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How to Raise Capital Through an ICO?

How to Raise Capital Through an ICO?

 

How to raise capital through an ICO

Selling blockchain-based assets is one approach to raising money for your ICO platforms. Consider that you have an innovative idea for a brand-new blockchain firm. You might wish to use the blockchain to construct the first decentralized computer in history, which would be capable of producing native digital assets as well as decentralized software. Tokens, which are digital assets produced utilizing your blockchain, will be used by network users to conduct transactions.

It seems like a really smart idea. However, just as with any startup, you must first raise some money. Your alternatives for a typical business are to either: raise a venture round from private investors, pitch a venture ICO capital funding, or try crowdfunding via a crowdfunding platform.

But you have another choice with your blockchain startup: Why not generate money by offering the tokens the network will ultimately use? The value of the tokens will increase as the network expands and their demand increases, rewarding investors. An ICO platform is a capital-raising strategy used here.

Specialties of ICOs

  • Speed: Tokens can theoretically be produced and distributed in a relatively short period of time because creating an Ethereum-based token such as ERC-20 just requires 100 lines of code.
  • Liquidity: A 24/7 worldwide market is where tokens are sold.
  • No gatekeepers: Anyone who has a crypto-raising wallet can donate money to ICOs immediately from anywhere in the globe.
  • Ownership: Unless explicitly stated in the smart contract, ownership rights are not granted to token holders by tokens.
  • Community: ICOs draw early adopters, who support your success by uniting the early user base.
  • Minimal bureaucracy: Depending on the relative effects of your token, the number of disclosure requirements & paperwork may be minimal.

Before the launch

Not every venture can raise money using an ICO. First of all, it’s crucial to realize that an ICO is about more than just earning money. As with any profitable business, the most successful ICOs platforms have a product or service that customers want in addition to a compelling use case for a blockchain.

There are countless tokens available. Investors are hesitant to take the chance of investing in poorly thought-out enterprises without a very convincing response to these fundamental questions.

Build a team

An ICO is a significant project with many facets. To succeed, you’ll need a top-notch crew. Investors will pay attention to the team behind such an ICO because it is among the most dependable indications of its success or failure.

Choose the right jurisdiction

Although regulators & lawmakers are growing more knowledgeable about blockchain and cryptocurrencies, as a relatively new business driven by brand-new technology, it continues to reside mostly in a grey area of the law, including ICOs.

This does not, however, imply that local rules and regulations will not apply to your ICO. To determine the precise legal nature of your token, how it could be regulated, and what you’ll need to do to remain compliant, you will need to have a firm understanding of both anti-money laundering (AML) laws as well as securities law, which controls the issuing of financial instruments classified as securities.

Read also: What are the Essential Things to Know for an ICO?

The laws that will relate to your ICO capital will change depending on the country or region you operate in. Some nations, including Singapore, Switzerland, Hong Kong, the British Virgin Islands, Lichtenstein, the Cayman Islands, Bermuda, Cyprus, Malta, and Gibraltar, are recognized to offer favorable legal frameworks for ICOs and cryptocurrency initiatives.

Choose or build the right technologies

It should come as no surprise that selecting the appropriate technologies for your ICO will be essential to a successful ICO capital funding campaign. A blockchain, a smart contract, a token, and several types of back-end web & security infrastructure are necessary technologies that must be in place.

Blockchain: While some companies opt to create their blockchain & utilize it to host their ICO, the vast majority rely on well-known ones like Ethereum. These blockchains may have distinctive features and more flexibility, but they also demand more time and knowledge.

Smart contract: The heart of your ICO is a smart contract. In addition to handling incoming token purchases, it also links to your token wallet and allows token holders to transfer & sell tokens.

Tokens: Tokens may be programmed with a variety of functionalities because they are made of code. Tokens can be classified as asset-backed, utility, participation, or investment types. It is crucial to understand the state of your token because each type may be constrained by certain legal restrictions.

Infrastructure: Servers are also necessary to handle website traffic and accept visitors. Usually, manual verification or KYC services are used for this.

Security:  Good security measures will safeguard & convince investors about your platform. Your project and your investors will be more secure if you have a properly audited smart contract, a high-quality, dependable hosting service, domain monitoring for phishing, and your acquisition of comparable domain names.

Design your tokenomics

Generally speaking, you want to balance the price and supply of tokens for an ICO. If the reserve is too low, there may not be enough tokens to fulfill your investor base, or investors may be turned off by the high price of the token. If the supply is too large, the price per token will be diluted & low. Your project’s tokenomics should reflect both the nature of your good or service and the cost of your token. The allocation & distribution of tokens as well as the production of tokens are two important considerations.

Allocation and distribution: You will have to make many choices regarding how to distribute & distribute the token. The first is deciding if it would be beneficial to employ both a private and public ICO launch. A private ICO, frequently held as a pre-sale event before a public ICO, offers pre-mined tokens to a small, hand-picked group of investors. Public ICOs, also known as token crowdfunding, enable nearly anybody with a crypto-raising wallet to invest in a token.

Supply of tokens: A maximum supply, a total supply, and a circulating supply will all be present for your token. The quantity and the potential of your project will both have an impact on the token’s worth.

Select the token sale model

You must choose how to oversee the sale of the tokens after selecting the tokenomics of your platform. To attract and reward a variety of investors, the token sale strategy must strike a balance between simplicity and as much variety as is required.

Soft, hard & hidden Caps: The minimum and maximum amounts that your ICO capital must raise before it finishes are known as the soft cap and hard cap, respectively. Before the ICO starts, the caps are determined. Investors cannot determine the capitalization of a hidden cap until the allocation has been decided. Hidden caps can be rigid or soft.

Uncapped or capped with fixed rates: At an early stage of the ICO, you may set a fixed price for the tokens, often at a discounted price, and then move them to another fixed price at a later point. It encourages investors to place an early order.

Dutch auction and reverse Dutch auction: In a Dutch Auction, the highest bids are given priority as a smart contract is employed to determine the token’s price only after all offers have been received. Reverse Dutch Auctions begin with a high token price & cap that gradually decreases over each day the sale is active or for each block that is mined. Once the cap is met, the sale is over.

Collect and return (C&R): The cap is fixed with C&R, but there is some latitude. When donations reach the specified fixed cap, a smart contract gathers them and adjusts the final token distributions by ratio, returning any overage to owners.

Dynamic Ceiling: Dynamic ceiling ICOs generate a series of hard caps that raise the money in installments rather than releasing the whole cap to investors at once. The benefit of this kind of ICO is that it prevents whales from purchasing the full allotment at once, which would hinder smaller investors from participating.

Create your product roadmap

A means to an end is your ICO. Your investors will be curious as to why you are raising this money, what you plan to do with it, and where your business is heading. To persuade investors that your organization is genuine and likely to flourish, a thorough product roadmap is required.

The route map ought to include:

  • An articulated clear vision for your project, which you may create with the aid of a copywriter.
  • A set of objectives and milestones that are SMART (specific, measurable, actionable, realistic, and time-bound).

Write your white paper

A white paper serves as your ICO pitch. Investors conducting their due diligence on your project will mostly read it. Whether you’re conducting a private or a public ICO, you should ideally have this white paper in place before creating your community and approaching investors. It will be essential in persuading investors that your business is genuine and reliable.

Read also: How To Write A Compelling ICO Whitepaper That Actually Sells

Everything described above, including your market research, team, technology, tokenomics, and product plan, should be included in your white paper. Spend money on copywriters & graphic designers; the more professional your white paper seems, the more professional your project appears.

How to prepare for the launch

How to Prepare for the Launch

Create your website & brand

Investors will evaluate a project based on how well-designed your website is. Don’t skimp on web developers and designers; instead, get the finest you can afford. You should think about employing experienced translators to translate your website into the local tongues of the jurisdictions you wish to target if your project is multinational and you want to draw in foreign investors.

Your website needs to include a token sale landing page before your ICO opens. This page should include a summary of your project as well as its key selling features as well as a prominent link to your white paper. A well-designed landing page may be a potential lead for your initial coin offering.

Build community

PR: A solid PR team has outstanding, well-established ties inside the crypto media as well as in the tech and national media (maybe). PRs can position you as an expert to be mentioned in big trending articles, produce press releases that land, and, most crucially, know how to sell your unique project to journalists. PRs can get you published in thought leadership pieces in top-tier crypto-publications. Additionally, they may arrange interviews with founders for podcasts and YouTube channels run by well-known crypto celebrities.

Community groups: Before, during, and after your ICO, you should make sure that you are consistently engaging with your community. A community manager will handle your eager and curious investors while building and organizing your Slack, Telegram, and Discord communities. Participate in online communities like Reddit and BitcoinTalk, create your Medium blog, and update your GitHub often.

Social media: To inform investors and potential investors, it’s crucial to maintain an active presence on the most widely used social media platforms. Engaging and interesting social media management is something you should look into hiring.

Pay-to-play: Although some of these prohibitions have subsequently been lifted, several mainstream social media sites outlawed ICO-related advertising in 2018. However, you may still run sponsored advertisements in crypto magazines and other media. At different points in the token sale, it is worthwhile to experiment with alternative promotion and price strategies.

Influencer marketing: Having a notable celebrity on board may help your cause achieve new levels of awareness and trust. Because you’ll be connecting your reputation to theirs, conduct your research and pick the correct influencers.

Bounty programs: By offering rewards for reporting bugs, marketing your project, and maintaining forums as well as other fan projects, among other duties, you may increase interest in your product before the ICO. They are a fantastic method to get crypto-savvy people interested in the specifics of your project.

ICO calendars: Make sure your initial coin offering (ICO) is listed on each of the most well-known ICO calendars.

Rating agencies: Your ICO platforms will be rated and audited by specialized rating systems. Although they are not inexpensive, they may provide an amazing seal of quality and reliability.

Final Thoughts

Recall what we mentioned earlier: Your ICO platform serves as a way of achieving a goal. Congratulations if you were successful in raising the necessary funds. It’s time for you to continue interacting with your community and also fulfill the promises you made in your white paper.

FAQs

1. What is an ICO?

One method of raising money with cryptocurrencies is through an initial coin offering or ICO. Although a private ICO that doesn’t seek public investment is also conceivable, it is frequently a sort of crowdsourcing.

2. How can I invest in an ICO?

You can invest in an ICO by the multi-level procedure register for an ICO through the project’s website, get Bitcoin or Ether, move your Bitcoins or Ether to a wallet you control, buy ICO tokens, participate in an ICO by sending your crypto to their address and you get ICO tokens to your address.

3. In what ways does an ICO raise capital?

Coin or token sales are how cryptocurrency businesses raise money. Investors in both situations are positive about the business or the cryptocurrency & make investments with the expectation that the value of the asset will rise over time.

4. How can an ICO benefit a startup?

It is noted that ICO offers several benefits, including high liquidity, return on investment, availability, a quick method for raising funds, and minimal capital-raising expenses.

By |2023-11-27T11:16:17+05:30January 31st, 2023|Products|Comments Off on How to Raise Capital Through an ICO?

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SoluLab is a market-leading digital & technological solution provider with the upper hand in Blockchain, AI / ML, IoT, Data Science, and Digital Transformation. Proudly recognized as the number one global enterprise blockchain development company, we have a prominent team of developers & designers displaying extensive experience in their domains. Our UI/UX team is qualified to come out with pixel perfection in each project. The company is co-founded and mentored by the well-seasoned duo in the tech-business landscape, ex-vice president of Goldman Sachs and principal solution architect of Citrix, with over 30 years of software industry experience.

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