Naive companies and startups usually turn to angel investors and venture capitalists for fundraising. In order to receive an initial capital aid, these startups give away a part of their equity to the investors. While this idea has been prominently adopted from years, startups today are more interested in holding on to their ownership, and still secure funds for development. This is where Initial Coin Offering (ICO) comes into picture.
Initial Coin Offering (ICO) is a fundraising scheme, which involves presale of blockchain based cryptocurrency or crypto-token. So, instead of sharing equity, an intangible asset (usually a token) is being sold to raise funds, which is likely to have a better value in time to come.
How to Create an ICO: Getting Started
As the name suggests, Initial Coin Offering (ICO) is the first step for fundraising. Therefore, the project for which ICO campaign is being done should be able to gain interest and create hype amongst the investors. For this, following steps will help:
Step 1: Create a Token
For ICO, the returns are defined in the form of Tokens, whose return value in future is likely to grow. The Tokens are created following ERC20 standards (not a mandate though). These standards ascertains that the tokens are used as a monetary asset, transferred from one account to another, become a part of wallets etc.
To create tokens, you can use platforms like Ethereum and Waves token launchers that won’t require you to create blockchain from scratch. The sale of these tokens is controlled by smart contracts that makes exchange of digital assets possible between two parties (if the defined situations are met).
Step 2: Put a Cap on Tokens
Along with creating tokens, it is important to limit the number of tokens that will be out for exchange and their price as well. The price of tokens is generally very low initially. When creating tokens, make sure that you set a cap on number of tokens so that their demand increases (law of supply and demand).
Step 3: Write a Whitepaper for your Project
Create a whitepaper highlighting potential of your project and its features that excites investors. Unlike other white papers that are treated as a marketing tool, this one needs to be completely informational (including technical aspects, problem targeted, and how this project is a solution to that problem) and should be at least 2500 words long.
Step 4: Create Buzz in Blockchain Community
The next step is to create a buzz in the Blockchain community. Understand that for selling the tokens to the prospect investors, you need to make them aware about it. Selling off the tokens is possible by creating a hype and this will only convert if it is supported by the real community.
Step 5: Bring your Tokens on Exchange Platforms
When all of the above activities are accomplished, it’s the time to advertise the ICO on relevant platform. While it was a tough task earlier to bring investors to a website in order to sell the ICO, but today, platforms like Tokenmarket, Waves, ICONOMI etc. have made things easier.
ICO is a promising fundraising model and enable projects with potential to get on the road. If you need help to launch an ICO campaign for your project, connect to our Blockchain expert via 30 minute free consultation service.