What is a Launchpad?

launchpad is a matchmaking platform where new crypto projects and investors meet. The new projects need initial capital to bootstrap the product, so they offer investors early access to the sales of tokens. On the other hand, investors benefit by buying the token earlier, believing that its price will take off after trading opens. Launchpad, as a matchmaker, hand-picks promising candidates to introduce to their own community, offer a meeting venue (its platform), and gets a commission fee when the deal is successfully closed.

Suppose you are familiar with the traditional financial market. In that case, it is most straightforward to think of a crypto launchpad as an investment bank, and buying IDO is like investing in an IPO of an early-stage company. IDO is also the first time that an average retail investor can get access to the token sale before the project officially hits the market. In the crypto world, we call it before TGE — Token Generation Event.

As a retail investor, it is best to look at the launchpad as a financial product with 2 key components. First, you must buy the launchpad’s token and commit to stake it for a certain amount of time. Second, in return, you get access to an allocation of token sales. Each launchpad has its own tier system to ration the allocation of the token sales amongst stakers. Yet, the general rule of thumb is the more you stake, the more IDO allocation you can access.

Actually, very few crypto projects rely on their core budget on public round funds. Instead, launchpad fundraising is viewed as a marketing exercise. Since each launchpad has its own community of investors, distributing a small number of tokens to them before trading is a way of raising awareness and creating hype.