Nailing your crypto ICO

Wednesday 24 August 2016

Running an ICO is the de facto way of funding a crypto project. If you’re looking to raise funds for your own platform or business, what factors should you consider?

A solid proposal

It should go without saying, but it’s remarkable how many projects have nothing firm behind them. At best, they’re vapour, at worst, exit scams or pump and dumps. Crypto is getting older and more mature (and cynical), but there’s still plenty of these around.

Crowd

Accessing funding, users and enthusiasm from the crowd has become the de facto way of raising money in crypto

As a bare minimum, you’ll need a strong, clear and credible business document/white paper and a team with a known track record. If one or more of them is public and has a real-world presence, so much the better - that's becoming increasingly important and if you don't have that, you’re trading on reputation alone. Having an all-anon team doesn't make it impossible to raise funds, but it makes it a lot harder. There shouldn’t be any doubt as to the involvement of key people, so they should confirm their participation independently.

Presence in the right areas

Go where the money is. There’s no point pitching to traditional investors if you’re looking to raise bitcoins (which you’ll probably want to do unless you have a very clear understanding of SEC regulations, amongst others). That means getting the word out via crypto-specific channels, so make the most of any contacts you have with bloggers and crypto magazines. You’ll almost certainly need a thread at bitcointalk, which you will need to maintain to answer questions and shoot trolls. It’s a necessary evil, since so much investment starts there.

The right pitch

It’s not just about what you’re doing, it’s about how you say you’re going to do it. A recent study of Kickstarter campaigns suggests the wording of your pitch is critical. ‘Some of the top phrases found in successful campaigns were:

  • "Also receive two"
  • "Pledged will"
  • "Good karma and"
  • "Option is"
  • "Given the chance"
  • "Has pledged"
  • "To build this"
  • "Accessible to the"
  • "We can afford"
  • "Project will be"
  • "Mention your"
  • "Your continued"

The researchers noted that successful projects, which made up slightly more than 50 percent of the campaigns they analyzed, used the above phrases to express concepts such as reciprocity, scarcity, social proof and identity (belonging to a community) and authority.’ 

Secure the right amount

You need to make sure you secure enough funding to make the project viable; be realistic about how much that is. If you don’t meet your target, it’s probably best not to push ahead regardless - you’ll just end up disappointing everyone. If it comes to it, make arrangements to return funding to your backers.

But another issue is raising too much money. It sounds like a nice problem to have, but there’s evidence that securing a very large amount of funding won’t necessarily give you an advantage. There’s an old saying that work expands to fit the time available; the same can be true of money, and you’ll use whatever you raise to meet the same goals (well-funded businesses often burn cash needlessly).

Moreover, you’ll need to think about how the market will treat your project after launch. A large amount of funding implies a higher valuation/market cap, and possibly less room for growth in the medium-term. New investors might feel it’s already expensive and hold off buying, undermining overall confidence.

Needless to say, BitScan is doing all it can to make its own coming crowdfund for Incent successful. We hope you’ll be able to use it as a case study for your own ICO in the future.


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