Decide if an ICO is suitable for your business
The first step you actually need to take when launching an ICO, or Initial Coin Offering, is to assess whether distributed ledger technology and/or cryptocurrency is right for your business needs. Just because it’s ‘in vogue’ doesn’t necessarily mean it’s the best option. IBM have published a complete set of resources to help business owners decide whether they should launch an ICO, and how to go about starting up. Even if you’re a seasoned veteran, I would highly recommend reading over the documentation, as there’s something in it for everyone.
Back in 2016/17 there were some famous examples of ‘get-rich-quick’ schemes, with companies barely having their whitepaper together raising millions of dollars. 2018 and beyond seems to be shaping up with the regulators in mind. Business use cases are at the forefront of the serious cryptocurrency investors research. Whilst marketing can help promote your product, you can’t avoid the need for a solid business use case. So, get that sorted first!
Business structure and legislation
Now you’ve worked out that launching an ICO is right for you, it’s time to assess what business structure and relevant jurisdiction legislation applies to your idea. Whilst you may have discovered the best use of cryptocurrency to date, and can’t wait to get started, it will all be in vain if your CTO runs away with your intellectual property, or government officials freeze your companies accounts. Quite simply, do it right, and do it right from the start – it will help you no end in the long run. Here are some great resources on proper business structures, whether you’re a bootstrapping start-up or established corporate player.
- Business Use Cases
- Business Structure
- Non-disclosure Agreements
- SEC Cryptocurrency Investigations
It may be worth hiring an attorney at this point, to make sure everything is legally sound. There are great online legal resources for cut-and-paste business contracts and structures. It depends on your finances setting up. In short, get your business set up as easily and efficiently as possible. It doesn’t have to cost the earth. Keep your eye on national and international legislation. They may change, and as a new business or product you need to be ahead of the game.
Write a whitepaper
Or hire someone qualified and professional to do it. Check out Upwork or Freelancer for the best in the business. Check their credentials, and ask for previously written work. As with anything on the internet, don’t take everything at face value (!) If a writer seems too good to be true, or their rate is just too much of a steal, then alarm bells should ring. But why write a whitepaper in the first place? Well, you want to look legitimate for a start. It will also play a significant role in securing and boosting your ICO marketing strategy, acting as a point of referral and resource. Make sure it’s clear, with an emphasis on quality content over flashy looks and graphics. Check out this great ICO whitepaper resource too. An accompanying website, even if it’s just a landing page, will help your legitimacy too. As with the whitepaper, try and stick to content over looks.
Within your whitepaper, you should outline the technical aspects of your product, what pain points or problems you intend to solve within your industry (or new industry!), how you’ll do that, your team and qualifications/ experience, token platform, fundraising structure, marketing plan, roadmap. You also want to decide the number of tokens your company will retain for the development team, and any future investment projects. The Stellar Development Foundation have a good example of a non-profit structure here.
In short- make sure to take your time, invest in a quality writer, and polish up your website. When that’s done, it’s time for the fun bit.
Creating a token
This is the simplest part of the entire ICO process, which can seem bizarre when viewed from outside the cryptocurrency space. Tokens can represent any liquid or illiquid asset – i.e. anything tradable (and, currently, not easily tradable). Indeed, they can actually represent anything you can imagine. Whilst the sale of cryptocurrency can raise money in a comparable way to the seed funding of a traditional company, tokens have taken on an individual definition and class of their own. The investors buying your tokens won’t have the same rights or input (jurisdiction depending) on your company, so offering peace of mind is paramount. Therefore, it’s important to give your coin investors as much clear information about the funding rounds and what they mean for the value of your token.
Coin circulation will play a large part in your business use case. If you’re not fully familiar with the various economic levers that affect valuation, or just want to brush up on them, it would be worth reading around inflation/deflation principles, circulating supply and liquidity issues, as well as market saturation etc. It will also dictate the amount of money your company initially raises and continues to acquire. Hiring freelance economic consultant specialising in tokenisation would be a great investment, with funds permitting.
Ethereum is still ‘king’ of the ICO’s, using a Turing complete model of smart contracts, which allows businesses to inject as much flair and flexibility into their product as they wish. For more reading on how to actually launch an Ethereum ICO, check out this fantastic guide. ERC20 tokens have their advantages and disadvantages, which you’ll need to assess properly. A great article discussing these very points is here. The kings crown may be slipping however, as both Waves, Stellar and whole other host of platforms allow a simpler, non-Turing complete smart contract functionality, sacrificing complexity for simplicity and ease of use.
Market Liquidity and ICO funding
Choosing a platform for your token also has funding and liquidity implications. ERC20 tokens are still the most popular form of direct fundraising for token and blockchain projects, where you can receive Ethereum as your main form of cryptocurrency. If you want the most common cold, hard ‘bang for your buck’, ERC20 tokens are still THE choice. These tokens currently must be listed on centralised exchanges (with a few and growing number of decentralised exceptions). Starting out, you won’t have access to the big liquidity of something like Binance or Bithumb straight away. Weigh up the risk vs reward of choosing an ERC20 token to be listed on a smaller exchange.
Your other option is to elect for a decentralised exchange, or DEX. It might mean you have less liquidity than the big exchanges to begin with, but potentially more in the future. It all depends on how things develop. Something of note – depending on project size, it may pay off to initially launch on a DEX, and then work towards listing on centralised exchanges in the future. This means you have the ease of launch and flexibility to ‘reverse engineer’ further listings. Here are some further great links and resources on the advantages and disadvantages of ERC20 tokens, DEX’s and more.
Decide how much money you want to raise in each round, and set it as a ‘hard’ and ‘soft’ cap (definition). You can spell out to investors how much each token is worth in subsequent seed rounds, what percentage discount they are receiving, and how much they might be worth at market value. KYC (know your customer) regulations are also kicking in, dependent on where you are setting up.
You can also choose to combine the above ICO fundraising model with more traditional modes of capital raising, such as Angel/private investors and even Venture Capitalist firms (when they eventually get involved with cryptocurrency!). Angel investors can provide invaluable insight and contacts within the industry, and return much more than their initial money. Again, research, research, research!
What is ICO marketing? Simply – marketing for your ICO! It was big in 2017. It’s bigger in 2018. There are a HUGE amount of marketing channels and resources at your disposal. Depending on your business use case, you can identify what approach(es) will work best, and develop your ICO marketing strategy appropriately. All of the information below can be best thought of as your ‘Direct ICO marketing checklist’ – organic driven public interest, paid PR and Agency firms, or a combination of the two. And where better to start than the cryptocurrency and blockchain forums?
- Reddit: Ethereum, Stellar, Waves, EOS, Cryptocurrency
- Bitcointalk: a fantastic resource. Make sure to have the best write-up possible. Be prepared for positive and negative feedback, and take all of it onboard. Indispensable marketing and guide.
- Quora discussions: There are many discussions on Quora about different ICOs and specific cryptocurrencies in which you can actively participate and link back to your ICO landing page.
- Facebook groups: ICO groups are growing by the day. Potentially great customer/public engagement executed well. Altcoin Today. Cryptobeast. CCInvestingCommunity.
- LinkedIn professional groups: Another growing forum for ICO discussion and advertising. Curtail any articles to the tone of LinkedIn, as opposed to something more informal like Facebook.
ICO marketing companies and agencies
- Influencer marketing: A double-edged sword. Can go spectacularly right, or monumentally wrong (see John McCafee). Carefully research and have a proper contract in place before approaching potential ICO influencers or affiliate marketers.
- Media coverage: Get the right PR in the right media outlets, and your position, credibility and message will drive people to your token and product. A combination of mainstream and alternative media outlets would be ideal, budget dependent. Whatever your choice, make sure you have a consistent message
Social Media Marketing and Engagement
- Slack & Telegram: Slack and Telegram are very much in vogue for the growing and established Token brands. Communication is key. You only need to see the huge fallout and ‘FUD’ resulting from poor communication with otherwise promising token projects. A great place to promote your message and combat any misinformation.
- Paid media: May seem ‘old-school’ in time, but paid media, and more accurately paid advertising still has a stranglehold on internet viewership. Both Google, Facebook, Twitter, Reddit and more have fantastic paid advertising products to take advantage of. Again, uniform message across all platforms. It doesn’t need to be expensive, and can be extremely effective. Here are some brilliant guides on how to get the most out of your paid advertising: Neil Patel (google ads). Facebook ads. Twitter ads.
- Airdrop rewards: A common method of spreading awareness and liquidity amongst existing cryptocurrency users. Generally distributed to ‘main coin’ holders who own Ethereum and Bitcoin. Great at getting the attention of a particular community. Can be a double-edged sword, as it potentially dilutes value to fiat investors, and therefore weakens brand authority.
So, launching an ICO, unsurprisingly, takes quite a lot of work. It is a business venture after all. There are a whole host of further free resources which can provide invaluable advice, from how to finesse your business idea to dealing with partnership re-shuffles and exit strategies.
Disclaimer: This article is not meant to be taken as investment or legal advice, but rather as a rough template to show the process behind an Initial Coin Offering and what the project’s stakeholders should consider when running one. Given this field is relatively new, best practices on what to do and what not do are still being defined.