1. What is an ICO and how to start an ICO?
ICO stands for Initial Coin Offering. ICOs are an increasingly popular way for cryptocurrency and blockchain startups to raise money. An ICO is similar to an IPO or Initial Public Offering for a company on the stock market. However instead of issuing a stock, the project or company sells digital tokens similar to Bitcoin.
This creates a more engaging and accessible investment ecosystem. ICOs are a great way for companies to raise capital and for investors to get an early stake in a promising new enterprise.
Here are a few interesting statistics:
In the summer of 2017, Initial Coin Offerings surpassed early stage Venture Capital funding, raising more than $1.2 billion. Many projects raised millions in only a matter of minutes.
Gnosis, the Ethereum based prediction market, raised $12.5 million in just ten minutes. They definitely figured out how to start an ICO!
2. Should my project conduct an ICO?
When deciding whether or not to conduct an ICO, there are a few things you need to consider. When ICOs originally came on the scene, many organizations chose to use an ICO as a way to circumvent the regulatory requirements of an IPO.
ICOs operated like the wild west with no regulation and no oversight, however that is no longer the case. In July of 2017 the Securities Exchange Commission SEC released a ruling on “The DAO”. This ruling concluded that “U.S. Securities Laws May Apply to Offers, Sales, and Trading of Interests in Virtual Organizations”.
Regulatory interest is not only coming from the United States, several nations including China have begun to crack down on the ICO industry. If you have questions about whether or not your planned token is a security you may want to contact the SEC or the TXSRB.
Another thing to remember is that while many ICOs have been hugely successful, many have failed to meet their minimum funding goals and were forced to return all of the funds raised to investors. A poorly executed ICO can be damaging for a startup in this competitive industry.
3. Where to start?
After you decide your project requires an ICO, it is important to have a clear vision of what you wish to achieve. You will need to pick the right team for the job to make that vision a reality. You will also need to relay that vision to investors and show them how they will benefit from both the project and the ICO.
4. Assembling a world class team
Choosing a talented team well suited for the demands of project development is important but it is also important to include experienced developers. Investors want to see an experienced team with a proven track record and reputation within the industry. Seeing a group of fresh faced developers with no prior projects or online reputation is a huge red flag for investors.
Assembling an experienced team is key. Your team members should be clearly listed on the project’s website. Posting links to LinkedIn and other social media accounts will help reassure investors.
Another way to quickly add pedigree to your ICO is to enlist a team of wellknown and highly experienced advisors. Having an industry mogul’s name associated with your ICO is sure to attract high profile investors.
5. Where to start a successful ICO?
The first thing to do after assembling your team and before executing a successful ICO is to clearly define your project’s goals. In order for your ICO to be successful, you will have to be able to present a clear vision to investors. Three useful resources for articulating your goals are whitepapers, roadmaps and a simple sales pitch.
Your whitepaper is where the technical details of your project are clearly and publicly laid out for investors to review. Whitepapers should be well written and organized, breaking down the problems your product intends to solve and how it will solve them. This is best practice on how to start an ICO.
A roadmap is way for investors to monitor the team’s progress. Your roadmap should have a list of milestones/goals and a time frame by which you plan to achieve them. Falling behind schedule can often put investors off, work diligently to meet your deadlines.
Lastly, your project needs a good old-fashioned sales pitch to first grab the attention of investors. This should be one to three sentences prominently displayed on your website. This pitch is meant to simplify the intent of the project. Remember most investors are not computer programmers and blockchain experts, leave the technical details to the whitepaper and FAQ.
6. How do you attract investors to your ICO?
How the ICO is structured will have a major impact on investor interest. Details like total token supply, the number of tokens available for sale and planned use of funds, will all be scrutinized by investors.
One popular way to attract investors is to offer discounts or rewards for participating in the ICO early. You may also want to consider having a pre-sale which offers a steep discount for early bird investors.
Clear instruction on how to participate in the ICO should be easily found on the ICO web page. It is also a good idea to have a plan for refunding investors if the campaign fails to meet the minimum funding thresholds. This additional guarantee will help ease the minds of skeptical investors and is key to how to start an ICO.
7. How do I launch the ICO?
Once you have you have put all of what we have covered into place, you should be ready to launch your ICO. When and how you launch your ICO can be just as important as the project itself.
You should state your intent to have an ICO a week in advance to ensure you can build momentum and investors can prepare for the ICO. Remember, most ICOs require Bitcoin or Ether, investors will have to purchase those tokens before participating in the ICO.
The other reason you want to have a few weeks leading up to your ICO is so that you can run a successful PR campaign to build excitement and gain the attention of investors.
Hiring a good marketing team is a must! You want to hire a team that has experience in the cryptocurrency industry and understands how the industry functions. A good marketing team should be able to help with web development, social media marketing, content creation, press releases, SEO and much more. You have a vision and a great product so make sure you have a great marketing team to help share that vision with the world.
Some marketing firms will have access to ICO consultants who will be able to help optimize your ICO to attract big investors.
8. Platforms to launch ICOs?
Many ICOs use Ethereum and the ERC-20 Token Standard for their digital tokens. ERC-20 allows developers of wallets, exchanges and other projects to know in advance how a new token, based on the standard, will behave.
Here is a great article explain ERC-20 Tokens
Many other platforms are capable of launching ICOs, including the increasingly popular Waves. Other blockchains are set on getting into the ICO business, so expect the space to become very competitive. Ultimately, you want to choose the platform that will best serve the needs of your token and business.
9. How do I protect my ICO?
The popularity of ICOs and the enormous amount of money they bring in has unfortunately attracted a lot of criminals and scammers, seeking to take advantage of this new crypto craze. It is important that you communicate clearly with your investors, giving them new updates and also warning of potential scams.
One popular way for scammers to steal money is to launch a spoofed webpage for an ICO. Make sure your investors know only to invest through your website and with your approved address. You should also make clear that any solicitations that are not from your official email are scams. Investors are giving you their hard-earned money for your project, you should make sure you do all you can to protect them.
10. ICO Pitfalls to avoid
First and foremost, you need to ensure that you are not doing anything illegal. As mentioned earlier ICOs are no longer unregulated. You should contact the SEC if you have any questions about your token and U.S. securities law. Having to delay or cancel an ICO because of regulatory issues can be very damaging for your crowdfund.
If there are any issues along the way, make sure that you communicate them openly and honestly with investors and the development community. It is quite common for the price of your token to quickly rise and also quickly fall after being listed on cryptocurrency trading exchanges. Do not panic from the initial volatility, it is to be expected.