When Launchpool launched we extolled our mantra of egalitarian investing. We wanted to give everyone an equal opportunity to invest in projects at rounds usually reserved for investment funds. I’m very proud of everything the team and council at Launchpool have achieved in delivering on this aim.
At the start it was very important to me to make sure the smaller holders were looked after and could contribute to our community and investment rounds. Where $LPOOL traded significantly higher than it is today the entry level to investment needed to stay reasonable.
Assuming an $LPOOL price of $3 (and even higher) then the new pool sizes still offer investment opportunities at very attractive levels compared to other crowdfunding platforms.
Drilling down into the figures we can see two main trends.
1) The dollar cost of allocation per pool is far lower in the smaller limit pools.
2) The funding rate is lower in the smaller limit pools.
This evidence shows that it is in fact the investors staking in unlimited pool that have been disproportionately penalised. And the imbalance is actually very substantial, indeed it is not fair and not egalitarian. Therefore it goes against our ethos and thus we are trying to address it.
This could be addressed in two ways.
1) To increase the limits on the pools
2) Offer more allocation to the “No Limit” and 250 limit pool
The reason I have gone for 1 over 2 is that 1 provides an incentive to buy $LPOOL on dips, which is beneficial to all holders and Launchpool. Any proper community member that buys into our project and has the means available should be incentivised to do this.
Regarding trend 2 — overall funding rates — Egalitarian also means considering the needs of all stakeholders. Since the smaller pools are the least well funded that is bad for the projects and bad for Launchpool, who generally makes up the difference.
Therefore uncapped pool investors are showing that they are more willing to pay for the allocations offered. This is something we must encourage as it benefits all stakeholders.
For the last 5 projects the cost of allocation (i.e. how much value in $LPOOL must be staked to get $1 of allocation) has a trend running through it.
It’s generally 3.5 times more expensive in the 250 limit pool than the 50 limit pool. Meaning you must stake 3.5 times as much $LPOOL in the 250 limit pool to get the same $1 worth of allocation as you do in the 50 limit pool.
In the “no limit” pool it’s far worse. Generally about 6 times as much $LPOOL to get the same amount as the 250 limit pool. Meaning about 15 times as many to equal the 50 limit pool.
It is clear to me that this is not fair to the uncapped pool stakers and even 250 pool stakers, moreover it negates any incentive to hodl and build your stack. This is to the detriment of the community and the platform and the projects.
What we see from this is a churn in community members, where those that may like the platform can’t justify continued investment since the cost of capital makes the allocations too expensive or simply not worth it. So we see lots of 50 limit pool investors, fewer 250 limit pool investors, and fewer still uncapped pool investors, when in fact we aspire to be a platform for all investors.
Smaller investors add value to us and we do not want to alienate them. It is not my intention to remove the imbalance completely. The bigger the community the stronger we are together. However we must try and find a balance that best fits all community members and the platform, and the projects. My aim now is to get the difference between pools down to 2x between the smallest pool and the middle pool and 3x between the middle and “no limit” pool.
The pool sizes will remain under review for the foreseeable future as we try to find the “sweet spot”. This first change will run until such time that a new normal has been established. At that point we will re-evaluate the numbers and the effects this has on the community.
For low cap pool investors we are not abandoning you, or rejecting you from our community. We are simply making efforts to amend an imbalance you have been enjoying for a long time, so that it better reflects everyone’s needs and is more egalitarian. Our community needs to retain long term investors that wish to accumulate $LPOOL. This can only be done if they are proportionally incentivised to do so.
Richard Simpson, Launchpool CEO