When evaluating the potential upside of your market cap, the investor compares your hard cap to other previous or upcoming ICOs in the specific industry of your project, and also to other ICOs in general regardless of which industry they are in. Hard cap is the single most important factor to take into consideration when estimating the upside of token price. The smaller the hard cap is, the more appealing the upside of your token price will be from investors point of view. However, if the hard cap is too small compared to the vision your project aims at, the investor will have doubt how your project will reach all the milestones with the given budget, especially if it seems likely your project will not reach the hard cap.

Soft cap is usually evaluated by estimating if reaching your project goals are realistically doable with the budget your project would have in case of barely reaching the soft cap. Also in case your soft cap is remarkably large, your potential investors might wonder what your project is going to do with all the money raised. And in the case of not reaching your soft cap the investor wants to know what will happen to the project and raised funds, eg. is the refund going to be automatic by a smart contract or is it manual process that could potentially take a long time.

Is there a sweet spot for hard cap in ICO market?

Your potential investors evaluate both hard and soft caps differently in bullish and bearish overall cryptocurrency market condition. Invictus Capital has conducted market research on finding the sweet spot for hard cad USD amount from investing perspective, and the results are shown in the following graph:

*Returns expressed as multiples, outliers removed. (source: InvictusCapital and tokendata.io)

Bar graph showing the Bitcoin-based returns for increasing ICO raise amounts in USD, indicating that smaller ICO raises have historically resulted in larger returns.

Even though the ICO space is still quite young and sample size isn’t probably large enough to draw waterproof conclusions, the graph of Bitcoin-based returns seems to show a clear trend in ICO amount raised and ICO return. The market tends to favour those ICOs that have raised 4-6 million dollars, and returns are clearly higher below the 9 million usd benchmark. When planning your ICO, it might be valuable to keep these findings in mind to attract investors in the highly competitive ICO space.