
- 5.Startups want to sell out tokens as quickly as possible. The quicker private sale tokens sell out, the more likely it is that when a project’s liquidity hits an exchange, the price will grow. No-brainer.
Clearly, a lot of these problems are at odds with each other. Startups want a quick sell-out, investors don’t want first come first served. Startups don’t want whales, large launchpad bag holders want access to more tokens.
Our completely bespoke tier-allocation logic looks to solve this mismatch: