What if I told you that you can raise a fortune in mere minutes? Would you already know what I was talking about?
Initial Coin Offerings seem exciting on the surface, but there is a great deal of preparation that goes on behind the scenes.
This article is for the aspiring crypto-entrepreneur, telling you exactly what it takes to successfully launch a business using this new fundraising model.
The problem with emerging technology is that unless it has a very specific use case, it can be difficult for people to imagine how it might be used. This is why Bitcoin and other cryptocurrencies have been accused of being “solutions searching for a problem.”
While this might be unjustified, The best ICOs are still undoubtedly those that aim to solve a real-world problem. Like any successful business, the ICO should be based on fulfilling specific needs.
Not only that, but if it is to be an ICO, then it needs to have a token that is integral to the idea, and not just tacked-on for fundraising purposes.
If you are struggling to conceptualize a token in your business model, then it might be a red flag. The computational costs of building a decentralized application are far more expensive than a centralized application, and there needs to be a strong rationale for doing so.
There are generally two types of tokens, the first being Equity Tokens, that are similar to traditional stocks in that they represent ownership of an asset and can give voting rights for governance. These also come with some legislative complications, which is why most ICOs choose the Utility Token Model, where the token provides users with future access to a product or service— like the Basic Attention Token which functions as a medium of exchange between advertisers and publishers, or Ethereum, which powers the Ethereum Virtual Machine.
Once you have a revolutionary idea for your ICO, including a token with a clear purpose, then you’re ready to set out on the road towards running your own Blockchain-based business.
With a strong vision driving you forward, you should be able to attract a team capable of bringing it to fruition. Successful teams generally consist of three types of folks – hackers, hipsters, and hustlers.
The Hustler leads the operation, usually as a CEO, and is in charge of making all the tough decisions, balancing the books, and devising a strategy for success over the short and long term.
The Hackers will be building the product, writing the algorithms, and assembling the core mechanics of the technology that will underpin your ICO.
Then finally the Hipsters – who will bring the creative flair to marketing, web design, copywriting, and brand identity.
With the team in place you are ready to start assembling what will be the cornerstone of your offering: the white paper.
Until you have a working product, the White paper will be all that you have to promote your offering. This one document should give prospective investors enough information to fully understand your ICO.
Everything about your product needs to be explained in your white paper. It should include all of the technical details, all of the token-related information, financial plans, and an overview of the team—all synthesized in one key document.
By this time you should at least have a prototype that you can use to demonstrate proof of concept, and the white paper should explain this in a clear and accessible way. You might have a technical white paper for developers, and a non-technical paper for ‘normal people’ to read and be able to understand your project.
Once you have finished the white paper, which you might want to do with the aid of a ghostwriter, then it’s worth getting some feedback from some experienced crypto advisors before you publish it for the whole world to see.
The breakneck speed at which blockchain has developed has left legislators in the dust, and created a treacherous territory for for new startups to enter.
The absence of ICO-related regulations does not make ICOs exempt from the law, but instead has created a legal grey area that requires extra care to negotiate. To avoid committing any offences, you’ll need the assistance of a reputable law firm with experience incorporating blockchain companies and running an ICO process .
Wherever you are located, you will also need to consider what countries will be allowed to participate in your ICO. Each one comes with its own regulations. In the USA for example, ICOs only allow accredited investors who are effectively registered with the government to participate.
Effective ICO marketing should be as well-organised as a military operation—an overarching strategy should be in place that encompasses all of the channels your team has chosen to communicate with.
And all of these channels should lead prospective investors back to your well-designed website, which can’t afford to exclude any detail – team members, advisors (with linkedin profiles) budgets, and a clear roadmap to the promised land.
Every ICO will approach this differently, but the marketing strategy will probably consist of Community Engagement and Content Strategy. This involves having people on hand ready to answer questions from growing community, regularly updating a Twitter account, and devising a clear public relations strategy. Some ICOs also delve into paid advertising.
Done right, ICOs are possibly the most profitable and efficient approach to crowdfunding ever. But they certainly aren’t easy, fundraising through an ICO requires the same levell of maturity and understanding of a market as fundraising with Venture Capital.
As the ICO fundraising mechanism ages, it is likely to mature in a way that weeds out the scams, and feeds the strong— so there is still scope for revolutionary ideas to take hold of this method and make it a success.