Influencer-Investors Benefit from Promoting Tokens

Crypto’s influencer group often invests in numerous startups and then uses their social media platforms to promote them. In return, projects offer these KOLs special deals. For example, the option to sell their tokens earlier than other early investors – sometimes right when the token is launched. 

These “KOL rounds” are gaining popularity among founders as a way to market their projects without spending upfront money. However, these arrangements aren’t always disclosed to the investing public. 

Venture capitalists and angel investors, who traditionally fueled crypto projects, are now joined by influencer-turned-investors like the KOLs.  

These KOLs flood social media with information about which crypto protocols to watch and invest in. It ranges from anonymous avatars to well-known YouTube personalities. 

A review uncovered a growing trend where influencers invest in crypto startups and then promote them to thousands of retail traders on platforms like YouTube and X (formerly Twitter). Projects are counting on KOLs to attract users and enthusiastic buyers before launching their tokens. 

Navigating the Transparency Challenge: KOL Rounds in Crypto Fundraising 

The shift from traditional paid promotion to KOL rounds has altered the dynamics of crypto fundraising. Instead of being paid to promote projects, KOLs now invest in them. Although under favorable terms like discounted valuations and early token selling options. 

Despite the rise of KOL rounds, not all details are transparent to retail investors. Many KOLs don’t disclose their financial arrangements with the projects they endorse, potentially violating consumer-protection laws. 

As the “creator economy” continues to reshape online interactions, experts anticipate further growth in the prominence of KOLs within the crypto space. This trend, particularly pronounced in crypto, sees KOLs playing a significant role in marketing and fundraising efforts. 

One recent example is Humanity Protocol, a startup competing with Worldcoin. Angel investors and KOLs, who had to engage in social media activities promoting the project, contributed to raising funds for it. 

In the evolving landscape of KOL rounds, participants often receive a significant portion of their tokens upon launch, enabling them to sell quickly for potential profits. 

While some projects enforce transparency regarding KOL engagements, others leave disclosures up to the influencers themselves. This lack of transparency raises concerns about misleading retail investors who rely on these endorsements for financial decisions. 

Overall, KOL rounds offer benefits to both projects and influencers but may pose risks to retail investors if not properly disclosed.  

As the crypto industry continues to evolve, transparency and ethical practices will be crucial to maintaining trust and protecting investors.