What is an ICO (Initial Coin Offering)?
An ICO or initial coin offering is a means to raise funds for a start-up or new idea, this consists of an organization creating a token and distributing it online. This innovative crowdfunding model allows startups to bypass traditional early seed investment.
This can also be referred to as an Initial Token Offering (ITO) or a Token Generation Event (TGE)
Unlike traditional equity, buying a token does not necessarily entitle you to a share of the company, each token is unique and you must research the whitepaper for more information about the specifics of each blockchain project.
Summary of ICOs:
ICO stands for Initial Coin Offering.
This fundraising event operates through the sale of crypto-assets or tokens to investors in exchange for monetary investment. Looking for the ICO Marketing Service? Contact us.
What is an STO? (Security Token Offering)
Security is a broad classification that refers to any kind of tradable asset. The legal definition of security varies by jurisdiction.
When assessing the likelihood of an investment contract being considered security, the United States Howey test is a broadly used mechanism. According to the SEC in the US, an investment is a security if it involves “an investment of money. And a common enterprise. With the expectation of profit, primarily from the efforts of others.”
Through ICOs, STOs and crowd sales, investors have access to a wide variety of securities tokens, ranging from coins backed by precious metals to tokens redeemable for tangible assets.
Summary of STOs:
STO stands for Securities Token Offering
This fundraising event operates through the sale of crypto-assets or tokens to investors in exchange for monetary investment.
This is liable to fall under a considerable amount of regulation compared to an ICO
Launching a Successful ICO
Classify Your Token As An Asset
When considering to hold an ICO, there are two broad areas that you must first consider. Are you issuing a utility token or a security token?
A utility token will provide access to a product or service (Failing the Howey test)
A security token is an investment (passing the Howey test)
Having a clear picture of which path you will take from the start will save countless legal hours down the line.
This plays a role when promoting your token as there are many restrictions when marketing security around the world.
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ICO Pre-sale & Private Sale
These are token sale events designed to raise funds prior to the main crowd sale.
What is Private Sale?
A Private Sale event usually consists of founders and core team members conversing with their advisors and pitching the project to crypto funds, VCs and angel investors.
What is Pre-Sale?
A Pre-Sale event can be used as a means to test and validate whether crowd investors will invest or not. A pre-sale is also a way for projects to raise funds to cover expenses for the crowd sale.
Some ICO expenses may include:
Smart contract development
Paid Advertising (e.g. PR, social media marketing, paid to advertise)
Create A Whitepaper That Attracts Investors
The first step when launching a successful ICO is to create an ICO white paper. Generally, this whitepaper includes:
Information on the project (start/finish date) and key milestones
What the project will do upon ICO completion
Capital needed to begin the project
Token allowance and division
The aim of this whitepaper is to tell the story which defines the business problem and solution while offering beneficial insights and value to potential investors during the ICO period.
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