Original author: Fairy, ChainCatcher
Original editor: TB, ChainCatcher
The once-popular KOL round of financing has now become a nightmare for many KOLs:
“I invested in more than ten KOL rounds last year, and lost money in all of them. Most of them didn’t even issue tokens, they just disappeared.”
“Let me tell you this, basically all KOLs didn’t make much money this round.”
Last year, I applied for more than a dozen, and finally successfully issued two. Of the 5,000 U issued, 400 U went out.
I thought it was a shortcut to participate in high-quality projects at a low cost and realize wealth appreciation, but it turned out to be a total loss. Some people helplessly joked: I lost face and money at the same time.
The KOL wheel seems to be becoming a derogatory term, and has been reduced from a code of wealth to a hunting ground for capital.
Win-win “personality”, unbalanced results
The KOL round of financing was originally set up as a mutually beneficial early financing model, aiming to build a win-win ecosystem for project parties and KOLs.
Project owners can leverage the influence of KOLs to quickly increase their visibility, attract initial traffic, and build an active community to promote the long-term development of the project. KOLs participate in early-stage investments at a relatively low cost. If the project is successful, they can not only get returns, but also increase their influence in the industry, achieving both fame and fortune.
However, the real market is not so ideal. The ideal win-win situation has gradually turned into a one-sided harvesting game.
High valuation, long lock-up period and low return have gradually become the three standard features of KOL rounds. The goal of many project parties is no longer long-term construction, but short-term cashing out.
It was a mess, and KOLs were gradually lost in the game, and even being harvested in reverse.
Why did all KOLs suffer losses this time? Let’s hear what the KOLs themselves say:
Lack of lasting narrative support
@realChainDoctor said: “There is no particularly lasting narrative (hotspot) this round.”
For projects that are not supported by long-term hot spots, the KOL round is essentially just a paid publicity round. Once the market heat wanes, it will be difficult for the project to maintain its valuation and the return on investment will shrink significantly.
High valuation + long lock-up, a fixed pit
@blockphd 7 said: “KOL rounds are basically fixed-point pitfalls, with high valuations and long lock-up periods.”
The valuation of KOL round financing is generally inflated, and the lock-up period is long, liquidity is limited, and project owners often promise to bring friends on board, but in fact they are precisely harvesting. Some project owners even use the linear release mechanism to gradually dump the market, causing KOL round investors to be forced to break even or even leave at a loss.
The primary market space has been severely compressed
@0x cryptowizard said: “The project has now directly compressed the space for Tier 1 and KOL to 2-3 times the expected amount due to the pre-speculation of cryptocurrencies, and also locked it for a year plus cliff.”
This design greatly compresses investors profit margins, resulting in a lower rate of return than the secondary market in a bull market.
The market environment has deteriorated, and more projects have engaged in money-making activities
@yuyue_chris said: The market environment is bad. At the peak in November and December, a large number of project parties tried every means to raise money, especially finding people around them to sell through OTC while allowing retail investors to exit liquidity. At the same time, there are also scams, using the name of investment to raise money...
Many project owners lack long-term planning and sell off their shares as soon as they open, pursuing the strategy of doing more projects and making small profits. This short-term thinking makes the return on KOL round investments extremely unstable, and even the principal is difficult to recover. In addition, as the market environment deteriorates, project owners will do whatever it takes to make money.
KOLs have limited capabilities and information asymmetry
@yuyue_chris said: “Although KOLs need to identify the quality of projects themselves, most KOLs are just large retail investors and do not have the ability to fully identify the authenticity of information, so they are deceived and killed based on fake news and false information.”
Can the KOL cycle still be played?
According to @YeruiZhang, KOL rounds can be roughly divided into three categories:
Slave Wheel: Generally earn up to 2 times the principal or return the principal
Investment round: risks and benefits coexist, accompanied by big losses and big gains
OTC Call Round: Buy Coins at a Discount After TGE
The terms of the Black Slave Round are harsh and suitable for small investors who hope to accumulate connections and strive for quotas. The returns are limited, but the requirements for vision are relatively low. The core strategy is to build relationships with the project parties and strive for more quotas.
The investment round requires a no regrets mentality and a deep understanding of the underlying logic of the project, team background and market prospects. KOLs need to have pricing capabilities to avoid falling into traps due to high valuations. This is also the category that is most likely to go wrong.
The key to OTC single-round calls lies in hedging strategies, and KOLs need to have a deep understanding of liquidity.
All three categories have their own unique risk and return models. Overall, the KOL round of primary projects tests the investors vision, while the KOL OTC round of secondary projects tests the understanding of liquidity. However, the most important thing is the KOLs ability to negotiate prices. If the pricing is not negotiated well, everything is empty talk.
Nowadays, the threshold of KOL ecology is getting lower and lower. Fans can be increased and barriers can be broken. The more so, the easier it is to be targeted. Currently, many KOLs choose to stay away from KOL rounds of financing, and some retail investors have also made it clear that they will never invest in KOL rounds of projects.
Of course, the KOL round of financing is not without high-quality projects. The future KOL round may not disappear completely, but it must return to rationality. When speculators exit, only those who truly have the ability to capture value can survive in this game.
