I’ve been involved in the Crypto space since 2012 and our company IrishApps have been accepting payment in Bitcoin since 2013.
Increasingly I’ve been asked by clients and acquaintances about how to create an ICO and whether to invest in existing ICOs. I’m going to discuss the fundamentals of ICOs in this blog post.
Initial Coin Offerings are primarily used to raise funds so that an entrepreneurial or small business can launch some kind of crypto or blockchain based product or service. They are also used to raise funds for non-crypto business ventures instead of venture capital or traditional crowd funding.
What is an ICO?
An ICO is simply a way to sell some future crypto currency for some already existing crypto currency which may in turn have been bought with fiat currency. For example, you can create a new crypto currency called XYZ which you can sell for Bitcoin, which itself was originally bought using Euros. Of course, in some cases the company that created the ICO may accept direct payment in fiat currency in exchange for their new XYZ crypto currency.
As mentioned, ICOs are used by startups to raise capital and are an alternative to Crowdfunding. The new currency being sold can sometimes represent a share in the startup company, but usually this is not the case, so it’s important to realise that in most cases, purchasing currency as part of an ICO is not the same as buying shares in a company.
So Why Buy a new Currency and what use is it?
In order to know what the new currency is useful for or what it’s potential future worth will be, you need to find out what the new startup intends to do or what service they will offer. Usually the startup will explain this in a White Paper. You should satisfy yourself that based on it’s intended use, the new currency will have some utility, will have some future demand in the market place and ideally, the new startup business should make extensive use of crypto/blockchain emerging technologies.
As a Technology Startup, should you consider using an ICO to raise funds?
If your startup intends to leverage blockchain technology as part of it’s core offering or technology, then an ICO is a great way to try and raise funds. The new currency or token that you create should be a fundamental part of your business and part of the core structure. Your White Paper should plainly describe how the new currency will be used in your business. If your idea gains traction and attracts customers then it should be obvious to the investor that the currency will appreciate in value.
Blockchain tokens or currency should be integral to your business.
What are the Steps to Creating an ICO?
There are several practical steps required to create a successful ICO.
First you must have a website.
Like any technology based business, a website is necessary to explain what your business is all about and for other marketing purposes. You won’t get investors unless you have a good website. The following aspects are important:
a. Internationalisation – have the website in multiple languages
b. Landing page formats are most popular. Try to have all the detail about your startup on a single scrollable page. Go with what’s proven to be successful for other ICOs.
c. There should be a countdown timer to the launch of the ICO and after launch, this countdown timer should be replaced by a ‘Join ICO’ button.
d. White Paper summary. There should be a short summary of the White Paper explaining your startup idea in as simple a way as possible, with a link to the White Paper itself.
e. Your new currency should be explained in detail. The reader of the website should be able to clearly understand what the new currency (or token) can be used for.
f. Details about your team.
What is a White Paper?
White papers are traditionally used to explain a new product or service and are usually used in the B2B realm (Business to Business). In the IT world they’re often used to explain new software patterns or new technologies or different approaches to using existing technologies.
For example, in the early 2000’s, NoSql databases became popular and Google and Amazon released White Papers to explain how their implementations of NoSql databases worked. Bitcoin and Ethereum followed suit and released White Papers to explain how their underlying block chain technology worked.
Since them, it’s become a necessity for any block chain (crypto) based business to use a White Paper to explain their new business offering.
White Papers are increasingly effective from a marketing perspective and add authenticity and authority to your startup. They act as a point of reference and document of record for your technical proposal or business idea.
Make sure your White Paper is logically structured and follows a linear progression and train of thought. Even though it’s an important marketing tool, it should be targeted at the technical audience while striving to simultaneously explain the concepts to a non technical reader. It should be as simple as possible but no simpler! It’s tone and style should be more academic than other materials presented to the public.
Last buy not least… Marketing.
Without effective marketing nobody will hear about your ICO or new business. Most of your marketing should be done online.
Use forums extensively. Reddit is the most popular forum for geeks and my fellow software engineers but it not necessarily the best place to look for ICO investors. The following forums are proving to be popular with potential investors in ICOs:
Hope the above guide gives some idea as to what’s involved in creating a ICO. Watch out for upcoming blog posts on the more technical aspects of creating your own crypto currency. I will be explaining how to create a crypto currency using Ethereum and even how to create a block chain from scratch using Java or Python.