Initial Coin Offerings – The Next Frontier of Startup Funding
App Builder Appy Pie, Oct 11: ICO, it all started in 2017, and is now being summed up as “The Next Frontier of Startup Funding.”
Similar to Initial Public Offering, Initial Coin Offering is a form of crowdfunding using cryptocurrencies, which is specific to Blockchain world.
ICO came into limelight in the beginning of 2017, and by the end of July 2017 became a debatable topic among the global leaders. Even reports show that many controversial ICOs collected around $600m from people for uncertain purposes, which had nothing to do with business idea.
Though many ICOs have earned a good chunk of revenue in a form of cryptocurrencies, but truthfully this new fundraising phenomena, right from the bitcoin community, is sure to put an end to easy money making process very quickly, while forcing stupid and greedy investors to go beyond making money and realizing the true nature of the proposition, payback and monetization, transparency issues and many others. And, if blockchain’s new reality goes the right way, the next wave of smart investors would be ready to invest more, rather than buying something for the namesake of tokens.
So, let’s take a deeper look into this groundbreaking blockchain technology, Initial Coin Offerings (ICO).
Who are ICO Clients?
Initial Coin Offerings, or ICOs, is a trending topic in the business industry, which is gaining interest of many entrepreneurs who are seeing potential growth of their organization in the blockchain market. Here is an overview of people who are looking to invest in ICOs:
- Tech companies with existing businesses
- Online entertainment industry, including casino, betting, gaming, sports, etc.
- Financial technology companies
- Investment and funding companies
- Conventional real-sector businesses
- Blockchain/ICO/Cryptotrade service providers, the main source who created the recent boom and creating the new market of opportunities from the scratch
- Service providers who utilize distribution ledger integration into the real economy
- Former and future scammers
An Overview of ICO Budget
Generally, it costs up to $200-500k for conducting Initial Coin Offerings utilizing external services and consultants, of which 5-10% budget is usually spent on:
- 30-50% on marketing strategy, digital promotion, and content marketing
- 20-30% on PR campaigns, and conferences
- 10-20% on advisors, consultants for legal activities, whitepaper and storyline
- 5-10% on front-end integration, including websites, ICO-page, wallets
- A fixed amount for ICO campaign manager, including a few percent from the raised funds
Here, we will guide you through the entire process of ICOs so that you can decide what you can handle yourself and what you may have to delegate.
Token and Cryptocurrency Misconceptions
In this guide, we have explained common misconceptions between tokens and cryptocurrency.
Tokens – Generally equivalent to the company’s stakes (as in IPO), or prepayment for services, tokens are issued for Initial Coin Offerings.
Cryptocurrency – Often termed as Bitcoin or Ethereum, cryptocurrency is equivalent to real currency, and primarily used in exchange to products and services purchased. In a fundraising campaign, instead of real money, cryptocurrency is circulated for making transactions.
Step 1. The Idea
Before moving ahead with blockchain technology, you must be clear that your idea is well-connected to blockchain world and comprises at least one of the several pre-requisites:
- Must provide technical innovation or solution for distributed ledger technology, including:
- Trade finance
- Cross-border payments
- Digital Identity
- Multi-party aggregation
- Record keeping
- Big data
- Smart contracts
- Transaction speed
- Add values to new digital era by providing new services and environment created on blockchain technology, such as:
- Social networks
- Benefits blockchain-free businesses, while adding value to bottom line by integrating with blockchain technology:
- Supply Chain management in blockchain
- Minimizing transaction costs
- Adding transparency to operations
- Adding cutting edgy technological competitiveness
- Business Process Reengineering in blockchain
So, before you give a thought to ICO, free up your mind, and remember if 20-years old can make it big, why can’t you?
Moreover, you can even test your ideas at BitcoinTalk. Simply start a new thread in the relevant topic by including new theme, like “pre-ICO – Airbnb for Love Birds” (a great idea, unfortunately not ours). And, when you launch the main marketing campaign, simply remove the prefix “pre”.
However, your idea may rest in peace after receiving feedbacks from the community, therefore don’t be in rush to spend money before you have actually tested it somewhere, such as Focus groups, Telegram channels, and other communities.
Stage 2. Team
We won’t be specifying on this as you can either have consultants or outsource your task, or you can have your own team who expertise in:
- Strategy and storytelling
- Marketing strategy
- Content managers
- Community managers
- Targeting experts
- Blockchain technical team that develops:
- Front-end and back-end integrations to blockchain
- Wallet integrations
- Servers and hosting
- Security around your infrastructure
- Handle the operations budget
- Raise finance for ICO
- Monetization and Exit strategies
- Fiat to crypto and back strategies
- Genesis for token emission: size, price, regularity
- ICO cap and distribution of funds
- Exchange rate issues and forecasts
- Tax issues
- Bank compliance issues
- Exchanges and CryptoTrading Platforms’ listings – post-ICO
- Legal (Appendix 2)
- Jurisdictions and cross-border issues
- Tax issues
- KYC issues
- Compliance issues
- Token underlying idea and attached rights and risks
- SEC and other developments (https://coinbase.com/legal/securities-law-framework.pdf )
- Different industry niche, including financial services, recruitment, real estate, technology, etc.
Stage 3. Know Your Competitors
Before you start your ICO campaign, make sure to understand your competition. Here, your competition is not limited to look-alike services and products that you directly competing against, but it also involves other ICOs who are competing for investors and their money. So, before launching your ICO campaign, you must be clear that you need to stand out one way or the other, if you really want to achieve success in the blockchain market.
Stage 4. Company registration
By now you have a clear idea about Initial Coin Offerings, you very well know who your competitors are, and what manpower you require. Now, comes company registration. So, before going ahead with it, think outside the box and mitigate the risks by effectively dealing with grey unregulated ICO practices. Here is the list of some of the countries using ICOs:
- Starta – US
- MobileGo – US
- Golos – Beliz
- Polybius – Estonia
- ZrCoin – Cyprus
- Waves – UK
- SONM – Singapore
- Exscudo – Estonia
- BitCAD – Singapore
For more information regarding recent developments by country in terms of legal acceptance of the cryptocurrencies, please visit Wikipedia: https://en.wikipedia.org/wiki/Legality_of_bitcoin_by_country_or_territory
Stage 5. Describe your product value
The brainchild of every ICO, WHITEPAPER, is generally a summarized analogue of Business Plan and Prospectus. So, if your team is ready – it won’t take too long for you to pen down something that you are completely aware of. In your whitepaper, you can describe about your products and services, how it is linked to blockchain technology, and much more.
But, before bringing your idea to paper, you must note that there is always a direct connection between whitepaper quality and the amount of crypto and fiat currencies that fill your ICO-wallets, so you must move accordingly to make your ICO a success.
Moreover, always keep in mind that a few investors read the whole document, thus your presentation must be accurate and engaging, if you want to grab their attention in first attempt. There is also a trick – the bigger the whitepaper, the less chances anyone would read it to end. So, follow the below given approach to create an innovative WHITEPAPER for your Initial Coin Offerings.
- Background – where and why it all started
- Introduction – your market niche and why you need blockchain
- Market analysis – SWAP analysis, growth potential, competition
- Product introduction – what products or services you are offering
- Product specific section – more detailed product specifications with visuals, graphics, tables and math
- Technical information – detailed description of technical specifications of the product
- Case studies – examples of the product usage
- The pre-ICO – the terms of private placement or fund-raising pre-ICO
- The ICO – the terms for investors
- Road map of development – what has been already done, what needs to be done
- Financial projections – distribution of raised funds
- Team – 4-6 key team members and advisors
- Conclusion – strong and catchy message, slogan to emphasize what a unique and lucky opportunity your investor will receive
- FAQ – spend good time preparing any possible question that your investor might have. Make sure that your investors understand their way around the Personal Cabinet and payment options
Stage 6. Website launch and e-mail subscription
Almost every ICO active today possibly have single-page website, which makes it convenient and easy to understand for users. So before moving ahead to launch your website, you must ensure a few things discussed below:
- First of all, if you are planning to make it big with advanced marketing campaigns, make sure to have a secure hosting in advance
- Be prepared for the D-day as you may experience an enormous amount of traffic at once. Failing to cope up with a huge number of visits might bring doomsday for your Initial Coin Offerings
- Also, be prepared for the risks as no one knows when your website can be subject to DDos-attacks from hackers, or least possible, might be competitors
Our motive behind these warnings is to make sure that your ICOs is a great success. Here is the proven way how you should make your website:
- Subscription form
- Video presentation
- ICO description
- Team member profiles
- Product description
- Case study
- Whitepaper, terms and conditions, disclaimers
- Contacts and social networks
You can also keep investors updated about your latest offerings through different subscriptions, which includes:
- Weekly news
- Regular reminder about the starting date for ICO
- Reminder about ICO 5 minutes before its start
- Security issues and
- Step-by-step guides or tutorials for using the Personal Cabinet and Payments
Stage 7. Investment proposal
By now, you must be clear about pre-Sale, or pre-ICO options. Here, we would recommend you both, as it can help you identify loopholes and glitches in the system, creating a press-event opportunity, which is great for marketing on social platforms. Here is discussed the checklist for running a successful ICOs:
- ICO start and finish date: no longer than 3-4 weeks
- Currency type, i.e., cryptocurrency, or fiat currency. Also, keep in mind the banking and country restrictions
- Product prototype – whether it is ready or not?
- Tokens description, including total emission amount, cap limit, ICO token value, etc.
- Audit of the core code by the independent auditor, placement of the core code to GitHub or similar
- Tokens distribution, i.e., describe investor’s share, team’s share, advisor’s share, automatic or manual distribution, etc.
- Partners, mentors and advisors
- Bounty campaign terms and conditions
- Bonus structure in case of the multi-round ICO campaign
- Regulator’s risks to do with US and other countries’ limitations and restrictions for participation in ICOs
- Distribution of received funds, which includes product development share, operation expenses share, advisors share, investors share, founders share (brief explanation), and clear information about incentives and motivational strategies for investing in tokens
Stage 8. Marketing
Here is the list of social networks and communication channels that you can effectively utilize for providing your ICO event:
- Website blog
- E-mail subscription
- Link to GitHub (for open-source code)
In case if you can afford it – go multilingual. Yes, you got it right, if you have the capability you can initiate ICOs in multiple language, but make sure, you have appropriate multi-lingual support available at your desk 24/7.
Always go for professional moderators, who can automate the news efficiently, without any hassle. Besides legal and tax issues, you must be mainly concerned about your reputation and association with SCAM, which is not something that adds value. So, be ready to tackle genuine and competitors’ attacks questioning your integrity.
Rewarding subscribers, volunteers and active members of the communities supporting your marketing efforts via likes, and comments on social networks can also prove to beneficial in making your Initial Coin Offerings a huge success.
One of the best ways to promote your Initial Coin Offerings is through PR activities. As soon as you are ready with your model, you can start creating a buzz for your Initial Coin Offerings by circulating press releases on industry-related media platforms, based on your marketing strategy and research of the investor profiles. You can also get some industry news makers to comment on your press releases.
Content Advertising and SEO
Content advertising and SEO can also play a major in promoting your Initial Coin Offerings to a wider audience.
Stage 9. Personal Cabinet
Creating a personal cabinet of investors is one of the foremost thing that you must do to keep your clients happy and informed. The main purpose behind personal cabinet is to serve Payment Gateway for purchasing tokens, and keeping track of allocated tokens afterwards. Moreover, the personal cabinet may also act as an Investor’s wallet, so ensure it is highly secure and free from vulnerabilities.
Stage 10. Tokens Emission
In case, if you are looking for cost-effective and customized ways of token emission, let us clear there are only limited options around, including Bitcoin, Ethereum, and Waves. However, if you are doing it yourself and building your own platform to stay away from havoc, you must note down that every option has its own advantages and disadvantages. And, the biggest mins of doing it all alone is excess money and time.
Stage 10. Starting ICO
If you and your team is ready to tackle every challenge related to ICOs, don’t sit and relax, as you never know when someone can steal your fruits of your hard labor and achieve success.
You will never know what will be the outcome if you don’t give it a try. So, leave it to your luck and start your Initial Coin Offerings today!