Since the first ICO was launched in 2013, they have moved from obscurity to one of the most influential Fintechs fundraising facilities for companies, projects, and start-ups alike. The first ICO on Mastercoin raised $500,000, which is a pretty good sum for the first of its kind. However, by the summer of 2014, Ethereum managed to raise $2.3 million (3,700 BTC) within just 12 hours of its token sale, and by September of that same year, the Ethereum ICO closed in at $18.4 million. By May of 2018, $13 billion had been fundraised for companies via ICOs. ICOs have shown they have powerful fundraising potential, but if you’re up to date on cryptocurrency and the Fintech world, you’ll know that navigating and launching an ICO can be a complicated endeavor that’s susceptible to turbulence and corruption. Millions of dollars have been lost through ICOs - in 2018 an estimated 81% of all ICOs were reported as scams. Setting up and launching an ICO has to be achieved through a rigorous process and be the right financial step for you. Location, your team, your Whitepaper, your asset-token, and more all play an integral part in your ICO’s success.
Thankfully, we have experience launching our own ETH-based ICO here at Invatechs, a dedication to finding solutions to your technological challenges, and a commitment to sharing our advice and knowledge. We’re going to take you through 10 steps that’ll help you launch your own successful ICO with tips and tricks along the way.
WHAT IS AN ICO?
ICOs revolutionized the concept of public funding and crowd sales. In simple terms, an ICO (Initial Coin Offering) is when a company sells its assets (i.e tokens) for fiat currencies, or for cryptocurrencies like Ethereum or Bitcoin to help them publicly fund their work on a project or product. By extension, your ICO can give your investors access to the product or project they’re bringing to the market. The Whitepaper plays a key role in your ICO’s conception, as it’s both a marketing tool and a means to discuss and forecast the details of your project. Technically all you need is a website and some tokens to get your ICO up and rolling. Still, it’s important you take some precautions and consider downloading and registering for a software like Ambisafe, that stores and allows access to your tokens and assets. You’ll also need a Web Wallet that allows you to collect donations from your contributors. ICOs are great if you’re looking for like-minded investors, but you need to bear in mind some limitations: your ICO campaign shouldn’t last too long (1 – 2 months ideally), you should set realistic fundraising goals, and you’ll want to destroy any parts of the token(s) left over that haven’t been bought.
Step 1 – Is an ICO right for me?
We’ve briefly discussed the pros and cons that come with ICOs, in terms of risks, reputation, and funding, but let’s dig a little deeper. Your ICO could potentially fundraise what you need in a short amount of time. More than that, a lot of projects in the ‘centralized’ financial world fail to launch their IPOs (Initial Public Offerings). However, you’ll want your token to blend in with the product you’re developing and bring something new and valuable to the blockchain. You’ll be joining a list of cryptocurrencies that is already vast and competitive. What are you bringing to the table, and how will you stand out?
Step 2 – Where Can I launch an ICO?
Different countries have different regulations and policies when it comes to running an ICO. For example, tokens offered to residents in the US are subject to SEC regulations. You also want to be aware of what a suspicious ICO campaign looks like so you don’t get flagged for inspection. You can also use a Howey Test to check your token isn’t labeled as security.
ICO-friendly countries you might want to consider include Singapore, Hong Kong, British Virgin Islands, Lichtenstein, and the Cayman Islands.
Step 3 – Assemble a team
You’re nothing without a good team. Running an ICO campaign by yourself or with just your founders will be an ambitious task that requires skills and expertise you might not have. As well as your team, you’ll also want advisors on-board, including someone with a law degree as well as experience with assisting ICOs.
So, in your focus team, you’ll want: growth hackers for business development, engineers with blockchain experience, and contributors to the open-source community. They’ll work in tandem with your legal/industry experts who can advise you on insurance, finance, etc. It’s also a good idea to get some reputable public figures and successful ICO founders on your advisory board. This will give you the skills, knowledge, and credibility you need to provide a strong foundation for your ICO.
Step 4 – Review your product
With your vision, location, and team assembled, you’ll want to take it back to basics and review the product/project you’re fundraising for. As we’ve seen, the market is saturated with cryptocurrencies, and scams are a widespread problem with ICOs. That’s why it’s important to have a clearly laid out and articulated product roadmap with defined steps for how you will generate revenue from your product.
Step 5 – Prepare your Whitepaper
Make sure your Whitepaper is front and center of your website. It’s one of the first ways you can instill potential investors with trust, prove your credibility, and advertise your product. Your Whitepaper should incorporate some key features including:
Market research (industry and competitive landscape)
Your product roadmap
Team and advisory board overview
Information on your token economy and sales model
Take a look at the 10 most successful ICOs if you want some inspiration for what goes into an impressive Whitepaper. You may also want to consider using a position paper, which is simply a much shorter document that pitches your product in a few pages; you can gain some initial feedback before you start work on the much longer Whitepaper.
Step 6 – Consider your community
Anyone with a crypto wallet, ledger on the blockchain, or even a Reddit account is a potential investor, and you’ll want to reach as many people as possible. That’s why you’ve got to be a committed member of the cryptocurrency markets and communities. An active presence on BitcoinTalk or Reddit is just a starting point, you’ll also want to consider activity on platforms like Medium and GitHub too. A public communication channel like Slack will also be important for keeping in touch with your contacts. If you want to reach beyond the digital realm or online forums, you could also consider pitching your ICO to industry experts and attending conferences. This market is continuously emerging but it’s one that has already become highly competitive. That’s why you’ll want your team, product, and knowledge to be broadcasted to as many platforms and people if you want to generate hype.
Step 7 – Your Token sale model
You’ll need to decide on a token sales model and get to grips with the terminology. Let’s break some of it down.
Soft Caps – This is the minimum amount you’ll need to raise for your ICO to be a success, if it doesn’t reach this minimum target your contributors will ask for their investments back.
Hard Caps – This is the maximum amount you can raise. Once you’ve reached this cap your ICO will stop.
Capped with Fixed Rates – This will limit your ICO duration whilst offering a fixed token-to-cryptocurrency exchange ratio on a first-come-first-serve basis. The number of tokens available will be limited as well.
Uncapped with Fixed Rates – There’s no limit to how much can be raised or your number of contributors. Early contributors will have access to a discount and your ICO’s duration won’t be limited.
Hybrid – Whilst ICOs develop and grow, token sales models can be effectively mixed together. You could create a model that works for you, but overcomplicated sale models could potentially put off your early supporters and make you susceptible to vulnerable attacks.
Dutch Auction – With the Dutch Auction model, you won’t be required to set the token price in advance, instead a smart contract will accept bids until all tokens have been sold; higher bids will get priority in receiving tokens.
Step 8 – Smart Contracts
One of the final and most important steps in your ICO launch will be setting up and developing a smart contract; ERC-20 token is the industry standard. OpenZeppelin provides one of the most popular templates for smart contracts, they’re hard-tested by experts who have run successful ICO campaigns and are veterans in the blockchain industry. Make sure you audit your smart contract before it goes on the Ethereum blockchain, once it’s on there it’ll be difficult to maintain control over it and investors will want to see some extra caution taken with their contributions.
Step 9 – Launch your ICO
You’ve been working with a dedicated team, put all the legal, technical, and monetary infrastructure in place, and your smart contract has automated the ICO to begin its collections. Now it’s time to watch your work unfold and monitor your ICO’s activity.
Step 10 – What to do when your ICO has finished
Your ICO may have ended, but blockchain experts and social networks will still be monitoring your progress. It’s important to keep the lines of communication flowing between you and your supporters and you’ll want to provide transparent information on your deliverables. Now that you have the means and funds to work on your project/product, your journey is far from over yet!
Launching an ICO can be a complicated process and these 10 steps are just a starting point for you to begin more research and enquiry. At Invatechs, we can take you that next step further. We have a dedicated portfolio of projects under our belt and a highly skilled team that can lead you through the process. Contact us today to book a free consultation, and we’ll help you make your ICO the very best success it can be.