Launching Your ICO? Consider the Following Before You Begin.
In all the crypto craze of ICO’s in the past year, launches have changed dramatically from non-traditional high risk to today’s more traditional launch style landscape.
As ICO’s near the $5B mark in funding, investors are keeping an ever-present close eye on your product to ensure your commitment to the ICO is fulfilled. Value creators have increasing leverage and justifiably so in order to reduce ICO’s that are truly not ready for a public offering.
ICO’s offer a faster onramp into market for fledgling companies, initially supported by investor capital and subsequently sourced at the speed of social media. Entrepreneurs can avoid the grinding process of an IPO or losing partial company control from parceling out equity. While the ICO is the best course of action for a token-based company, it is critical to meet traditional steps that matter towards the ICO goal.
For the purpose of this article, we will assume you have already considered:
- You have determined tokenization is necessary to your company.
- You have completed a competitive set review
- Researched the legality of bringing an ICO to market in your specific country
- You have chosen your distribution sales option (private, pre-sale, actual ICO or general)
These are your experts in cryptocurrencies and blockchain. They are well known in the community, possess a follower base and have deep experience in the process of bringing tokenization to market.
Keep in mind not everyone with these credentials are good for your project. You will need to scrutinize each one for ‘fit’. Rule out any who accept cash in order to make recommendations. Reputation is important here as those who are a good fit also come with great contacts to help when specific issues arise.
Online contact, LinkedIn for example is one way to open the door if your budget is restrictive. Connecting person-to-person at conferences is another way should your budget permit.
Venture capital is provided to new companies or companies implementing very new technologies. It is required in most cases as the new tech will not be successfully brought to market without supporting funds.
If you are an entrepreneur, raising venture capital funds would come about under the following:
- The venture is at the startup stage
- The venture is using technology not previously implemented by others
- The business fails to attract investor funds
- The business owners seek out partners with specific business skills (mentorship, knowledge etc) and financial resources together.
Proper tokenization, when done right, is far cheaper than end-to-end encryption. This is the purpose of the value your token will offer.
Processing your tokenization through an outsourced vendor with PCI certification is growing as the preferred method of data exchange. This method eliminates your company from maintaining a token vault in order to retrieve data and exchange the authentication. The appeal of removing confidential customer information from your company, remains popular with the outsourced tokenization process.
The benefit is in the liability costs and savings via PCI compliance, being significantly reduced by not collecting and storing credit card data.
Clearly outline how your tokens will be distributed.
- What stages will be used
- Private sale
- ICO itself
- General sale
- How many tokens will be
- Issued in total
- distributed to your team
- sold during each stage of the token sale
- sold during special scenarios as additional sales.
Knowing your platform for distribution is your easiest choice. ICOWatchlist data shows 81.7 percent of tokenization projects use Ethereum as their platform of choice. There are other markets such as Waves, Stratis and Hyperledger but their combined total remains at only 3.7 percent.
While some of these platforms assist with the creation of tokens, customizing specific aspects of them will be required by your development team or a trusted third party you’ve engaged.
Your White Paper
This is your most important document of all. It must cover:
- Market analysis / Competitive set analysis
- Company Vision / Mission
- Development Strategy
- Token specific information
- Token distribution information
- Legal issues
- All resources available
- Description of your team
- Early investors
- Early advisors
- Anything else relevant but not mentioned above
While investors may not review each page of your document, rest assured their legal teams will. You must ensure everything is included as the ones who do end up reading each page will be of most benefit to you as they will bring forward any issues in advance that may hinder your ICO.
If you are running a PR campaign and blockchain pundits discover flaws, they will have no issue publicly exposing these flaws to their tens of thousands of followers.
PR and Marketing
This step is only begun after your team is in place, white paper is complete, token is created and your ICO campaign is complaint with all laws and regulations applicable.
Paid ads need to be fully taken advantage of. The ad spend costs usually are relative to the amount of retail investment that comes in. So you can equate it to for every dollar you spend on ads you will raise 3-7 times that. You will also need to decide how much money (or tokens) you will make available for bounty programs, provided they are a part of your campaign.
A proper PR campaign is similar to your website in that it must be clear, concise and targeted to your potential investors. This campaign must clearly define where your company positions itself today with supporting FAQs online as well as in your terms & conditions.
Communication is the keystone to any campaign and as such, your company must be in constant ‘smart’ contact with investors prior to and during the campaign. Involvement in the cryptocurrency community is key here as well.
Telegram Line, Kakao, Forums, ICO calendars, Reddit, Quora, Slack, LinkedIn, and Facebook are only a few of the many resources at hand to engage in community communication.
Without a doubt, ICO’s are the new seed funding for 2016/17/18. It is new territory and changes come about swiftly. While shakeouts and market changes are inevitable, this is only the beginning of an incredibly powerful fundraising model for new ventures.