You often see this term circulating around ICOs and IEOs. What is a softcap stand and what happens if a company cannot reach it?
What is a softcap?
A softcap stands for the minimum amount of money a cryptocurrency startup needs to raise, through an ICO/IEO, in order to successfully follow their roadmap and create a viable product.
What happens when a softcap is not reached?
In most cases, when a softcap is not reached during an initial coin offering, the founders refund all early investors and postpone or cancel the funding of their project idea.
Where can I see an ICO/IEO’s softcap?
You can find out what softcap a cryptocurrency startup has set for its upcoming initial coin/exchange offering by reading through their whitepaper.
Usually, the initial coin sales will come at a discounted price, compared with later rounds, after the softcap has already been reached. Therefore, if you decide to join a token sale that has not yet reached its softcap, you will most likely receive a discount.