In the world of startup companies and venture capital, the question of whether initial coin offerings, or ICOs, are a viable solution is frequently asked, and this, certainly, is a valid question. With success stories like Ripple, it gives proof that there are endless possibilities for firms looking to raise the funds they’ll need to realize their grandest visions.
After all, Ripple’s initial investment of just $10,000 expanded into $1.5 million, and this was done in within a 5-year timespan. Though critics may point out that some ICOs have quickly lost much of their value, it should be noted that even those that have lost 50% of their value nevertheless retain net assets totaling close to a million dollars. ICOs have raised $6.3 billion in just the first quarter of 2018 alone, showing that there is a robust market for those who are able to launch successfully.
Do Your Homework First
In order to see if an ICO is a viable option for your business, you’ll need to put in the work. At this time, most ICOs require that money be invested at the outset, on average, to the tune of $60,000. While it is absolutely possible to launch on your own, you will still likely require a team to lend their talents to the effort.
It helps to have a background in cryptocurrency, but if you do not, you’ll need to employ the services of developers and people who specialize in the blockchain. In addition to this, it is necessary to remember that you will be managing a full-fledged PR campaign and all that that entails.
You’ll need to engage the public, and this means that you’ll do best with the help of marketing strategists to assist with positioning and messaging. This pre-launch phase will necessitate between six months to one year to fully make preparations.
Your startup must create a unique solution to a problem, and it must integrate a use for a new token. Investors will want to see that demand for the proposed coin is high, a clear indicator that its value is sure to rise. The usual factors of identifying the target audience, felt a need, and a thorough knowledge of the market must also be addressed.
As the SEC is becoming stricter with ICOs, it is vital to enact Know-Your-Customer policies, or KYC. This means that clients’ identities will need to be verified in order to reduce incidences of fraud, money laundering, or other illegal activities, and hiring a knowledgeable attorney will be of immense benefit in this regard.
Next, you must create a suitable token, deciding how many to issue and under what conditions. Your plans will need to be articulated in a document called a white paper, and this must be available for any interested parties to examine.
It must be understood that there are key players in the world of crypto and that these people can sway the opinions of thousands of others. Your white paper must provide satisfactory details regarding every aspect of your proposed business in order to gain the endorsement of these expert influencers, thus raising your chances of success.
Post-Public Engagement Phase
This segment can take roughly three months to complete, and it involves getting the word out about your ICO in the crypto community and among investors. Your reputation is paramount, as your ICO can fail if your company’s behavior is deemed to be shady or if your financials are not sufficiently outlined and transparent.
Your website will need to contain information about your team, the vision you aim to achieve, and the ways in which you will protect the interests of your investors. A short bio will suffice to inform people of team member roles, skills, and assets, and you can include goals and the projected timeframes to completing them.
Most firms will hire social media and PR managers to handle their publicity needs for them, and you’ll need all hands on deck to communicate about your ICO on the various platforms and forums related to cryptocurrencies.
Fidelman & Co. specializes in management consulting, presentation advisory, and financial modeling. We focus on building businesses alongside entrepreneurs and investors. Contact us today for more information about what we can do for you.