How to start an ICO

Starting an ICO can be difficult. Running a successful ICO is even harder. There are currently thousands of live ICOs and competition has never been higher, so this is not something that’ll be easy. However, the rewards are there for those who are prepared to work hard and work smart — During Q1 2018, 204 out of 412 ICOs raised more than $100,000. Want to know how? This article outlines everything you need to know when running your own ICO.

Build your product and team

The best way to maximize the chance of ICO success? Have a working product. Ideally, one that is unique and solves a real-world problem. In this newly-born industry, legitimacy is a big hurdle to overcome — we must build trust. By having a working project, you’re building trust and instantly positioning your ICO above most other projects in the space. With that said, having a working business is not crucial to success. There are hundreds of highly-valued projects that are nothing more than just an idea! Infact, 46.6% of ICO campaigns in Q1 2018 did not have any development — Proving that this industry is largely built around ideas and future promises.

1 — Ideation

This is the project’s exploration phase. It involves empathizing with your audience or customer base, defining a problem worth solving, and discovering how an innovation could lead to a successful business venture.

2 — Validation

Validating the business model is another critical element. Make sure to test and validate your value proposition before launching your ICO, you should explore all the ways you can do this. You can find a collection of resources from leading companies and experts to help build your products at:

Product Frameworks - Best practices for product managers and entrepreneurs

At HedgeBlock, and its sister company Fusion (Fusion is a global platform designed for innovation efficiency at scale), we love running Google Design Sprint:

Next, you want to build your team. Preferably, you already know a few people that have already formed a working relationship together. This ensures that your team knows how to utilize eachother’s skills when it comes to solving the initial business challenges. If not, we recommend a strict hiring process — Every first-class ICO needs a first-class team!

ICO Setup

Setting up the ICO should never be rushed! We recommend this process takes 3 to 6 months. This length of time allows you to finalize the following:

A — Legal work

A seriously important area that shouldn’t be overlooked. Despite blockchain being a trending topic, the industry is still lacking clear regulations on a global scale. We always recommend getting legal advice from one of many reputable law firms with cryptocurrency experience. An example of such company is a US law firm, Cooley — A firm that has developed a framework called SAFT (Simple Agreement for Future Tokens). This is an open-source legal framework, made specifically for token sales. Don’t worry if you’re not from the US, these blockchain law firms are functioning across the globe. Please remember that the legal aspects of launching an ICO vary from country to country. You should find out whether the jurisdiction has a high-quality regulator when building your legal structure and operations in each region:

• Switzerland 🇨🇭: Switzerland have already established a global hub for virtual currencies, known as the “Crypto Valley”. Switzerland really is emerging as one of the world’s leading blockchain ecosystems
• Malta 🇲🇹: The Cabinet of Malta recently approved the “Virtual Financial Assets Bill”, providing the regulatory framework for cryptocurrencies and initial coin offerings (ICOs)
• Singapore 🇸🇬: Singapore currently does not have laws that could be applied to the regulation of cryptocurrencies and an ICO. However, the state’s official stance suggests that they are not planning to implement any prohibitive measures.

B — Tax

Officials have two main questions to ask: 1) Are the ICO process an income? 2) What is the utility of the token? Countries are finding it difficult to answer these questions and put clear guidelines into place. For example, the Internal Revenue Service (IRS) has not issued any guidance concerning how token issuances are treated in regard to taxation. This means we are left to apply the existing tax rules until we are given more certain ICO tax laws.

C — Utility vs Security

Utility tokens represent access to the public blockchain — In this case, the tokens serve an important role in the eco-system, and not designed as investments. On the other hand, it’s believed that security tokens derive their value from a tradable asset. Again, countries still aren’t clear on whether they believe crypto-assets are utilities or securities. However, in an announcement on Thursday June 14th, the U.S. Securities and Exchange Commission Director of Corporate Finance William Hinman said that the commission would not be classifying ether or bitcoin as securities. They will be making decisions on other crypto-assets on a case-by-case basis.

D — Tokenomics & ICO Phases

• Token Usage, Utility and Value: Before releasing your ICO, you must have a clear understanding of your tokenomics. This means having a token-based model that correctly interacts with the business model. Your token should: allow for product usage, governance action, contribution, voting, or simply access to the market. If the token usage is not clear, there is serous weakness in that specific tokenomics model.
• ICO phases: ICOs are conducted in multiple stages, usually: Private sales, pre-sales, and finishing with a public sale. Private investors are usually well-regarded funds or individuals with a large amount of capital — as such, they get the biggest token discount. Investors at the pre-sales stage also usually get a bonus for investing earlier than those who buy tokens at the public stage.

E— Sales & Marketing

• Investors Deck: document for investors for seed investment before the IC
• Litepaper & whitepaper: A vital component to any successful ICO is a clear & concise whitepaper. This prospectus should include: The problem, the resolution, project location, token description, blockchain governance, team qualifications, and potential risks. The crypto-space is filled with sub-par whitepapers, some are lacking technical writing, others are just copies. We recommended working with a professional blockchain writer when developing your whitepaper. At the very least, hire an editor before the project goes live!
• Marketing Strategy: You’ve developed your ICO and can’t wait to go live, but wait… Have you ran a successful marketing strategy !? There have been countless high-quality ICO projects that had a great product and experienced team. Unfortunately, they didn’t utilize an effective marketing plan to promote themselves. The result? Token sales that went nowhere. Ooopps!
• ICO listing websites & rating agencies: Such as Coinschedule and ICORating. These sites get visited by thousands of potential investors daily. Be seen!
• Events and roadshows: These are great for meeting face to face with established investors. Crowd capital will quickly follow once you’ve picked up initial investment from these big connections.
• Online groups: Slack, Telegram, Line, Kakaotalk are the perfect way to create a vibrant community. These groups are also an excellent way to answer community questions and connect with your audience
• PR, Outreach and Community Management: People need to be made aware of your ICO, and a community needs to be formed. After this, you need to manage your community and ensure everything is running smoothly. We recommend producing unique press releases, and distributing them to the best sites. You should also publish as many articles as you can into the most popular blockchain outlets. Remember, content is king !

Conclusion

To conclude this article, we are finishing on five factors that must be taken into account if you want to run a successful ICO :

1. Coordination is key. All members of the project must know their role and all work under the same core belief.
2. Assessing and finding partners is hard and takes time, especially if you are working in a small team.
3. Most of the partners and services are distributed across the world. Therefore, it is helpful to have someone who can manage communications and organize meetings.
4. Take your time before launching. We realize running a project is very exciting, but it’s vital to not rush into the market.
5. Don’t talk about how much money you’ll make! We’ve seen countless projects saying how they’re “going to the moon”. It’s seriously unprofessional and really doesn’t inspire investor confidence.

Want to streamline the ICO process and increase your chance of success? Contact us

Originally published at hedgeblock.co.