How to start?
Before launching an initial coin offering (ICO), find out what an ICO is. An initial coin offering is a fundraising tool that promotes future money markets in exchange for digital currency of immediate net asset value (Bitcoin, Ethereum, etc.). ICOs have become a favorite way to fund cryptocurrency projects.
Are Initial Coin Offering Campaigns Suitable for Any Business?
Although this is the most significant trend currently, it is not suitable for all companies on the market. It can even be detrimental.
Some economic actors seem to think that the initial coin offering is a perfect tool for any project. It allows you to raise money quickly and get around the lengthy and costly processes to obtain funds for your business. Although this was the case during the first days of the formation of the initial coin offering market, it is no longer true.
Like everything else in the cryptocurrency industry, ICO’s ethos is growing rapidly, but before deciding to launch your ICO, you must think about the foundation of your operation and its real value.
Ask Yourself the Right Questions
Before launching an ICO, it is necessary to make sure that your project needs the blockchain technology to be set up. To do this, answer the following questions:
- Why do you need a token? Does your product require a blockchain? What are the benefits of using blockchain technology?
- How can you structurally link your token to your product? Can you integrate it into your application?
- How can your token interest investors? Is there a mechanism that links its value to the success of your product?
- Will your offer fall within the legal framework? Remember that with an ICO, you do not sell stocks. Otherwise, it would be an IPO. You can not guarantee any profit.
After understanding how an initial coin offering works, having verified that you need it, and which model suits you best, you can look into the technical issues to model the project.
How to Leverage the Team in an Initial Coin Offering campaign?
Avoid hiring unknown members. Present the team, including the background of founding members (at least links to their Linkedin profiles) and developers (links to their Github profiles): in the face of the proliferation of more or less serious ICOs, it is the unity of the team and transparency on this subject that will reassure tokens buyers.
Establish a Transparent and Consistent Mechanism for Selling Tokens
In theory, it is preferable that the gains of an ICO do not exceed the estimated costs for the development of the project. In this perspective, an ICO should be “capped” with maximum leverage. For these questions, there is no single answer: everyone should invest according to their needs, ambitions, and plans.
Similarly, price mechanisms that increase over time are likely to promote irrational behavior (fear of loss) and are therefore subject to controversy. It is true that these mechanisms favor ups and downs as consequences. Again, it’s up to you to consider them. So, you should really think about the possibilities, advantages, and disadvantages of the different possible methods to start and develop an ICO-based project.
The Objectives of the Project
Make sure your goals are defined and realistic: it is a vital task. The list should be clearly stated and must contain realistic objectives.
Of course, the team and the white paper still provide a proof of concept for the project. Being able to present a functional and tested product to the public is the best thing you could want when preparing an initial coin offering. If this is the case, it is strongly advised to make the prototype the primary objective of the campaign and to wait for the confidence of the investors to rise.
How to Protect the Interests of the Investors?
Premiums for early investors, a secure portfolio for contributions and a return process for funds in case of failure. Transparency is therefore essential to reassure token buyers. It is therefore recommended to describe the project development plan following the ICO in as much detail as possible, and include estimates of time and costs for each stage of the project. For example, following the initial coin offering, it may be useful to set aside a portion of the amount raised for security actions (independent audits, for example).
A posteriori, between the time of the ICO and the launch of the network, we must not forget (or neglect) to regularly inform token holders about the progress of the project regarding the roadmap announced previously.
What Factors are Important?
Deadlines and good communication are the most important steps. In most cases, ICOs are time limited, which means that you must be prepared.
The most important elements to address are those listed above: the team, the objectives and the conditions of the investors. This means that the campaign has to be launched after they are firmly established, which can probably take about two to four months after the creation of a project.
Another important aspect of a crowd sale campaign is advertising. In fact, one of the most challenging parts is being visible, because the market is growing and there is an ICO launch almost every day. Make sure you communicate regularly with your audience before and during the entire campaign. This will help bring more people together, as well as provide feedback.
The main communication channels, in this case, are social media – Twitter and Facebook, forums – Bitcointalk and Reddit. Consider the option of hiring a professional whose only job will be to monitor and participate in dialogue with your audience on these sites.
There are ICO platforms to make your job easier. Their goal is to facilitate both the process of launching an ICO and investing in one. They work similarly as Kickstarter, which groups together various crowdfunding projects and makes it easier for contributors to find in which project they want to invest.
This approach can save a lot of money and effort, compared to launching a token, which is inevitably associated with high development costs. Admittedly, it gives the company less control over the further development of the token, but if it is not the primary product of the company, the compromise may be worth it.
Errors to Avoid
Breaking the law is the first and most obvious. When you are dealing with someone else’s money, you must make sure that you do not break the rules at every step, so it is strongly recommended that you hire a lawyer when planning a campaign.
Losing the trust of your audience is also a big mistake. The blockchain industry is unregulated and full of scam stories, so participants are very cautious. Any sign of potentially fraudulent activity will serve as massive red flags for the public.
That’s why staying authentic, keeping in touch with contributors, and keeping your project up-to-date are some of the most important things you can do for your crowd sale campaign.