The new Initial Coin Offering phenomenon exploded last year in May with little information for the people that are not involved in the blockchain community. The most speculated information was that they make lots and lots of money. The method is very simple, the startup comes with the technology and anyone can invest in that idea with cryptocurrencies. The participants who have bought in early are usually incentivized to increase the project’s value.
The Key to “ ICO Land ”
According to Jonathan Chester Founder & President of Bitwage all you need three things to start an ICO:
- Marketing/Investor Relations
Every ICO has behind a new idea that will change or improve the future of an industry or even the world. The most profitable and sought out is the communication sector with almost 29% capital raised from a total of $7.6 billion. The ICOs in Finance are on the second place followed by trading and investment projects on the third place. You can see the full chart here.
An important detail is choosing the perfect platform. Choosing the right blockchain gives the projects the certainty that the token will sell and also that the investors’ funds are safe.
It would be nice to have a “crypto-jail” for scammers but that’s only possible for the future rogue AI’s that will try to conquer the virtual space. So when it comes to legal issues, the SEC is always trying to find ways to improve the regulatory base. An amount of research is needed and also a compliance to the new updates that are being made. By adopting the new regulations is also a way to stand out in the crowd as a serious business with clear perspectives and purposes.
Kotler’s rules of marketing will not help you a lot in this industry. So just a fancy logo, a great punchline and a prayer are not enough. The product has to be ready for action or a least in development before you can start the marketing campaign. ICOs usually have a board of advisors delegated for these tasks.
It’s not all sunshine and rainbows
There are a lot of ICOs that fail big in the game of crowdfunding. Either because of poor marketing or the idea behind the technology was not relatable for the investors. Good examples for big fails are CoinDash, The DAO and Maidsafe.
Daniel Dabek said in an interview for FORBES:
“Maidsafe launched it’s ICO on the Mastercoin protocol, now called OMNI. The original plan was to only accept Mastercoin for 10% of the crowdsale since there was not much market liquidity for Mastercoin. Bitcoin would make up the rest of the sale. However, the smart contracts did not work as intended, there was a technological failure and Maidsafe ended up with Mastercoin making up 60% of the sale.”
ICOs are potentially good businesses with ideas meant to change the future of both the real and virtual world (or just to fill your pockets with cash). But the steps towards success are always slippery and they can send you back to square one in an instant.