Could my Business use an ICO?
A touchy question, which we discussed in our other articles. Many experts do not give an unambiguous answer, so the Merehead team offers its own. An ICO is suitable for companies, entrepreneurs, enthusiasts, and ideologists who believe that their project is able to influence, if not the whole world, then at least a particular country. Simply put, an ICO is an international and open means of fundraising and launching your project through alternative means than an IPO on a national stock exchange. It fits both digital projects and offline projects equally.
How does an ICO work?
The ICO process is often compared to an IPO, but this is not entirely true. It is much closer in ideology to compare this fundraising method with fundraising campaigns like Kickstarter and then later with the IPO process. In turn, the ICO process can be divided into several logical stages. At its core, it relies on blockchain smart contracts. It does not matter what blockchain you choose, whether Ethereum, NXT, Hepyrledger Fabric or another option. We'll talk more about this later in the article.
Therefore, smart contracts are the starting point, the core, and the foundation of the entire ICO. Obviously, before we get ahead of ourselves, however, the very first step is to create your own cryptocurrency or token, followed by the pre-ICO and ICO period, or in other words, the crowd sale.
How to Begin your ICO Journey
Once you have decided on your idea and have conducted research on competitors, you are ready for the first active steps. It is possible to rely just on yourself and your team at this stage, but if you wish to avoid some time consuming and beginner's costly errors, use an expert crypto and blockchain agency like us, Merehead, and we'll be with you at every step of the way!
Perhaps the most powerful and effective tool of your ICO. The white paper is a technical, operational and phased description of your project and ICO. It includes a detailed description of the team and the biography of each team member. Particular attention should be paid to education and previous relevant experience. If you run an ICO for the food market, or concerts, you will hardly succeed if your key team members worked only in the field of cinema. Relevance and expertise are key points. If after reading these lines you understand that none of your team members have relevant experience, do not worry - there is a solution. We will talk about it later.
The white paper also includes a roadmap. Please note that this should be both in the document and on the landing page. The fact is that the white paper is only the focus of a subset of investors. Others pay attention to your site, presentation, pitch, graphical interface and about 5-7 other things.
The roadmap should be presented in depth for the first six months to a year of your plans. Looking further into the future, quarterly roadmap updates will be sufficient. If you can add past victories and achievements to your timeline, then go for it! The fact is that every investor wants to make money on your project, and they use this section to estimate how much money they can earn and when. Investors want to see a return that is 10 or 20 times higher than the initial investment over a certain period of time.
Do not expect that every passer-by reveres your white paper, but this does not negate the fact that your white paper needs to be done well. A white paper is of interest to a large amount of investors, cryptocurrency enthusiasts and influencers. Low-quality documents can bring irreparable damage to your ICO and brand. If you need consulting, advice or help in writing an effective white paper, please contact us, and Merehead experts will immediately be there to help you. Sometimes, when building a cryptocurrency exchange, owners of exchanges write such documents as well.
The volume of the white paper should not be larger than 100 pages. On the other end of the spectrum, you might aim for 5-10 pages, but then find it difficult to adequately describe your achievements, ideas, plans and the market. Pay attention to details, and do what suits your project best.
Due Diligence for ICOs
Research on your company and analysis of its ICO plans is extremely important for investors. In the last year, the market has seen a lot of frauds and scams, and thus investors are concerned about this. In almost every podcast, conference, and event, speakers advise investors to pay special attention to the proper due diligence of ICO. This is in addition to an analysis of social attraction, the white paper, the involvement of the team in your project, project quality, readiness, and many other factors. Be prepared to find that at least half of your investors, if not 70% of them, will conduct due diligence to be sure of your ICO. You must be prepared before the battlefield, and be aware of both your weaknesses and strengths. Contact your agency or Merehead for a deep due diligence review. Identify the pitfalls as early as possible, and fix them. In the end, give your project the due attention it deserves.
As mentioned earlier, the team must have relevant experience, which is extremely important. This does not mean that you cannot launch a successful ICO without it. Do not get me wrong - if your goal is to raise $10,000, then experience is irrelevant. However, with a target of $10 million, every point, every verge, and every edge must be honed to perfection.
The ICO team can be divided into several groups. The first and most important is the founders and C-level managers (CEO, CTO, COO, CMO, etc). The second is your developers and managers. The third, least significant, group is your ordinary employees. This includes your customer support team, public relations managers, etc. On the question of how many people you should specify as team members on the site and the white paper, there is no definite answer. If your team is small, specify them all with links to personal profiles on LinkedIn, Twitter, and VK (for Russian-speaking audiences). If you have more than 50 participants, clearly the most important ones should be presented. For example, you can check out hold.co for some ideas.
We'd also like to share a few important details about how to build a team for an ICO and properly manage it. For instance, our company was contacted by the founders with a team of 15 and up to 30 members. At each stage, all of them encountered certain difficulties in managing. In other words, at first it was a problem to find qualified candidates. Fortunately, you can find the right candidates from other countries on the IT market, including those with experience in building cryptocurrencies. If you cannot find the right person in your country, ask for help in nearby countries, or those with a common language and lower costs.
For example, if the ICO is from Russia, it is worthwhile to look closely at candidates from Ukraine and Belarus, as there will be a common language to make cooperation run smoothly. For Germany, this is Switzerland and Austria. For the English-speaking audience, you can look out to the Philippines. There is always a solution. But it's worth remembering the mentality and approach to work. The devil is in the details.
Time zones provide another separation, since it will be impossible to work with a common language. Therefore, you will have to use corporate accounts in Trello, GDrive, Calendar, Skype, Slack and much more, including Zoom for Gulf countries. Alternatively, you can contact a specialized company like Merehead who will solve your headaches and help you to succeed.
How to Choose Advisors for ICO
Advisors are a significant part of the team, who strongly influence the project. It's not difficult to find the right advisers, which are the same as a mentor. They either believe in your project or ignore you until you impress them with significant results.
Their role in your ICO is to advance the road ahead with a subtle niche. Remember when I mentioned there is a solution, if the team does not have relevant expertise? The answer is advisors. If they have experience in the area of your project, your road becomes much easier.
Relationships with advisers are rarely paid. Providing them with a share in your project is a typical situation. They are definitely worth publishing on your ICO landing page because they are influencers in this industry. Leveraging their experiences will help get you to the top.
You can find advisers for your ICO at conferences and professional events, and even LinkedIn
Creating your Own Cryptocurrency or Token
Determined in your idea, technical documentation, and white paper, it is time to choose and create your own cryptocurrency or token. Which one should I choose? What blockchain to choose for creating the cryptocurrency or token? Let us look at a few options:
- Fork of a popular cryptocurrency. In due time, many cryptocurrencies appeared, such as Litecoin (a Bitcoin fork) and Bitcoin cash, also Bitcoin fork. Just a bit of core customization, new packaging, and you are ready to work.
- Token-based upon Ethereum. Almost 90% of the tokens in circulation in Coinmarketcap's list are based upon Ethereum. You can read more about these tokens and how to create them via our article on creating an ERC20 token based upon Ethereum. To date, there are about 7 ERC standards, the most popular among them is ERC20, with the option of numerous settings and additional functions. Cryptokitties, Binance coin, and the Venezuelan Petro are all tokens upon Ethereum.
- Neo, NXT, Ripple (XRP), Waves tokens. Fortunately, other blockchains also have the capabilities and functionality of smart contracts - the basis of cryptocurrencies and tokens. Pros and cons vary individually from blockchain to blockchain. For example, Waves tokens can handle more transactions compared with Ethereum. On the other hand, you have to consider opportunities and functionality. Often the creation of a cryptocurrency on NXT is more expensive, longer and less efficient. If you are not sure which type of cryptocurrency you should choose, contact the consulting agency or our managers.
- Developing Your Own Blockchain. This is the least effective method for an ICO in terms of complexity and the incredible investment of required time and money. Why reinvent something from scratch if there is a ready rich functionality on the Hyperledger Fabric? Consider, for instance, the importance of blockchain in healthcare, and you'll realize why you need to move fast.
- Cryptocurrency creation upon other blockchains. Hyperledger Fabric, Corda, Ethereum, NEO and others all have their own blockchains. In addition, on each of them, you can create a cryptocurrency.
It does not matter which platform you choose, because for decentralized cryptocurrency exchanges your own coins are fuel.
There are dozens of marketing and PR channels. However, within the ICO, we are interested in which is most effective. There are forums and social networks, ads on Facebook, Google, Bing; there are conferences and of course your own landing page. We described details of an ICO marketing plan in our article earlier.
I want to remind you, however, that marketing should be carried out during all stages of pre-ICO, crowd sale and even before the launch of the cryptocurrency itself. The point here is that marketing includes both internal and external. You have to work for the brand. Lead generation, investor relations, and even marketing to potential team members and advisors are all important tasks to conduct. Your investor base is much more important than your user base.
Localization and Translation
This is marketing's assistant and servant. The richest investors are in the US, China, Korea, Japan, and Russia. If your site does not have localization for these countries, you are making a serious mistake. Always remember the Pareto principle. 80% of the effects come from 20% of your efforts, and the remaining 20% of the effects come from 80% of your efforts. This can be projected onto the above-mentioned countries when it comes to cryptocurrencies.
Do not forget that localization is not so much a translation into another language but an adaptation to another audience. It manifests itself in their manner, orientation, mentality, language, writing, and other aspects. Of course, this does not negate the fact that localization must include translations, but localization is much more than language, and includes things like cultural variables as well. But what if you don't have the right team members to get the job done, or your second-language skills are poorly mastered?
How to Make a Bounty Program for ICO Localization
If your team itself doesn't have the language skills to move forward, a bounty program comes to the rescue. For example, a user who helps you localize to an important market receives +2% of your tokens. This is fair for a very solid contribution in localization, isn’t it? The referral system, bonus program, and gratitude for sharing in social networks are the 3 pillars on which the basis of promotions is built.
After details are worked out with marketers and approved by the founders, you'll find that an incentive program or bounty program is able to make an explosive avalanche effect for your ICO. A major sin is not to use such a plan. With proper application, it can reduce marketing costs several times. However, it requires a well-coordinated effort of the marketing department and technical specialists, as well as the customer support department.
Finally, we came close to launching the pre-ICO campaign. At conferences, people often ask why, after all, is the Pre-ICO stage necessary, and if the ICO can be held without it. The answer is that you can indeed do an ICO without a pre-ICO stage; it is not a mandatory requirement for these projects. However, the price of mistakes can be enormous. The pre-ICO stage is often needed for several reasons. First, this serves as an important and detailed study of the audience. If on a pre-ICO you have reached a hard cap, then this can be for several reasons.
Either you underestimated the amount, or you overpaid for marketing. A cannon can be used to shoot sparrows, but is it necessary? It is like hiring a development team to make your own cryptocurrency exchange, instead of using a white-label crypto exchange. Secondly, the cost of ICOs vary from $15,000 to $80,000. The founders don't always have such an amount on their hands to cover everything because there are still costs for marketing. The Pre-ICO allows you to fundraise a little money that you can spend on marketing and on further improvement.
From the analysis to realities and forecasts. In particular, how long should the Pre-ICO last? Normally, 1-2 weeks. In our practice, there were projects with a pre-ICO duration of 1 month. I strongly advise against conducting longer pre-ICO campaigns, since it will negatively affect the brand.
At this stage, users are often very interested in investing in your project and therefore it is very easy to achieve the soft-cap. This is due to one simple reason. The cost of tokens/cryptocurrencies during the Pre-ICO is much lower (often 3-5 times), in order to attract the attention of the audience and build hype and buzz around the token. Here arises an avalanche effect. In addition, because coins are cheaper, then the margin and revenue will be greater.
What should I do after the Pre-ICO is over? Is it worthwhile to start the crowd sale? No way. After the end of this stage, analyze the sale, evaluate your abilities, consider your expectations, and determine how realistic it is to achieve the amount that you planned. After making changes, improvements and iterations in your smart contract, test it and you are ready to move on to the next stage.
Crowd Sale Stage
The main life stage of the ICO, which shows whether your product will be alive, developed and successful. All efforts should be spent on successfully overcoming the previous stages. The average duration of the crowd sale is 2-4 weeks, sometimes extending up to 2 months. However, it is worth remembering that successful projects reach the hard cap in just a few days.
What is necessary to know about the crowd sale stage? Only constant communication with the audience. Perhaps this is the only thing that can be corrected and improved at this stage. No changes in the contract, nothing. Only positive, deep and understanding communications with investors. Any contact, any lead, is your potential investor.
What to do After the ICO
<>If you thought that after the crowd sale your project is over - take your time with conclusions. The most interesting part of your project begins here. After launching a successful ICO, it is important to constantly maintain communication with investors, and keep them informed of developments and news. Perhaps mouseholing or aggressive marketing is a bit thick, but managing business pages in social networks are important.
You can spend fundraised money on development, marketing and further movement on your project. However, is it possible to increase the capitalization of the company, and if so, then how?
Quite a reasonable question. The fact is that after you have sold your tokens or cryptocurrency to investors, they want to exchange it for bitcoin, altcoin or cash. You can list your cryptocurrency on exchanges to help with this desire. That is exactly the way companies proceed after they have launched their products and gained popularity. Cryptocurrency listings on exchanges is a catalyst for capitalization. If things go well with the company, such news will drive new investors and increase the price.
Otherwise, if the product has not yet been launched, you risk everything, including the company itself. After all, the logic of investors is simple; they want to make money by investing. If, after selling tokens, you list them on a cryptocurrency exchange, be sure that your investors will rush there to sell them and roll the rate. That is why an ICO is compared to an IPO. You need to know their psychology and the way investors think.
How to List your Cryptocurrency on an Exchange?
On one hand, this is an ambiguous question and mainly based on human factors. After all, the owners of the exchanges are other humans with their own needs and desires. Nevertheless, there are many types of cryptocurrency exchanges such as admin-base exchanges, peer-to-peer trading exchanges, and margin trading exchanges. All of them can be further divided into 3 types: large, medium and small.
Requirements and criteria for each type vary at times. However, the minimum for small exchanges is your cryptocurrency or token should be open source. The exchange team will also analyze your currency for vulnerabilities and security concerns. If the results are satisfactory, they will gladly list your precious coins. Still, if your coin does not meet their daily / monthly trading volume or other requirements, exchanges reserve the right to de-list your coin at their discretion.