How to Do a successful ICO?
The startup culture is well and truly upon us now. Everywhere, one can find companies sprouting up out of nothing, sometimes being successful, sometimes fading away into nothingness. The point is, a host of new projects come up every day, and it is evident that a lot of money is pumped into these projects, whether it be through investors, founders themselves or even the public. Therefore, fundraisers and kickstarters are now essential parts of any startup.
In the past, Initial Public Offerings (IPO) have been the way to go for companies. They offer their own stocks to the public in exchange for investments and funds, they can be done by both small and big firms alike, either to make it big into the market or to become publicly traded. News of Alibaba’s USD 25 billion IPO has been well-documented by all reliable sources.
That’s all good, but what exactly is an ICO?
Now, as technology has advanced, new groundbreaking developments are being made in every field. Cryptocurrency is one such sector, which has looked to change the way we trade and transact. The popularities of bitcoin and ethereum have shot up massively in the recent past, and it is not without good reason. The potential and promise presented by technologies like blockchain and cryptocurrency offers an exciting look into how the future of fintech could evolve. New startups are coming up every other day which look to exploit blockchain and cryptocurrency technologies to make a host of tasks easier and more secure.
On the lines of IPOs, comes the concept of an Initial Coin Offering (ICO). It is referred to as the sale of cryptocurrency tokens of a particular company to investors and the general public in return for investment and funding to run their project. With the success of the Ethereum ICO, there has been a huge upturn in the number of ICOs coming up. This is also due to the fact that if the currency being offered is in demand, it can be sold and traded on all existing crypto exchanges.
Also Read: How to make a Cryptocurrency Exchange?
The fundamental difference between an ICO and IPO lies in the entity being offered in return.
ICOs offer their investors tokens of the cryptocurrency being integrated into return for funds, whereas IPOs offer a part of their company, essentially, in terms of stocks. This is the reason why ICOs could become the shares and securities of tomorrow. Ethereum’s successful crowdfunding program was so popular because of its ability to generate tokens which could be traded on the Ethereum blockchain instead of Ether. Also, an IPO can generally be regarded as an exit strategy for a company, while an ICO is an entry into the market for a startup.
Differences between venture capital funding and an ICO
The basic difference between a VC funding and an ICO lies in the fact that an ICO is a B2C sale, while VC funding is primarily a B2B sale. VC sales are long drawn out and usually prove the seriousness of the team/project under consideration, as in an ICO, incompetent teams disguising themselves as innovators may be able to raise good amounts of money just by a few whitepapers and prototypes. The risk borne in VC funding is usually by a single entity or a small consortium, whereas in ICOs, the potential aftermath of a catastrophe could affect large numbers of individual contributors who may risk losing out on their investments. However, the near-spontaneous liquidity offered by ICOs is what usually attracts investors and contributors.
The popularity of ICOs
ICOs are hugely popular with customers who are looking to invest in cryptocurrency projects that they believe could be potentially groundbreaking. They are not to be confused with crowdfunding campaigns, though. ICOs garner funds from investors looking for returns on their investments, while crowdfunding campaigns are basically donations. This is why ICOs are also referred to as crowdsales.
In 2017, however, the People’s Bank of China banned all types of ICOs, claiming it to be dangerous towards the financial stability of the country’s economy. Due to this, all cryptocurrencies tumbled, and offerings already completed were also penalized. Despite a few hiccups, ICOs remains one of the most efficient ways to get your cryptocurrency business up and running.
Because of all the factors mentioned above, companies today are looking towards ICOs to garner investments and enter the market. Doing an ICO is no simple task, but, if done well, can be a gamechanger in the industry and can help a company get a strong foothold in their sector. The stats clearly back it up. As of October 2017, total funding was reported to cross 3 Billion USD, largely due to startups looking to get funds through ICOs and willingness of investors to provide them with the necessary monetary help. In 2017, Tezos garnered the most contribution, with total money raised coming up to a staggering USD 232 million. This was followed closely by FileCoin, which managed to raise just over USD 200 million.
As far as 2018 is concerned, we are just 3 months in, and the Telegram pre-sale ICO has already managed to cross a sum of USD 850 million. All these huge figures lay testament to the fact that ICOs are indeed the next big thing, and can potentially make you billions in investment if done correctly. Now that you know all about the term ICO and how it benefits your setup, the next step is to gather information on how to do a successful ICO. Bear in mind, ICOs are not child’s play. There are a lot of complex and important points to be paid attention to, and many conditions and rules to look after. Not getting sued for your million-dollar ICO is just one of the many precautions you might need to take on your way to crypto stardom.
Stories like Ethereum do not appear out of thin air. Arguably the world’s most successful ICO, Ethereum’s initial offering was a result of innovation and hard work, with an eye for opportunity. Entering the market an then effectively killing it, Ethereum now sits at an ROI of 230000%. How to replicate their success? Here, we give you a detailed, step by step plan on what to do, when to do and how to carry out all the steps required to set up your own ICO.
The action before the action
Planning and organization take up about 70% of the time needed to perform the task. Doing a successful ICO is no different. Papers, legal regulations, personnel, token distribution plan, marketing strategies- all of these need to be well-thought out and decently put together. 66% of ICOs in September 2017 missed their targets, and the reasons may well be hidden in the aforementioned lines. This lays testament to the fact that planning and controlling of various aspects of the process is a fundamental task while setting up your very own million-dollar ICO.
Get your technical aspects right
Investors in this field are almost certain to be people who understand the crypto world inside out. After all, it takes a whole lot of mettle to invest in an ICO, or anything related to cryptocurrencies. Thus, your project needs to be technically sound and appear credible to potential investors, otherwise, you can kiss your funding dreams goodbye.
Put a whitepaper together
Whitepapers are the way to go here. They contain business plans with which companies look to outline the structure of their platform, information on how to do a successful ICO and are one of the first things that potential investors look into. It is, thus, crucial to write a good whitepaper that describes all aspects of your platform, how does it work and why should investors be looking to fund it. The paper should also be understandable by someone who has little technical knowledge of the subject but sees potential in your idea and would like to invest.
Once your Whitepaper is ready, get a prototype of your system open to the general public to see it live in action. This will only increase the reliability of your project among investors, as they will be able to see what they are going to invest in right before their very eyes. Building a reputation will go very far in doing a successful ICO, as most million-dollar ICOs were run by people who already had a foothold in the blockchain sector, and people knew they could be trusted. Engage in communities such as Reddit, build your mettle as a blockchain master and see how your ICO skyrockets.
Failure to execute this correctly could lead to your ICO being likened to OneCoin, which was a total shambolic display of scamming. No proof that tokens were issued exists, and the website was the parody of a scamming/hacking site.
Developing a D-App
Developing a decentralized app is the main part of the prototyping stage of your ICO. The dApp has its backend running on a decentralized, peer to peer network, with the frontend hosted on decentralized storage platforms like Swarm. They are considered quite easy to write and can be seamlessly integrated as part of your project in order to give more authenticity and legitimacy to your potential million-dollar ICO.
Get a distribution plan in motion
Once you have settled on the whitepaper and the prototypes, you will need to lay out a model of how you are going to release your crypto tokens, and what will the actual mechanism be for garnering funds for your project. Having sound financial policies attracts investors, who will fund you worry-free if they know that they are highly likely to get good returns on their investments, and your token sale mechanism will give them a fair idea of the probability of this happening. Keep a check on your inflation rates, because high rates can potentially scare off investors.
Also Read: Why 2018 belongs to 2018?
Assemble a sound team, both technical and legal
Teamwork makes the dream work, doesn’t it? Well, your dream of doing a successful ICO will only be realized if you gather individuals who are skilled in all aspects of the platform, and are willing to work as a team for one common goal. Management is important here, as is personnel picking. There is no use focusing only on gathering the best developers if you do not have people who can market your project. Similarly, your platform will never be stable if you employ only the ‘business’ people, what we’re trying to say is, a balanced team is very necessary to keep your project from falling into the pit of doom.
Let’s take an example of SpectreCoin here. The team behind SpectreCoin work under the pseudonym ‘Mandica’, utilizing the Tor network to make their currency all but untraceable. This outlines the importance of having a technically sound team working on your project.
As far as the legal aspect is concerned, get a good lawyer. Finding a blockchain/fintech lawyer would be a herculean task, therefore, you can make do with someone who is enthusiastic and has basic knowledge of securities, crowdsales, corporate formations, data privacy, taxes and the like. Lawyers will want to work for your idea as long as they are curious and find your platform to be something that could potentially be big in the near future. Also, many areas and country regulations need to be navigated, so getting a good lawyer is a must.
If the area of operation has a sandbox policy, you can and should keep the government informed about what you are trying to do, so that you stay out of trouble with the authorities and doing a successful ICO is indeed smooth sailing for you.
After all, is planned, build up your community
Start blogs and websites where you tell people about your project and why they should invest in it. Interact with communities on forums and online platforms such as Reddit and Twitter, create a substantial following on social media and consider hiring a community manager to do all this efficiently. After all, if people do not know what you’re trying to do, how would they invest in your project? A million-dollar ICO doesn’t become one without anyone involved!
Visibility of documents
Keep your whitepaper and other relevant documents visible on your websites, and include links to all your blogs, forums and social media handles on your site. You could also interact with GitHub and post your project prototypes there for people to view and suggest potential improvements to your project.
Form a sound community
Build your own community channel, let people know what you’re doing, and you are bound to do a successful ICO if you do the little things correctly. You could also create guides and FAQs for people to understand the inner workings of your platform, and communicate with big exchanges to ensure that they allow your token to be traded on their exchange. ZCash and Lisk have been real innovators in this field, as ZCash have their own forum while Lisk has self-hosted Rocket chat on their servers.
Simply marketing is not enough, potential investors need to see it to believe it, and once you form a good relationship with your community, investors won’t think twice before funding your project.
Decide a timeline for your token sale
When all is said and done, and you are ready to go live with your ICO, wait for a bit, and decide when and how you want to publish your tokens for sale. This is crucial, as it will decide the volume of tokens available to the investors at a given time, and mismanagement of tokens can lead to potential losses for both your company and investors. For instance, you could go for a private token sale initially, which is open to a few selected individuals at a certain price. Once the private sale is over, a private pre-sale can be conducted, with a few more investors and potential token holders included here, just to test the waters. After all this is done, you could then go for a final, public sale, which is effectively the time when your ICO goes live.
After deciding the timeline, pay attention to token Economics
How will your tokens be used? What will be the distribution of tokens among accomplishment of different goals? Token economics is basically deciding where the ICO proceeds end up being used. Assessing token utility is also crucial, as tokens are the mainstay of the ICO, the pillars that hold it up. Pre-Deciding where you end up spending your funds and in what amount will really go a long way in making your ICO a smoother ride.
What kinds of tokens to offer in your ICO?
When you set up an ICO, you need to reach a consensus on what types of tokens to put on sale. International organizations like FINMA categorize tokens into mainly 3 categories Payment tokens. They have no links with external projects, and are quite the same as cryptocurrencies. They can be potentially accepted as means of payment once reliability and confirmation of their usability come round. Asset tokens. They are similar to bonds and equities, representing assets such as interest payments, participation or ownership in companies etc.
Utility tokens. They provide access to an application or service, digitally. You’re now ready to go ahead and set up your million-dollar ICO! Once it goes live…
Take appropriate security measures to sustain your ICO
While the ICO is online, you need to make sure that your website stays available all the time. To make sure of this, choose a reliable host, and a simple website. If people are into your project, you will need to be online all the time. To avoid any kind of security fiasco such as scammers tricking investors to send money to the wrong addresses, make comprehensive guides and videos about what to do and what not to do while operating your platform.
There are sure to be some scam attempts while your ICO is online. It is your job to protect the platform from any kind of security breach, so keep a keen eye on proceedings. Address scamming, phishing is something too common in today’s tech-savvy world. CoinDash token sale was a lesson to be learned by all potential ICOs, as it was the first official breach of an ICO.
Engage the community
Your investors and users are bound to have questions about the workings and reliability of your project. When the ICO goes up, it makes for a great time to interact with your community and solve their doubts. Keeping the user base engaged will not only lead to the formation of better relationships but may also expose glitches and security flaws that may have crept unnoticed.
Post-ICO: what to do?
Lock up your tokens. Once the proceedings are over and done with, you could think about locking up your tokens for a few months, in order to fend off the pump and dump traders who would then just release a bulk amount of tokens on the market for quick profit. Diversification of funds is very important, in order to maintain the stability of the project.
Keep in contact with exchanges. Once you free up the tokens to be exchanged and traded in, keep in close contact with exchanges so that you can monitor the progress of your tokens. Initially, there will be a huge load on the exchange with regards to your token, so you need to take some actions in order to smoothen the ride. Also, consider working with multiple exchanges, this will help your token reach high trading volumes.
Continue community interaction. Keep interacting with your community even after the ICO is over and done with, using platforms such as Reddit or YouTube, to answer the users’ questions and solve all their queries. Update your user base regularly by sending out posts, newsletters and emails to them, containing all the latest happenings in and around your platform.
Congratulations, now you know, How to do a successful ICO, so go ahead, make some big plans, and set off on the road to glory! How to do a successful ICO has now been completely answered!
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