Why You Should Consider Launching An ICO
In the past, startup founders had no option other than getting money from investors in one founding round after another in order to be able to establish their businesses and expand. Then came the crowdfunding sites, such as Kickstarter and Indiegogo, democratizing fundraising by making it easy for everyday people to invest in interesting startups. With the rise of crypto-currency, ICOs are a natural extension of that model. Judging from the frequency of ICO announcements, it’s clear that a lot of startups are attracted to the concept.
So, should you launch an ICO for your own startup? That’s the million-dollar question, or the 257-million-dollar question, as in the case of Filecoin, the biggest ICO yet.
Well, ICOs are relatively quick and are able to tap from customers around the world, meaning that the only limit to how much you can raise is the strength of your marketing. In addition, ICOs generally do not require you to give up equity, unlike traditional funding options. The most attractive thing about ICOs for many startups though is the fact that apart from funding, they also come with growth in-built: As people buy your tokens, they automatically become customers of your products or services, meaning that you can simultaneously raise money while solving the problem of getting the critical mass of the first 1000, 10,000 or even 100,000 users.
The flipside of this is that ICOs, being as they are the frontier of fintech, require a high level of technical savvy, and you’ll need a solid plan in place for converting the cryptocurrency into cash and sorting out tax and other regulatory issues.
To get the very best of advice on how to maximize the chances of a successful launch, I asked three business leaders whose companies are at the cutting edge of cryptocurrency innovation. Here are the hacks you need to pay attention to:
Be on the right side of the law
The speed with which cryptocurrency came onto the scene has left governments scrambling to understand and regulate it. While some have chosen to stay hands-off, others have banned ICOs or so severely restricted them that it doesn’t make business sense to launch one there.
Mike Doty, Managing Director of ARK, put it like this: “Other startups can delay getting a lawyer on retainer, but ICOs must not. New laws and regulations can and have come up overnight, affecting everything from the selling process to the customers you can sell to. Not keeping track of your legal obligations can mean serious trouble for you and your business, and that’s not something you want to have to deal with while trying to raise funds.”
Keep the metrics and processes stable
ICOs have gotten a bad reputation as being very risky, largely due to the activities of scammers and poor-quality projects. One of the best ways to make certain you’re not tarred with that brush is to ensure that you keep the rules intact from when you release your whitepaper through to the end of the actual launch. Changing things like the price of your tokens or the individual cap mid-way will look very suspicious and will likely deter investors, even if there’s a good reason for it.
“Think through your play from the beginning to the end before you send the first tweet or blog post out,” Arshad Hisham, CEO of Magnus explains. “There are enough completed ICOs now that you can use as case studies so you’ll be able to factor every contingency into your plan."
Make sure your marketing is comprehensive and clear
ICOs are very technical and complicated things, but the trick to selling out your tokens is to ensure that you break the jargon down so that everyone who is interested will be able to understand what you’re about very easily. In addition, ensure that you have enough people on hand to respond to any questions from your community. That will let people know that you are active and serious and more importantly, that you care about your investors.
More often than not, investors will already have a clear grasp of how ICOs work, but you need to go further in showing how your project fits in with the model and how the tokens will be valuable on their own, apart from the possible price appreciation. “You need to answer the ‘why cryptocurrency?’ question,” Alexander Borodich, CEO of Universa says. “It is important to remember that the Blockchain is mainly about cryptography. That’s the fundamental principle behind the technology and investors will want to see proof of how the project is going to leverage it in the Whitepaper. If you can’t answer the question properly, experienced investors will see that you’re just jumping on the ICO bandwagon because of the hype and that will reduce their interest drastically.”