Best IEO strategies: How to fundraise on IEO launchpads
Over the last few months, we have been observing how Initial Exchange Offerings are breaking into the crypto space and — along with the bullish crypto market — completely reanimating fundraising for blockchain startups.
The crypto winter was tough for many projects, and even those who started in time to attract capital via ICO in 2017–2018 have lost most of raised amount if they kept it in crypto.
For those who came up even later, it felt as if the train had already left the station long time ago, leaving only a trail of smoke over the horizon. The ICO era was over, and although there were few projects who still managed to raise something as well as others who switched to an STO (Security Token Offering), most of projects were left on a roadside.
And then, suddenly, Binance performed three successful token sales in a row on their Launchpad for BitTorrent, Fetch and Celer. Each collected $6–7M USD during the IEOs themselves and even more afterwards — up to $30M.
That was the time when the crypto world learned about Initial Exchange Offerings, even though the first IEO’s were actually performed by Binance back in 2017 for Bread and Gifto. Those were very successful as well, but nobody seemed to notice that at the time, as ICOs were still stealing all the headlines.
Nowadays, everything moves forward very fast. Projects who fail to adapt quickly will surely get left behind, as life cycles of successful strategies in marketing and fundraising are becoming shorter and shorter.
So let’s talk about how the projects can catch an IEO train before it leaves the station as was the case with ICO’s.
The beginnings
First of all, there are several obligatory things that should be in place before even approaching any IEO platform.
The items below may seem obvious, but a lot of projects still neglect the importance of them.
- Token economics. In this article we already discussed how important the tokenomics are for IEOs. The token should have actual utility, a deflationary mechanism and incentive to hold.
- White paper. Most of blockchain projects have purely technical white papers with detailed descriptions of how their consensus works and bunch of formulas, forgetting about marketing strategy, having a solid business model and tokenomics. White papers should be designed not only by developers, but with input from business and marketing specialists. It would also be good to perform an Audit by an independent third parity (e.g. agency or single specialist) with expertise and experience.
- Product or MVP. Investors in the crypto space will most likely invest in the project with a working product or at least a MVP. Having some traction in the market is an extra advantage.
- Solid team. The projects with only a couple of founders in the team are not seriously considered by IEO platforms nor potential investors.
- Marketing and PR. Even though exchange performs some marketing during and before an IEO, the project needs to make their own efforts: build an active community in public chat (1–2k people), social networks (Facebook, twitter, reddit, bitcointalk etc) and publications/press releases in Tier 1 / Tier 2 media outlets (Cointelegraph, NewsBtc etc).
As per our experience, a lot of projects — even very good ones — need certain advisory help from professional market participants with the above items. Those who don’t realize this are far more likely to eventually fail.
IEO Strategies
Assuming all the homework is done and everything is ready, what are the next steps?
This depends on several parameters: the project’s target caps (fundraising goal) and the budget they have.
Due to high demand on the market both from projects and investors/traders, all the far-sighted exchanges started launching their own solutions for performing IEOs. At the moment there are around 30 IEO launchpads of different scales. Of course not all of them perform well. Some of them even list purely scam projects in pursuit of quick profit.
In this article we’ve discussed IEO performances across exchanges based on the most important metric — return on investment (ROI).
In the beginning, exchanges looked for the best projects and listed them for an IEO for free, only charging success fees. But again, the demand for the service significantly increased as tons of projects began filling out applications. So exchanges generally started to charge upfront fees for the listing and — as of now — it is almost impossible to get listed without a retainer — or at least it will take too long (due to the overbooked IEO schedule).
What are the options?
Major Exchanges
Who it suits: The projects with large target caps and good budgets for getting listed
Fundraising goals: from $1M to $5M
Required budget: at least 10 BTC
Suppose you have a high enough budget — the best option is to go directly to one of the major IEO Launchpads. Among them:
- Binance ($2,7B daily trading volume)
- OKEx ($1,9B daily trading volume)
- Huobi ($1,7B daily trading volume)
- BitForex ($1,6B daily trading volume)
- Coineal ($1,5B daily trading volume)
- BW ($1,5B daily trading volume)
Most of major exchanges charge 10 to 20 BTC for an IEO. The price would depend on the project itself as well — how well it’s packaged and marketed, how big the community is, and whether or not the project has some publications and preliminary interest from investors. All of this is assessed by the Launchpads and it’s possible that they’ll reduce the price if they like the project and it best meets their requirements.
Exchanges choosing the projects also consider the preferences of their traders, which can vary greatly.
Some of Exchanges are more flexible in terms of upfront payment and can split it 50/50. Most of them also charge a success fee, which varies from 15% to 30%. Generally, the bigger retainer the less the success fee and vice versa.
There is also an option to get listed for free on one of largest Exchanges. For example, Binance and Huobi could, in theory, take your project into consideration after you fill out the application on their official website. In reality, however, they are overbooked for months and months. Not to mention that they mostly handpick the projects themselves ruled by their own subjective criteria.
You can of course try, and you should, but it’s best if you don’t rely on it much. That expectation will take a lot of time that you don’t have.
NOTE: Binance, the biggest and most successful IEO Launchpad, doesn’t work with mediators/agencies for IEO listing, as their CEO Changpeng Zhao has explained.
As mentioned above, exchanges help with marketing — especially large ones — but projects still need to perform massive marketing and PR campaigns of their own in order to get hype and achieve the target cap eventually.
Medium Exchanges
Who it suits: The projects with small target caps and small budgets for listing
Fundraising goals: from $100k to $1M
Required budget: at least 2 BTC
It sometimes happens (i.e. very often) that really good projects with solid teams and products don’t have enough budget for marketing and getting listed.
In this case, they can approach medium/small exchanges for an IEO, among them:
- P2PB2B ($642M daily trading volume)
- Cointiger ($668M daily trading volume)
- Exrates ($104M daily trading volume)
- Gate.io ($144M daily trading volume)
- Bittrex ($81M daily trading volume)
- KuCoin ($39M daily trading volume)
- Probit ($39M daily trading volume)
Even though the above mentioned exchanges are much smaller than major ones in terms of trading volumes, the price for IEO listings can still be very high. For example, Bittrex could charge $50k and request for legal opinion. But for most of these launchpads the retainer would be around 2 BTC, while success fees could vary from 0% to 25%.
Along with this, medium exchanges can be a faster track, as they perform IEO’s more often that major ones do. In fact, it’s often quite easy to book the nearest date (like within two-three weeks).
The average amount that projects raise on medium sized exchanges is $300–500k, which could be enough for the first or seed round of a regular startup.
Marketing efforts for these IEO’s are required as well, although they don’t need to be as extensive as for projects that have a high target cap. It’s important that there still be an active community and some PR (publications in Tier 1 / Tier 2 media outlets). Usually a budget of $10–15k is enough to expose the project to the public worldwide.
From Medium to Major Exchanges
Who it suits: The projects with big target caps and small budgets for listing
Fundraising goals: from $2M to $5M
Required budget: at least 2 BTC
Another strategy which projects can choose is to perform an IEO in two or three steps.
The first step is to get listed on medium exchange in order to raise some amount that will be used for eventually launching an IEO on a major exchange with proper marketing and PR.
In this case, the project’s team should be careful with the token price after first IEO. This is because once the token gets listed, it circulates and is freely traded on a secondary market. If community members feel that the project is abandoned the token’s price will fall to the bottom immediately and there will be no chance to perform further IEO rounds.
Thus, after the first fundraising event is over and the project receives some money, they shouldn’t use it just for development or the next listing on a bigger Launchpad. Instead, they should set aside a portion of their budget for marketing and something else which is very important: market making.
Market making provides liquidity to the token on the market and is necessary for tokens traded on medium/small exchanges, since their organic liquidity is not enough for brand new tokens (unless this is very hyped token which was previously traded on a larger exchange). Liquidity providers, or market makers, are professional market participants that can fill the order book to provide a certain amount of daily trading volume on most exchanges. The cost of market making could vary from $5k to $10k per month depending on what trading volumes are required, what the general market situation is (i.e. whether it is bullish or bearish) and common demand for the token (which consequently depends on marketing and PR efforts along with proper community management).
Summary
To summarize everything shared above, this space is full of hidden risks, and projects need to be very cautious preparing to perform an IEO.
There are a lot of questions which founders and teams should ask themselves in advance: Is our documentation in order? Do we have solid token economics? Have we done any marketing and PR efforts? What IEO strategy should we choose?
Professional market players can always help and guide you through this obstacle course and significantly reduce the time it takes for your IEO listing process since they have direct connections with exchanges and wide experience in the field.
If you need some help with advancing your IEO, please contact me in telegram @amidatonga.
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