2017 was the year of Cryptocurrencies & ICOs.
Bitcoin hit a record high at $19k & $4bn was raised in ICOs in 2017 alone.
We all know the poster-children of ICOs – from Brave generating £35mil in 30 seconds, to Filecoin raising $200 mil in 1 hour.
So what’s an ICO & why does it matter?
Think of an ICO as a blend of an IPO meets crowdfunding enabled by Crypto: it enables firms to quickly raise capital.
Unfortunately, the ease of capital raised through an ICO means the fast growth & popularity has firms trying to launching their own coin offering. The perception of urgency leads firms to approach this without a clear view as to how it fits into the current status of their business, their future business plan & what their commercial proposition is.
So how do we ensure commercial clarity when launching an ICO?
Clear rationale on ICO vs traditional equity round
With more institutional investors getting into the ICO space, firms need to hone in on why an ICO is the appropriate route for investment.
Is there a genuine use case for the launch of a token or are you using this as an excuse to inflate the valuation you would otherwise get?
For example, MindArk, the founding company of Entropia is looking to launch a Token offering. Entropia is a virtual universe with an existing virtual currency. The development & growth of the universe to involve a token makes clear commercial sense for the business to date.
What is the role of the coin for the future?
Not only do you need to get under the skin of whether the token is a utility or a security, there needs to be a clear role for the coin. Looking beyond the initial coin offering, what is the actual commercial purpose of the token & how will it bring value to the market? Neo has clear commercial value in the market – aiming to be the ultimate platform for a new smart economy. Due to its focus on the Crypto & blockchain space, there is a clear role for its coin launched – to act as a means of exchange.
Who is your audience?
Having recently worked on an ICO & reviewed over 50 white papers, it is clear to me that firms often lose sight of who they’re selling the token to. Are you trying to get traction with retail investors, institutional investors or the existing community? Focusing on the audience is crucial as what they care about & place value on will vary. This will drive the focus of the white paper, the proposed milestones & engagement plan.
How do you build a community & drive true engagement?
Firms have fallen into the trap of thinking the success of an ICOs is based on who has the ability to shout the loudest in the market: who has the most money to throw in the fire pit of marketing. However, a successful coin offering is tied to coin adoption for the future. This relies on building a genuine community where investors & members are bought in & will drive the value of the token forward. Ethererum is a clear example of a firm who has done this well. The community it has built is almost cult-like but means the coin will retain its value.
So now you know how not to screw up an ICO you’ll be a resounding success – right?
Wrong, the market is fast moving & constantly evolving.
If you’re thinking of launching an ICO – consider the above & cut through the noise.
Clearly map out your objectives, roadmap & KPIs, do not rush into action & throw money in the fire pit of marketing.
By going slow initially, you will move fast.