An Initial Coin Offering is still the most exciting fundraising tool in the world for new digital companies. If you’re reading this article, you might want to try throwing your own ICO. We’ll quickly explain what this might entail, then go on a deeper dive to address all of the kinds of work you’ll need to do to make your ICO a success.
Launching an ICO is not an easy process. For successful ICOs, the correct personnel within a team is required to face all aspects of an ICO launch. There are legal matters, full marketing campaigns, development barriers plus much more that needs to be considered. This guide will highlight the major aspects needed to launch a successful ICO.
Ethereum raised $18 million in a 42 day ICO. EOS raised more than $4 billion (!) in a year long ICO. Other ICOs are complete failures, not coming close to meeting their funding goals. These companies typically peter out before they can launch valuable technology of any kind. Other ICOs are scams.
While ICOs are not formally regulated in most countries, they still have to follow certain rules. ICOs in America are policed by the Stock Exchange Commision, who has already taken down some fraudulent ICOs. ICOs in the United States are also subject to tax rules from the IRS. More regulations may be oncoming. China and South Korea have both banned ICOs outright.
ICOs can be run for cheap, but some estimates put the average ICO cost at at least $60,000. This covers initial development, marketing, legal costs, payroll, and a whole lot more. The ICO may be a fundraising tool, but you’ll need at least some startup capital to get to that step.
You may choose to run an ICO because you have an idea for a necessary technology that needs blockchain to function. You understand that the crypto community can be financially supportive of good ideas like these, and you know you have the skills to create a success. Aren’t sure if this sounds like you? Keep reading.
ICOs sell digital coins, but they’re really selling their team’s ability to create a new technology. There are almost 2,000 cryptocurrencies listed on CoinMarketCap today. Most of these companies started with an ICO, and most of them are redundant in some way. Only 40 of the top 100 cryptocurrencies even have a working platform in use today. Clearly, this is a crowded and immature market.
Looking out into the sea of ICOs and cryptocurrencies, it can be hard to imagine a solution for a problem that no one else has thought of. But this is your job if you want to run a successful ICO. You have to solve a new problem, or solve an existing problem better than any other blockchain project.
This is a tall order, but this is how innovation has always happened. If you don’t know the industry well enough to create truly novel solutions, the ICO path is likely not for you.
Most ICOs start with a team. To create your vision, you’ll need engineers, developers, designers, communication specialists, lawyers, advisors, and other smart folks. You may possess many of these skills yourself, but it will be almost impossible for you to do this all yourself.
ICO funds can be used to attract blockchain specialists and technologists to your team. But few ICOs are successful without a core of devoted developers already on the job. Not only do you need these people on the payroll, you need to communicate their qualifications to the crypto investing public. If people don’t believe that your team can achieve your goals, they aren’t going to fund your project.
A blockchain is a very specialized piece of technology. It’s ideal for data storage and security, for fast and affordable data transfer, and for communication and service applications of many kinds. The potential is vast, but you still probably don’t need a blockchain if you’re starting a landscaping company.
Many ICO companies enter the game without explaining why a blockchain would make their business model better. These cases are a naked cash grab from the investing public’s perspective. If you don’t need a blockchain to deliver the goods, this funding method likely will not pay off for you.
We’ve already covered the concept of novelty being important for blockchain platforms. People will be more interested in your ICO if you serve a new and useful purpose. But sometimes novelty consists of solving an old problem in a more efficient way than the current solution. This happens all the time in crypto.
There’s a concept in economics called “First Mover Advantage”. The first ICO company that brings a new technology to market automatically gets all the rewards. There’s no one else to take a piece of the pie.
There’s a second concept called “the Advantages of Backwardness”. New blockchain projects can learn from the mistakes of First Movers. Oftentimes, First Movers create a technology, discover that their design could be better, then have no easy way to rework their product. Latecomers can apply newer best practices, resulting in blockchain products that work better than the status quo from the very start.
Crypto as an industry is still young, but we don’t live in the earliest days either. Many, many ICOs have already been conducted. Many, many ICO companies have already failed and gone defunct. If your company isn’t solving a totally new problem, you can still have an effective ICO by understanding the tech of your competition, and creating something that works better.
ICOs, technically speaking, are conducted using various methods. Blockchains like Ethereum make it really easy to create new tokens, using code taken straight from their website. About 80% of ICOs are created using Ethereum’s tech for this very reason. Other ICOs are run on newer platforms like NEO. Still others construct their own blockchains from scratch, offering an ICO according to their exact standards.
An ICO can be created through one of these means by anyone with a moderate to advanced technical knowledge, with a specialization in blockchain tech. However, not all of your work goes on “under the hood”. You’ve still got to figure out how your investor-facing ICO characteristics will be organized, but we’ll get to those in a minute.
For certain people, running an ICO will be a legal breeze. Lax or nonexistent regulations will let you run your fundraising session as you please. Other jurisdictions have strict rules for ICOs, or may ban them entirely. Learn about the legal atmosphere or your region, and speak to a lawyer who has experience in the blockchain space. If there is not one available locally, find one online. The money you spend on legal advice will pay off when your ICO runs smoothly, without a letter in the mail from the IRS.
A whitepaper is a technical explanation of your blockchain’s technology. It also communicates your vision for what your technology can become. The whitepaper can be academic or inspirational. Many are both. Here, you want to show that you really know what you’re talking about. Have your engineers provide details about the code they’re crafting. Don’t be hasty or rely on generalities.
A good whitepaper is usually more than 10 pages long, though there are exceptions. Some are as long as 100 pages. Content in king in the whitepaper, and there’s no rule about length. Simply write as much as you need to convey detailed concepts about your blockchain, and leave it at that. Investors actually read this stuff. If you write a whitepaper that makes sense and conveys the excitement of your project, you’ll find interested parties making contact.
No ICO is successful without advertisement. This aspect of the process is little different from any other advertising campaign, though your efforts will be focused on the attention of people who already know about cryptocurrencies (most of the time).
Crypto communities live on forums like Reddit and BitcoinTalk Forum. Your materials should be presented in these places. Don’t simply spam these networks with your logo and fluffy hype pieces. Have respect for your audience’s intelligence, and appeal to them with real solutions to appreciable problems.
If you’re not a marketing professional, it’s a good idea to hire one. Beyond forums, you can stoke excitement about your ICO with interviews in web and print media (Forbes, for example, covers this stuff). Make sure the various crypto online magazines are talking about your ICO. Offer early rewards and other incentives.
Finding someone(s) with competence in marketing is essential. If you or your team can’t nail this step, it’s unlikely that word of mouth alone will raise sufficient awareness for a successful ICO.
Before you alert the media, your plan for your ICO must be well organized. The time before your ICO when the public becomes aware of your company is called the Pre-Engagement Period. Your ICO strategy has to be available from day 1.
There are basic housekeeping issues that must be addressed: Will there be a Pre-Sale? When will the crowdsale start? At what point will the ICO close (goal? date?)? How will tokens be delivered to investors? How will their investments be delivered to you? What is your strategy for the day after the ICO?
There are the economic considerations: How many coins to create? Will you offer bonuses? How many will be held in reserve, and for what purposes? How much of the supply will be distributed to the investing public? What exchanges will list your coin, and how can these partnerships be accomplished? What should you charge for your ICO coins, and what currency should you accept in exchange?
At this point in history, hundreds of ICOs have run their course. A number of best practices are now established. Learn from the experiences of past ICOs and craft a plan you can execute without a hiccup.
Following your ICO, your coins will need to become available on cryptocurrency exchanges if your project is to become a success. To create a partnership with an ICO, you may have to follow one of several strategies. Every exchange is different. Some exchanges will require payment in order to list your coin. These are often large exchanges that will represent a big “bump” for you and your token if it were to get listed. Others simply need to be asked. They list everything. They make money every time your coins are traded, so they are happy to do so.
Other exchanges have certain criteria for listed coins. These exchanges want only to list high quality projects, so that their exchange is not bogged down with lousy coins. Still others may have a complex application process to satisfy the requirements of a national or local government. There are even decentralized exchanges that have no staff. Anyone can list their coins on these exchanges using established procedures.
Exchanges can combine any of these characteristics. In most cases, you’ll have to approach them individually, or hire a representative to do so. Exchanges are swamped with business, so your project may not represent a priority to them. Don’t be discouraged if partnering with exchanges is slow. Many good projects take months to get listed on the best exchanges. Keep developing your project and keep trying to get your coin listed. Your efforts will pay off.
From here, it’s up to you to make an incredible product. Coin prices live and die on the integrity of the technology they represent. Bitcoin has no value if the blockchain isn’t secure. Ethereum would probably be at $0 if smart contracts had never been perfected. Some projects take months or even years post-ICO to finish their technological masterpieces. The important thing is that you do the work, and finish the work. If it takes a long time, or if you experience delays, communicate this to your investors and other interested parties. People have patience for greatness, if there is hope of big payoff. Your job post-ICO is to create enormous payoff in your final product or platform.
An ICO can take a year of planning, months to execute, and tens of thousands of dollars to conduct. Not every technology team needs an ICO, and not all of them are up to this task anyway. If you get to the end of this guide and still think an ICO is for you, we look forward to seeing your contribution to this incredibly exciting industry!