Blockchain ICO’s — The New Era of Crowdfunding Is Here
By Aviad Gindi, CFO & Co-founder @ bitJob.io
About the Author: The Author is the CFO & Co-founder of BITJOB.io — the 1st Decentralized Students JOBS marketplace on the Blockchain. Aviad is a driven Enthusiastic of Ethereum, Bitcoin and Social–economics. He’s also A Mutual Funds Manager, and an entrepreneurship instructor & mentor, and a very gifted & dedicated Basketball coach.
This Article was also published on ICO Crowd Magazine, July 2017.
Initial Coin Offerings are taking over investors’ radar, and everybody wants a piece of the pie ■ More than 25B$ has been invested in April 2017 alone, as that’s only the beginning ■ bitJob.io — The Student Jobs Marketplace is preparing for its upcoming ICO and has decided to share some campaign tips.
Crowdfunding is a method for small companies to finance the establishment and development of their business — an unorthodox method, compared to the traditional stock exchange IPO. This approach helps many projects get more, faster, and lower-cost funding than they can achieve otherwise.
When crowdfunding is used by businesses, the public gets opportunity to invest in startups, hoping for future profits from the company’s anticipated success. In 2013, more than $5.1 billion was raised worldwide through crowdfunding efforts. This rose to $16 billion in 2014 and more than $34 billion in 2015. (Those numbers are based on all crowdfunding platforms worldwide.)
In 2016, a wonderful thing happened when Initial Coin Offerings (ICOs), the cryptocurrency version of crowdfunding, started to get investors’ attention.
ICOs are one of the easiest and most efficient methods today for startups and individuals to receive financing without regulation that is financially burdensome while the project has no income.
People who participate in an ICO crowdfunding campaign, aka as “Token Sale” can pay through bitcoin or Ether “cryptocurrencies” that they either already have or purchase for the situation. The investor will receive the issued currency, also known as a “token”. For example, bitJob.io is planning to call their issued currency “STU” tokens, which represents a “student coin” in the Students’ Jobs Marketplace.
The issued currency has a predetermined value in Bitcoin and Ether, which is calculated by dividing the total number of tokens that went public by the amount of money that the company would like to raise.
The purchase of tokens is defined as a contribution to the development of the project, usually without any commitment from the company that raised the funds. There are also projects that promise future income for their investors, relying on future revenue streams (dividends).
The lack of regulation in this field attracts investors who are willing to invest low amounts of funds and receive yield potential that can reach thousands of percentages in a few days or weeks.
The main types of initial coin offerings:
1. The company defines how much funding they want to raise and how many tokens they’ll be issuing. That defines the value of each token, so the value stays the same through the entire ICO.
2. The company assigns a value to each token that varies according to the price of Bitcoin when the token is issued.
3. The company is interested in raising money without a cap limit (there is only a minimum limit and no equity maximum target). The value of each token will be defined at the end of the ICO, depending on the amount of equity raised.
Bitcoin and Blockchain Financing History
More than 25B$ has been invested in the month of April 2017, and it seems like only the beginning. For example, the “Aragon” project held its token sale in May 2017 and raised 25M$ in under 15 minutes. The token sale for the “MobileGo” project token sale, which ended that same month, raised 53M$.
If you combine all cryptocurrencies, the current amount in circulation is worth ~80B$. The most valuable tech brand in the world, Google, is worth ~675B$. It is reasonable to expect the cryptocurrency market to continue to grow and gain new investors, some bigger than the market is now.
To illustrate the strength of the cryptocurrency market, let’s review the Bitcoin price over the last 12 months.
Example of post-ICO valuation:
The numbers are clear — the potential for ICO is huge. Still, there are some major challenges facing the mainstream adoption of blockchain technology: the average Joe doesn’t trust Bitcoin or its reputation, finds blockchain technology too difficult to use, doesn’t understand or know about it, and has no drive to reduce decentralization.
Here are some factors that help make an ICO launch successful. BitJob.io plans to use them in their own upcoming ICO campaign.
1. Starting from the right foundation. The company must have a team of founders with the right skill set. There should be a CEO with experience in managing teams and leading projects, a quality control technician with proven knowledge of the blockchain architecture, a gifted marketer, and a financial expert — ANY solid project needs a great CFO to back up the token distribution and the economic expansion plan.
2. Writing the Whitepaper. This business prospectus document will detail all the technical and financial issues, show a roadmap for the project, and describe the general business model. Think of the whitepaper as the business card of the company; you can’t present yourself without it.
3. Building a professional website and even a basic mocked-up POC. This increases potential investors’ trust, demonstrates company seriousness, and illustrates the feasibility of the product.
4. Building an experienced board of advisors. A blockchain-based project requires technical knowledge. Including experience in the team will save time and money, and it is important to give the CTO the backing he needs for his delicate and crucial part in the very complex development process.
5. Using escrow agents. Escrow agents have been proven to be extremely beneficial for many ICOs. Investors have no guarantee that their funds will be returned, but escrow agents can give the investors some assurance that the projects they are investing in are audited and guided by a well-known person in the blockchain communities. This obligates the founding team to get the agent’s approval for any transaction they wish to post with the crowdsale funds, which is an external confirmation that they are following the company roadmap they published publicly.
6. Reaching influencers. The blockchain community is still growing and developing, but the core influencers are well known. Get the news of your ICO to them so it can reach as many people as possible in the world.
7. Using Professional PR. For an ICO to get its story to the right investor, it needs community-based advertising and marketing. A number of companies provide PR services for ICOs, raising the chances of a successful crowdfunding campaign.
Launching an ICO is not an easy Journey, Remember to smile along the way :)
www.BITJOB.io is coming up this summer, ICO starts on September 12th. Presale will open at August 2nd.
