Total ICO funding for 2017 has surpassed $3 billion in October. Startups all over the world are looking into raising money by conducting crowdfunding campaigns on the blockchain. With the number of ICO campaigns on the rise, the community is facing high competition for the attention of investors, which has started to reflect on the number of successfully funded ICOs.
66% of the ICOs in September 2017 missed their goal for different reasons. While some were maybe too ambitious, others lacked a good marketing campaign, or the team and product were not convincing. Early movers in the ICO space got lucky in the recent years, raising millions of funds in a matter of minutes or days, but with rising competition, this won’t necessarily be the case for all ICO’s to come.
Marketing is not enough, people need to know and trust your skills!
Many of these early ICO’s were conducted by deep stack blockchain developers that were part of the core crypto community, with high reputation and track record. The ICOs that sold out quick and fast did not come out of thin air. Early token investors – who by the way were also part of the core crypto community – knew these developers well, and trusted them, as their respective product idea had been discussed and peer reviewed for many months over Reddit, Twitter, Slack, Bitcoin Talk, various crypto podcasts, etc.
White papers are the business plans of the Web3 with which teams try to raise your funds, often before having a prototype. Writing a good whitepaper is the main task for every team. Avoid outsourcing the writing to third parties. If you want people to take you seriously, you need to involve the whole team: from core devs to your sales people. You need a semi-technical explanation of how your project works and an easy to understand walk through for non-techies. The whitepaper should be appealing to investors with no technical knowledge and developers alike. It needs to include:
- Credible technical roadmap.
- Plausible business roadmap.
- Clear tokendistribution model.
You can take your effort one step further and release a technical paper like the Ethereum’s Yellow paper or Zcash’s technical whitepaper. These papers give a further insight into the technical implementation and are only aimed at people with deep understanding of blockchain technology. They give more credibility to your tech know how, and allow for online swarm review. Technical papers have so far mainly been used for blockchain token sales and not for dApps token sales.
You will be more credible if you already have a product prototype. Encourage people to visit your GitHub page and play with the code. Please note, projects without a single line of code raise many red flags in the eyes of investors. If your name is not Vitalk Buterin or Gavin Wood – just using examples here – you might have problems raising money only with a white paper.
Investors are sensitive regarding token distribution and token pricing. You will need to be clear on how much of the funds (percentage) your team gets and how much will be dedicated to investors. Make sure you have the right monetary policy. If you are setting a high inflation rate, you might lose potential investors. Most of the dApps have no inflation because all the coins are pre-mined or spawned by the team. If you are developing a full blockchain such as Ethereum, you would need to design an inflation mechanism because it would be needed for the block reward system. Furthermore you need to decide what type of ICO you are conducting – capped or uncapped. For more in depth info read our ICO introduction blog post.
Having a diverse team is a key aspect. Don’t focus on business people only. If you want investors to take you seriously, make sure you have good developers on board. Also, choose your advisors wisely. Make sure that they all agree being part of your team. There have been many misunderstandings in the past regarding advisors who found their faces on different web pages and had to publicly announce that they do not endorse these projects.
Regulators all over the world are starting to look into ICOs, and regulate the scene. There are many unresolved questions regarding the role of a token (is it a security of not?), what taxes apply, what liability laws apply, etc.Because of regulatory uncertainties, many startups in the past have setup a foundation in blockchain-friendly countries such as Zug, Switzerland or Delaware, US.
Furthermore you need to understand wether your product you are building is in a highly regulated market – like making, energy, healthcare, etc – , and if yes, how will those regulatory laws affect your product/token. China, for example, banned ICOs in September 2017. The the SEC in the US is also looking into the topic, and starting to persecute the first token sales. So before you even think of conducting an ICO, make sure your get good legal advice form a law firm specialised in ICOs. One of the main questions you will need to ask your lawyers is: “Is the token classified as security?” the answer will depend and possibly could effect your token design.
Website & Newsletter
Keep your website clean and simple. Include your main value proposition, links to your whitepaper, blog and all other social media channels. Focus on collecting email subscribers pre-ICO. Many people don’t have the time to look into all projects and only subscribe to newsletters. Later this will become a powerful tool for your ICO campaign. After the ICO use the collected subscriptions for project updates and news. Very important part of the website is your team. Add team pictures and bios. Define their roles. People trust people they can research, thus they want to see faces.
You can have the best product, but if people don’t know anything about it, there won’t be a buzz and no one will invest. So social media is a no-brainer. You will need to be constantly active. The only tricky thing is which channel you chose as your main channel. Historically, the crypto-community has been strongly represented on Twitter and Reddit. Consider focusing on building big follower base there. This will be the foundation for your future ICO communication. You will need to be constantly active, generate discussions around topics of interest, and share mentions you might get from industry experts or respected media channels. Be authentic! Investors understand when a channel is being used for pure marketing or genuine community building.
Include a blog to your website where your regularly update your community about the state of your project, or topics of interest which are related to your project, and share the posts on social media. Consider connecting your website blog to Medium, since Medium has a huge crypto-follower base and could benefit your overall visibility.
All crypto projects have a main platform for direct engagement with the community. This is the place where the main discussion happens and were you gain credibility if you can survive swarm review of your idea. In the early days, people were using the Bitcointalk forum. With the emergence of Ethereum and ICOs, people started looking into alternative platforms. Many projects promoted Slack as their primary communication channel. Unfortunately Slack became a tool for the scammers to trick people into sending funds to false addresses. Many projects noticed that and moved to other platforms such as Telegram or self-hosted solutions. Projects like Zcash host their own forum. Others like Lisk have self-hosted Rocket chat on their servers, having better control over the platform. The main communication channel should be your priority when it comes to community building.
Hire a full-time community manager
Building a community is time consuming, many projects underestimate this role. Your community manager will need to coordinate online engagement of all members, and will be the bridge between the development team and the community. One sided PR by one person will not work. Your whole team needs to engaged online. But online presence is not enough. Your community manager should also coordinate talks at local meetups, conferences or other events, coordinate who gives interviews, or writes blog posts.
Get the founders answer questions and give interviews.A very powerful technique is hosting AMAs (Ask Me Anything) sessions on Reddit or Quora. Be prepared to answer really provocative questions. Furthermore, there are many blockchain related podcasts such as Epicenter or The Ether Review where founders come on the show and talk about their project and their vision. This is a great way to drive attention towards your project.
Record your interviews and presentations and upload these to your Youtube channel. Create small explanatory videos about your project. These could be short interviews or animated videos. Some founders use Youtube as a communication channel (e.g. Julian Hosp, TenX) to engage with the community.
Publicly share interesting activities
If you have a collaboration with other projects or companies, share it on social media. This will give your followers the confidence that you are doing a good job. Announce bounty programs. Could be anything from bug bounties to translation. If you find industry experts who genuinely support your project, invite them as advisors and share it on social media.
Pre-ICO Listing & Support
List your ICO date on all ICO-related platforms such as ICO Alert or Smith + Crown. Talk to private investors before the ICO. Ask if you could announce their names before the official ICO start. Potentials investors gain confidence in your project when they see professionals investors commit to your project. See Tezos and Tim Draper (Tezoz might be a bad example at this point in time, but back then the strategy worked!)
Pre-ICO: Investor Protection
SEC laws try to protect investors. In lack of clear international regulation you want to do your best to protect less educated investors, having easy to understand communication about what your token is, how the token sale will be conducted. Community standards for ICOs are being developed, in an attempt to protect investors from bad practices. The most important thing is to be as transparent as possible and have very good communication aimed at the least educated investors. Send out emails prior to the ICO with instructions explaining where your main communication channel will be. Include also a warning regarding scam attempts and how investors can protect yourself. Over communication is better than too little communication.
Announce bounty programs pre-ICO. Organize community games with token rewards. An example could be a content creation contest. They need to be designed well, pre- and post ICO. Allocate budget for bug bounties especially if you are designing smart contracts by yourself. Smart contract security is a very tough task.
ICO: Website Security & Stability
While the ICO is running, make sure you have a good hosting provider and simple website. If there is a big interest in your project, you will need to stay online at any time. If you are managing your community on Slack, please disable all chat communication while the ICO is running. There have been many successful scam attempts by people who trick the users into sending money to the wrong address. Create how-to guides on how to participate in the ICO. List the recommended wallets on your website. Shoot explanatory videos about how to send funds to the ICO and how to secure the tokens. After the ICO you will need to list your token on the exchanges. This involves a lot of preparation even before the ICO. Start building relationships with the exchanges. They have a long list of tokens waiting to be approved. Make sure you start negotiations early on.
ICO: Adress Scamming
While the ICO is running there will be many scam attempts. This is where Slack shows its weakness and could fail you in terms of moderation because you cannot disable private messages there. People are slowly moving to alternatives such as Discord or RocketChat. Keep an eye on your webpage. There have been succesfull attempts where people have managed to change the official address on the website whithout anyone noticing and investors lost their funds. See the CoinDash token sale.
Post ICO: Token Release
Consider locking the tokens for a few months. This way you will scare pump and dump traders who invest in ICOs solely for one purpose: dumping all tokens on the market for a quick profit. Talk with exchanges regarding the token listing. They are overwhelmed with requests thus an early action is required. After the token starts trading, you want it to have high trading volumes which won’t happen if you are listed only on one small exchange.
Consider diversifying your funds. Don’t keep all your eggs in one basket.
- The ICO Handbook
- Most ICOs Fail: Tale of Two Worlds, Erik Risley
- Tim Draper-Backed Blockchain Company Tezos Diverts $50 Mln into VC Fund, Cointelegraph
- China’s central Bank has banned ICOs
- Community Standards for ICOs: Do’s and Don’ts
- Token sale Best Practices for Founders
Also published on Medium.