How not to do an ICO – “Common ICO Mistakes”
ICOs have now become the new ways to fund startups and projects related to blockchain development. With the venture capital model now almost obsolete, ICOs are a new rage. We have successfully journeyed from these offerings making mere millions, to figures crossing the billion-dollar mark easily. Cryptocurrency projects and initiatives are now booming, thanks to ICOs. Perfectly formulated ICOs, well-executed plans, solid smart contract logic, and reliable token economics are the features of a well-executed blockchain development coin offering, with investments for such projects soaring past the USD 1 billion mark easily.
However, all is not rosy when it comes to doing an ICO. There are some common ICO mistakes and ICO flaws that should be avoided in order to keep your project from biting the dust. Constant vigilance on your part is necessary to ensure that your ICO reaches the heights that it is supposed to. Before getting lost in all the glitz and glamour that the world of token offerings possesses, it is important to ask yourself one simple question.
Is an ICO fit for your business?
Before knowing about the common ICO flaws, one should actually know if doing an ICO is a mistake in itself or not. There are business models regarding blockchain development that does not suit the concepts that an ICO runs on. Blockchain real estate is one such sector, where startups and companies have been using blockchain to crowdfund their project, but it just hasn’t come off for them. In a real estate scenario, there is bound to be an advisor-investor ‘sticky situation’ of sorts, because ICOs do away with the need for advisory, even though real estate is something which cannot function without advice. Thus, usually what happens is, in the name of legitimacy, companies hire advisors who do nothing but get paid for being on the employee payroll. This is detrimental to both companies and investors, who might get disenchanted by this sticky situation.
Once you are cent percent sure that an ICO fits what you are trying to achieve with your blockchain development, then, by all means, proceed with your crowdsale. Here is where the common ICO mistakes come in.
It is your job to keep some simple albeit important things in mind when you carry out your coin offering. Lack of attention towards even one of these factors could lead to your ICO not performing as well as you would have liked, or even completely failing. Therefore, it is important that you realize what is to be done and what is to be avoided like the plague. What are the most common ICO mistakes that we encounter?
Also Read: How to do a Successful ICO?
Lack of a clear plan often leads to a failed ICO
When was the last time you came across a project with no clear sense of direction, faulty vision statements and no instance of planning whatsoever, and thought to yourself, ‘That’s awesome, I’ll invest in this project’?
Never, probably. Common ICO mistakes like these are what put investors off. A clear plan, well laid-out steps of operation and a good vision statement as to what you expect to achieve with your project is important to make your project a legitimate one, and to make your ICO a successful one, and ward off any ICO flaws. Even those people who want to invest in a good project will refrain from doing so if they cannot understand what the fuss is all about. Your blockchain development project should make it very clear what it aims to achieve in the future, how you plan on doing things, what’s in it for investors, and what kind of products or services you’ll offer. This is indeed one of the most common ICO mistakes, as developers or project founders tend to lay off the hard work in the initial planning stages of the project, thinking that they would kickstart the effort once things get up and running. The important thing to realize here is that in order to kickstart things, you need to put a great deal of effort beforehand, to lay down that organizational plan for your project.
Below par whitepapers and prototype could be the biggest ICO Mistakes you’d make
Whitepapers are one of the most crucial aspects of any project that is looking to make money through an ICO, and having a bad one is one of the most common ICO mistakes. The first thing that investors are going to do is to look at your whitepaper, in order to know about the technical aspects of your project. Bad writing, an omission of crucial details, confusing or misleading documents- all can be detrimental to the success of your ICO. Also, not putting time into the project video could be an ICO flaw of sorts for your potential million dollar ICO.
When it comes to the prototype, a competent team of programmers is a must, so that there is no chance of there being any glitches or bugs in the code, and no chances of any common ICO mistakes and your dApp performs exactly as you want it to. Security is also a very important feature, as most ICOs are victims of hacks and scams, so the code must be tested to ensure that there are no vulnerabilities. Taking the example of KICKICO, they were forced to stop their ICO for about 2 hours in order to address some security flaws, and secure the already raised money. This, it is believed, cost them about USD 5-6 million in potential further funding.
Having a substandard whitepaper and glitched prototype is one of the recipes for disaster when it comes to doing an ICO, and is a common ICO mistake. Therefore, be wary of you dApp and your documentation, and get it fixed as soon as possible by your blockchain development team (if it needs fixing).
No attention to PR and Marketing team
The success of an ICO depends on how well it is promoted and advertised to the investors. Yes, the whitepaper and prototype are one of the pillars on which your project stands, but what use is having a splendid documentation and killer blockchain development team if it is not well promoted, and no one knows about it? You wouldn’t even raise a tenth of the money that you would have raised with a good PR and Publicity team in place. The time to assemble such a team is right at the early stages so that you can start appearing in the media as soon as possible, and your team helps you get in with the right people for your project. The more trust that you can put in your marketing team, the better. They are the ones who will protect you from the most common ICO mistakes and ICO flaws. Third parties here would not be preferable, but if they are the best of the best, there is no harm in shelling out some extra money with the prospect of making millions more. Creating blogs, launching your websites, advertising, and other media outlets are all ways to communicate your product to the world, and it is totally necessary to do so in order to make your ICO a successful one, and avoid any common ICO mistakes and ICO flaws.
Not having a marketing plan in place can also be detrimental to the health of your project and your ICO, and is another common ICO mistake. Having the right channels up and running is what gives your project the cutting edge, it is what separates the best from the rest. So take some time and put together the best marketing and PR team that you possibly can, in order to avoid any ICO flaws.
Using flawed logic, due to setting the cap too high
Another common ICO mistake is that due to the volatile nature of cryptocurrencies, their prices are bound to keep rising and falling for the duration of your ICO. Because of this, your initial cap and goal may increase or decrease depending on the prices. Now, the cap has to be coded into the smart contract, and although the goal could be lowered, the cap has already been written into the contract and claiming that it was lower than what is stated could be taken as unfair means by investors, which is understandable on their part.
Owing to the previously stated point, the volatile prices of cryptocurrencies could, in turn, introduce flaws in the smart contract logic. Due to inconsistencies with the cap written into the contract and the actual figure stated, the community may accuse you of cheating and may launch a vendetta against you due to this ICO flaw. If you ever find yourself doing such a common ICO mistake, keep releasing fixes and updates to your dApp that resolve the issues with the smart contract logic, and maintain consistency with the caps coded and stated in the documentation. If you, for example, decide to reduce the cap (due to an increase in cryptocurrency price), you could gradually release updates which solve the issue with the incorrect logic.
Flawed token economics repels sane investors
No matter how wondrously you may carry out all the other blockchain development steps involved in your ICO, any issue with the procedure will ultimately boil down to the tokens that you distribute. Having flawed or lackluster token economics can prove to be a downside for your offering, and another common ICO mistake, as the tokens are representative of everything that you are offering to your investors. If there is a case that you simply cannot explain to your investors the utility and usage of your tokens, there is a high chance that they will refrain from funding your project. After distribution, how the token will function, how the value will be structured and what will be its utility are a few questions that should be answered by you satisfactorily to help rake in that extra million dollars. The marketing strategy is also involved at this point, as the job of communicating all the aforementioned features of your token is the work of the marketing and PR team.
Substandard security measures
Handling your investor’s money responsibly is the least you can do to instill faith into them. Flawed security arrangements and vulnerabilities are not going to benefit your offering in any way, shape or form. Hacks and scams are becoming notoriously popular, and there is every chance that someone with malicious intent will look to compromise your project and run off with your investor’s money. Therefore, it makes having tight and non-penetrable security features a must when you are looking to avoid common ICO mistakes. This can be achieved by having guides and FAQs that clearly describe the workings of your website and dApp, so that users are not tricked into transferring their money elsewhere by scammers. Also, the network on which your platform works should be a secure one, since any vulnerability can be easily exploited by hackers who may then proceed to steal all of the money raised by the ICO, which is in itself a huge ICO flaw.
Lack of communication with investors and users
The importance of building a good community cannot be emphasized any further. One of the major reasons why ICOs fail, even after doing all the right things regarding blockchain development, is lack of communication between the developers or project leaders and their investors and users, one of the most dreaded common ICO mistakes. This communication gap is what leads to less and less money being raised, as people who aren’t aware of how your project works will naturally not be willing to invest. The marketing and PR team has a huge role to play here since it will be their planning and organization that leads to people knowing what your project is and how does it work.
Also, once the PR strategy is up and running, another common ICO mistake is to stop publicizing the event any further. Creating awareness among your community is a marathon, not a sprint, and the process should not be stopped at the successful conclusion of one or two events. The best customer you can get is the one you already have, and a strong line of communication will ensure that it stays this way.
So, what’s the final word?
Now that you know all about how not to do an ICO, and all the common ICO mistakes and ICO flaws, you can go ahead and start planning for that big token sale that will propel your blockchain development project to new heights. Keep in mind all the things that you’ve read here, and you should be good to go!
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