Tips for successful ICO: essential documentation

The article offers to the ICO projects the structured approach in ICO documentation development in order to demonstrate their reliability and trustworthiness to potential investors.

1. Introduction

Since the first ICO that was launched back in 2013 by Mastercoin (now called Omni), its concept became very popular and has reached over USD 2 billion in 2017. This growth demonstrates the attraction of ICOs for the existing and newly emerged companies. The main reason for such popularity are the advantages that ICOs offers compared with the standard means of fund raising. Still, it bears a lot of risks for potential investors due to the lack of regulations in the field of blockchain and cryptocurrencies.

The major pain here is that there is no standard, universal structure, or so-called “best practice” when it comes to how the ICO documentation should be structured.

Therewith, this article offers to the ICO projects the structured approach in ICO documentation development in order to demonstrate their reliability and trustworthiness to potential investors and, henceforth, project platform participants. Our opinion is based on the analysis of a dozen of successful ICO projects and determines which documents they have presented, as well as the main components of the Whitepaper and typical errors in ICO project documentations.

Onepager

Whereas one of the main preparatory step of launching the ICO is preparing the Whitepaper, the project team is also advised to prepare the Onepager, which generally includes the following information:

• Problem
• Solution and proposed product/service
• Token implementation (how the token will be utilized within the platform, its economics and main technical features)
• Token allocation
• Team and advisors
• Roadmap
• Project highlights
• Other important project-specific matters

While this document is optional, still we recommend to give pride of place to the Onepager and hold it available for downloading from the ICO website, as it might be the first paper that will introduce your project to potential investors.

Technical paper

As there are no general guidelines to the ICO project documentations and generally it is being reviewed by people who have deep technical knowledge and who have none, some of them complain on the ICO project paper to be too technical or not technical enough. Therefore, we recommend to prepare the separate Technical paper for the ICO project, where the team can introduce the detailed technical description of the project, its system architecture, main technical features, etc. Herewith, it will demonstrate the project team knowledge of the concept they are offering and give the technical experts the opportunity to analyze and assess the technical feasibility of the ICO project.

Whitepaper

The Whitepaper states all the significant terms of the project and it is a must-have for any ICO. The main thing you should know is that the Whitepaper is a professional document that have a great influence on the potential investors decision to invest in your project or not.

Based on our analysis we outline the major components of the Whitepaper that potential investors would like to know about the ICO project, and emphasize main errors that can raise uncertainty regarding the team’s ability to deliver the project.

2. ICO Project Whitepaper

One of the most important component of the successful ICO is the Whitepaper, as it is doubtful that anyone will be willing to invest in the project that does not have properly developed documentation on its concept, main features, technology, etc. Below you can find some tips on creating the Whitepaper containing the information that is important for potential investors.

Good idea

Even a perfect Whitepaper will not work for the bad idea. That is to say, the project should bring a real benefit to its end users and solve a real problem.

Problem and market review

The project Whitepaper should outline the main problem it aims to solve. Basically, it creates the demand for the project product/service. Why is this so important? Well, if a person who reads the Whitepaper does not need your product/service, he/she will not have any incentives to buy your tokens. Besides, a good market analysis reveals the project major competitors, trend and identifies where and who your customers are. It is also important to highlight the project competitive advantages that makes it stand out from the crowd.

Proposed solution and product/service description

After stating the problem, it comes to bringing out the solution that your project proposes. The main point here is to be highly specific and transparent in defining the real benefits of using your project product/service. Also in this section we usually expect to see the justification of the use and the need of blockchain solution for the proposed product.

Technical description

The ICO is all about financing the development of a specific technological solution. To complement this the whitepaper has to have technical description of the solution under development. It may be delivered as a separate technical paper or implemented in the general whitepaper. In technical description we generally want to see detailed yet concise summary of the platform/solution architecture, key roles within the platform, technological stack used, technical features description, how decentralization will be achieved and what consensus mechanism will be used as well as any other technical topics which are important for the project (e.g. security of data, systems integration, etc)

Registered legal entity behind the ICO project

To bring more trust to the project the team should register the company that brings the solution to its users. That would definitely add some points in favor of choosing to invest into the project. While it is not necessary to mention legal entity behind the project in the whitepaper, it is still recommended that it is mentioned on all official documents as well as on website.

Project roadmap

Every ICO should be backed with the detailed roadmap showing the timeline of the project main milestones, including its technical development, marketing & business development activities, and project partnership plans. Hence, it is crucial for potential investors to see that the project is durable and the team has the clear vision of how the project will be implemented. It might be separated into the technical and business roadmap, and its main milestones should be covered by the vesting/lock-up period for the tokens allocated for team and Foundation.

Team & advisors

The potential investors want to see the people who stand behind the project. Therefore, one of the main component of the Whitepaper is to show that the team members possess relevant experience and education to get the work done. It is recommended here to include the members with varied experience, particularly, technical specialists, blockchain experts, marketing and finance specialists, experienced management team and influential advisory board. Don’t forget that all the team members’ and advisors’ credentials should be supported by their official LinkedIn profiles, as potential investors want to get the information verified by the publicly available sources.

Project partners and investors

The project supported by other organizations and, especially, investors will be more attractive for potential investors during the ICO rounds, therefore, we recommend to disclose the information on the project partnership and release announcements stating the nature of partnership and amounts of investments the project received from private sale.

ICO details and token metrics

This part contains information on the project cryptocurrency, including the type of token, plans regarding the token issue, the project hardcap, its total supply, the amount of tokens that will be kept by the project creators, etc. Some of the main factors that are being considered by potential investors are bonuses, lock-ups for bonuses and for tokens secured for the team and Foundation, utilization of unsold tokens, token buying pressure, and others. Another important point is to explain what will happen in case if the project does not raise the target amount of funds.

Token and project economics

In this section a discussion of the need for the project’s token is required. In any way, the project token should bring some value to potential investors at the point when it will be redeemed. So, the Whitepaper should clearly state the prospective use of tokens on the platform. Also, it is important to present an accurate and specific proceeds allocation scheme to demonstrate the project development needs and justify its declared target amount of funds. In addition to that, a transparent description of project’s economics, token and fiat (if applicable) flow is required.

Legal discussion

Taking the lack of regulation in the ICO sphere, we recommend to include in the Whitepaper all aspects of regulatory jurisdiction, which can contain an information regarding the issues relevant to your project legal security plan.

Project risk factors

The Whitepaper should also outline the most significant risk factors of the project that can have an effect on its investors. It is obvious that any investment inherits some risks, still, a diligent project would outline some of the major factors, such as:

• Regulatory uncertainty
• Market conditions
• Project technical development
• Possible issue while raising funds using ICO (including hacking and loss of data)
• Legal issues
• Others

3. Common Errors in Whitepaper

As it is stated above, the Whitepaper is a complex representation of the ICO project, and its main goal is to inspire trust of the potential investors in the project that is being proposed. Yet, the Whitepaper’s structure is not predetermined, which results in some common errors. Some of them are the following:

• Absence of market research and competitor analysis
• Not justifying the need of using blockchain in the project
• Purely technical or not technical enough
• Insufficient information regarding the ICO details and token metrics
• Not mentioning the marketing and business development milestones on the roadmap
• Absence of technical specialists and blockchain experts in the team roaster
• Not stating the affiliation to the project in the team members’ and advisors’ official LinkedIn profiles
• Inadequate distribution of tokens
• Absence of proceeds allocation scheme
• Not specifying the project plans in case if the hardcap is not reached
• Unclear token and project economics
• Absence of potential project use cases
• Inconsistent figures and numbers throughout the document
• Poor grammar and/or spelling

As the Whitepaper is a crucial step in launching the blockchain project, it should be stated in a simple and comprehensive manner and provide a detailed explanation of the technical, financial and other details of the ICO. Therefore, the project should include all the necessary information in order to make a well-considered decision to invest in it.

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