An Initial Coin Offering (ICO) can be seen as an equivalent to the Initial Public Offering (IPO) for a company operating in the cryptocurrency industry. ICOs are employed by entrepreneurs in their efforts to raise funds to create a new coin, app, or service.
The best feature of ICOs is that there is no need of red tape and formality. In fact, most of the times a company simply has to submit a whitepaper in order to qualify for an ICO. Companies all over the world have been able to raise millions of dollars in matter of mere seconds with the help of ICOs. The amount raised through ICOs in the last few years is remarkable. For instance, in 2018 ICOs raised a total of $7.8 billion. These statistics put things in perspective and explain the sudden growth in interest in ICOs all over the world.
There is, however, still a lot of confusion when it comes to what an initial coin offering is (ICO — sometimes called a token generation event or token sale), the kinds of companies that an ICO can be used for, and the steps that go into launching an ICO — from a project’s perspective.
Blockchain technology is relatively new on the block and there is a lot of content on the internet relating to the topic, and with the launch of every new ICO, various lessons emerge. This article curates the information about ICO development solutions and process to help entrepreneurs understand the process behind an ICO, and what exactly do the project’s stakeholders (i.e. the team, board, stakeholders, etc) need to think about when conducting an ICO.
The following step-by-step process can be followed by an organization for the ICO development services:
- Pre-planning Phase
A business owner needs to be clear about two very important things before starting with the process:
- The purpose of the token
- The need for an ICO
A business owner needs to have a very strong reason to build a decentralized application vs. a centralized application. If the application doesn’t need to be built on top of a blockchain protocol, the business owner should think hard before moving forward.
If in case the business owners are unsure whether their application should be built on the blockchain or not, they should spend more time in thorough research and spend more time learning about Bitcoin and Ethereum. Building a decentralized application is fundamentally very different from an application using client-sever architecture. The team needs to fully understand and appreciate the components of the blockchain and what can be built on top of this new architecture.
Here are a few things to keep in mind while deciding whether your project should do an ICO in the first place:
- Everything you do and all the actions you take will be reflected in the price of the token.
- You’ll need to be an international company from day one.
- All of your internal team discussions will likely be pushed publicly.
- There will be great stress in trying to build things that are long-term valuable vs. short-term valuable.
- If your product isn’t open-sourced already, there will be a huge backlash to become completely open-sourced.
- In general, cryptocurrency projects are a lot more transparent than typical start-ups, or even traditional public companies.
- In general, good blockchain projects look and function much more like open-sourced software projects vs. traditional tech businesses.
- Planning Phase
Once the business owner is ready and absolutely committed to doing an ICO, the core components of ICO development services need to be discussed. The team needs to work on the offering, whitepaper, token design, legal precautions against the inevitable hackers, and being prepared for communication (website, slack, social, press, interviews, etc).
The most important consideration for the ICO development company at this point is to decide what to accomplish with the chosen distribution method. Other important considerations include the amount of money to be raised, how the amount is going to be divided amongst the team, the investors, the partners, reserving for the ecosystem, reserving for the company/foundation, whether there will be a pre-sale, what currencies to accept, and whether there should be a cap to the amount to be raised.
Effectively, the ICO development company would need to have a well thought-out and crafted offer in which all of the information is presented to the person looking to participate in the ICO.
- Putting Together a Whitepaper
The whitepaper is the most important document that the ICO development company needs to furnish. The whitepaper is where everything above comes together and is synthesized in one key document. The whitepaper should cover all of the inner workings of the application, how the whole system works, and how the token will be used within the system. A whitepaper is instrumental in giving a prospective contributor a complete picture by including every kind of technical information. Technical whitepapers are hard and can easily take 200+ hours of work from the whole team in a very short period of time.
- Legal Formalities
Once the research and documentation is taken care of, the business owner needs to find a reputable law firm that has experience with incorporating blockchain companies/foundations and running an ICO process — to advise them on the process.
- Work on a Communication Strategy
In order to provide great ICO development solutions, teamwork and effective communication among team members is extremely important. In general, the communication strategy for the team will encompass of all of the channels that will be used to communicate about the project (website, whitepaper, slack, social, etc). All of these channels need to be in sync, the whole team needs to be on deck, and the business owners need to respond to people on time.
The company needs to have a clean, updated GitHub repository, which should be kept public so that potential contributors can review everything themselves beforehand.
There should also be an internal communication channel like Slack, Rocket Chat, etc. where the teams can be actively reporting to the community manager who can act as a bridge between the larger community and internal teams.
- Appoint a Community Manager
As the project grows, the business needs to have extra people on staff ready to answer questions on all channels at any time of the day. The more successful an ICO is, the more community support it will need. There needs to be a sustained presence on the web well before the ICO, during the ICO, and well after the ICO. Potential contributors need to know that the team is serious and in it for the long-term.
- Get Social
The business should buy the website domains that are similar to itself, and all of the various TLD variations of its name. At the same time, all similar social media accounts should be registered as well. Cloudfare needs to be set up on the website’s landing page. Finally, set up the two-factor authorization even for team members.
This is not an exhaustive list by any means. If you are worried, you should consult with an ICO development company or a development solutions provider who has been through the ICO process before.
Fundraising through an ICO vs. fundraising through equity isn’t any easier, it’s just different. Be sure of the venture you are embarking upon as if you do an ICO for the wrong reasons, you’ll be stuck with the consequences for a very long time. It is the most exciting opportunity that a business can get into if done right.