Last year was a big year for the blockchain industry, and possibly the most significant since the technology was first developed. An immense rise in the price of Bitcoin, Ethereum and other coins put blockchain technology into the cross-hairs of the media and onto the radar of investors all over the world. At the same time, along with the growing popularity of blockchain technology, we saw Initial Coin Offerings (ICOs) hit the market, which slowly began to dominate the talking points among Cryptocurrency enthusiasts.
However, many scams, hacks and risks have surrounded ICOs and in many ways, this makes it difficult to talk about them in a positive light. In the wake of such a huge bubble, it is also natural for imitations and scams to pop up. In this sense, while this might put many serious investors off, it does signify that the hype is there for a reason. In fact, most of the projects that are currently in development will probably fail and more than half of all ICOs that appeared in 2017 have already failed. That being said, with every project that disappears into the ether, these ICOs and the money that was put into them furthers the infrastructure and mainstream attention.
An Extensive Guide to Launching an ICO
As we are still in the early age of blockchain technology, ICOs are not prominent as a common funding technique which means that as entrepreneurs, we need to be careful how we proceed with these projects. Every business leader must act responsibly and professionally with the proceeds of their ICO. Transparency is crucial as well as the ability to deliver on promises. Not only does this help solidify ICOs as a legitimate funding mechanism, it also creates traction with your investors.
With this in mind, to help you navigate the blockchain industry and release your own ICO, the following article is an extensive guide and a step-by-step walkthrough on releasing your own ICO, including marketing advice:
So What Exactly is an ICO?
In case you might be asking yourself, an ICO is an unregulated method of raising funds for a new cryptocurrency venture. An Initial Coin Offering, better known as an ICO, is used by entrepreneurs to circumvent the heavily regulated capital-raising process. The ICO process takes the power out of the hands of venture capitalists or banks and puts it into the hands of entrepreneurs.
In an ICO campaign, a small amount of the cryptocurrency is offered to early investors of the project in exchange for money or other cryptocurrencies (often Bitcoin). Due to a lack of regulatory compliance and middle-men, ICOs are often very high risk for investors.
When a cryptocurrency startup attempts to raise money through an ICO, they will initially create a whitepaper which details the plan for releasing an ICO. The whitepaper contains what the project is about, the aim of the project, any needs fulfilled by the project once completed and how many of the virtual coins the entrepreneurs will retain. The whitepaper also details what type of money or cryptocurrency is accepted, the length of the ICO campaign and how much money is required to carry out the project.
Throughout the ICO campaign, supporters of the firm buy the initial cryptocoins offered in the ICO with legal tender or virtual currency. These coins are called tokens and are akin to shares of a company sold during an IPO (initial public offering) transaction.
If the amount of funds raised do not equate to the minimum required for the project, the money is refunded to the investors and the ICO is considered a failure. If the money reaches the required amount within the set time frame, then the funds are given to the entrepreneurs to either initiate a new scheme or complete the previous promise.
Most investors in the early stages of a cryptocurrency buy the cryptocoins with the hope that the ICO is successful and the subsequent plan succeeds after it launches, which in turn dramatically raises the cryptocoin value, turning the investors a large profit.
An Example – Ethereum
A good example of a successful ICO that shared a huge profit with its investors was the smart contracts platform Ethereum, which uses Ethers as its coin tokens. In 2014, Ethereum launched its ICO and raised $18 million in Bitcoins, which equates to $0.40 per Ether. The project went live a year later and a year after that, the tokens had a value as high as $14 each.
Funding and Regulations
ICOs are essentially a type of crowd-funding. Like IPOs or other methods of crowd-funding, a share or stake of the startup is sold to amass funds that will help the company in those tenuous first years of trading. The main difference between an IPO and an ICO, is whilst an IPO deals with investors, an ICO sells shares to supporters who desire to see the business develop, much like crowd-funding, though supporters of an ICO often want to see a sizable return in their investment. Because ICOs generally fall between crowd-funding and selling shares, they are known as crowd-sales.
Many ICOs have been successful and the future for ICOs looks promising as well as innovative. Investors are consistently warned to be careful when dealing with ICOs as a significant number of crowd-sale campaigns are in fact scams. Because the fund-raising channels are not regulated by financial authorities, any funds that are lost to fraudsters may never be recovered. As such, you have to reassure your potential investors of both your credibility and your reliability. We’ll cover that a bit more later.
At the start of September 2017, the People’s Bank of China made ICOs illegal, stating that they are disruptive to the nation’s economy and financial stability. The central bank believes that tokens cannot be used as currency on the global market and that ICOs have no place in the banking world. Because of this, both Bitcoin and Ethereum plummeted in value. Many cryptocurrency investors viewed China’s ban as a forewarning that cryptocurrencies will soon be regulated.
To carry out a successful ICO, you need to undertake extensive preparation. You need to be aware of any regulations and navigate around them whilst ensuring your ICO is as valuable to both you and your investors. There are two points to focus on when you launch your ICO to garner support from the media, public and finally investors.
– Authenticity – Be genuine. Those that work within and invest in the cryptocurrency industry are not dull people. The cryptocurrency community quickly see through fraudulent ICOs and are able to identify honest projects to support.
– Transparency – people love honesty. If an ICO conceals information, then it creates mistrust between the community that will invest in your project and your project itself.
So now that you are clued up on what Initial Coin Offerings are and their place in startup companies, you need to start making a plan for launch. But where do you start? Rest assured we have prepared a step-by-step guide to launching your ICO, right from your whitepaper to a press release. Check out the steps below:
A Step by Step Guide to Setting up your ICO
Part 1: Setting Up Your ICO
– Step 1: Do you Need an ICO?
– Step 2: Familiarize Yourself with Global Legal Challenges
– Step 3: Write your Whitepaper
-Step 4: Choose your Token Type
-Step 5: State your Terms and Conditions
-Step 6: Scout your ICO Team
-Step 7: Choose your Blockchain Platform for the ICO
-Step 8: Set up your Website
-Step 9: Create your Issue Calendar
-Step 10: Smart Contracts
-Step 11: Setting up the Hardware
Part 2: Marketing
-Step 1: Legal Loopholes
-Step 2: Brand Identity
-Step 3: Develop a Story for your Coin
-Step 4: Reach out to Journalists and Develop a Press Release
-Step 5: Spreading your Media Coverage
Part 3: Launch!
Part 1: Setting up your ICO
Here we’ll be focusing on the nitty gritty of launching your ICO. How to create a coin, which platforms to use, any legalities you should be aware of. Creating an ICO campaign is a lot of work. You’re creating your own cryptocurrency, essentially a balanced economy or digital framework for trade. Consider Bitcoin or Ethereum, imagine creating those tokens, well, you are about to do the same. So get a good team together, boot up your laptop and have a notebook ready. This is where your ICO starts…
Step 1: Do You Need an ICO?
Remember, almost half of all ICOs sold in 2017 eventually failed by the start of 2018. There are a number of reasons, especially mistrust between the investors and project managers. But even more important to an ICOs success than reputation or transparency, is the fact that many of these projects weren’t suitable for an ICO in the first place.
Many cryptocurrency experts remind us that an ICO is not a tool to raise a large number funds in a short amount of time for any business. ICOs shouldn’t be considered as the same as an IPO only without long and expensive regulatory processes. While ICOs might have been a quick and easy way of raising funds without any regulation when they first hit the market just a few years ago, now things are beginning to change. As ICOs become more and more formal, the cryptocurrency community is starting to install informal standards that all ICOs should respect if they wish to see success.
The main thing every startup should consider when discussing an ICO launch, is whether the digital token, that is the coin that they are offering, can be successfully integrated into the business model. To put it simply, if the only use for the coin is to trade on the cryptocurrency market, then there is no point for an investor to support it. It doesn’t stand for anything and can’t be backed up by something tangible. This is a sure fire way to guarantee your coin will crash after the ICO is launched.
Any token that hits the market during an ICO campaign will be scrutinized by the cryptocurrency community immediately. The only thing that will give your coin a chance, is if it has a practical use in the real world. In other words, if a decentralized cryptocurrency will not increase the value of your product or service, then you can stop reading now.
Step 2: Familiarize Yourself with Global Legal Challenges
This essential research should be undertaken as soon as possible. In fact, if you’re reading this article, it might be worth looking into it now. In the wake of China’s ICO ban in September 2017, more and more countries are looking to start either regulating the fund-raising strategy, or ban it all together. The essential ones that you need to know are those that have already implemented regulations. In China, ICOs are banned and successful projects are being forced to refund any tokens bought. In Russia, coins must be registered and taxed, and in the United States, it varies depending on state. South Korea have also banned ICOs entirely and Australia has issued regulations.
You can find a more extensive list of regulations by country here.
Step 3: Write your Whitepaper
The first and potentially most crucial step because at this point, you’ll be concreting your idea and sharing it with your prospective supporters. In these initial plans, your project won’t be as solid and tangible as it needs to be, and so you’ll likely need significant research into areas related to your business. Once you identify the niche that your ICO will target and hopefully fulfill a need within, you must try to portray exactly what your ICO will deliver, and provide evidence to back up your claims.
Many whitepapers are available online, and it might be worth reading through them to see how they are written and what points they attempt to address. Make sure that you never try to replicate ideas or plagiarize whitepapers. That will only undermine your authority and transparency, creating an unstable foundation for your project. Your whitepaper should tell the story of your ICO. A narrative should be concise but clearly communicate your vision for your project. You need to establish where you are coming from, why you are undertaking your project and how it can change the world. We’ll look into creating a narrative a little later.
Start your whitepaper by explaining the problem that your project will solve or begin with your project’s mission. After the introduction, lead into how your project will work, features of your token and any benefits that supporting the ICO will bring to contributors. Begin backing up your claims with any progress that you’ve already made and lay out a detailed plan of future actions. Be specific with any information you already have, making note of key dates, team members and how the token will be commercialised.
Step 4: Choose Your Token Type
This is where you can start getting creative. You need to begin considering the purpose of your token (hopefully it will represent something tangible and could be considered a “security”) and what kind of digital token it will be. Make a decision on a symbol to represent your token. It should be easy to remember and quickly identifiable, don’t go for anything too fancy. For example, Ethereum’s tokens Ether have a symbol of “ETH”. It’s pronounceable, it’s short, it’s clear and you even find these combinations of letters in a lot of words. To be succinct, it’s quick and easy to remember. Don’t go for something like “RYJSSJ” because honestly, no one will remember that after seeing it on an exchange.
You have to decide on how the token will be used to incentivize your investors and supporters. Set the worth of your token in the real world, will they be exchanged for a physical product or represent a share in the business. At this point, you should also set token caps. Some ICOs are uncapped, but the public are more favorable towards ICOs with clearly cut soft and hard caps.
Step 5: State Your Terms and Conditions
In this step you have to research the legalities surrounding the ICO world. You should put into writing certain legalities and formalities. Firstly, you should lay out the name of your project and outlay any terms likely to reappear throughout the T&Cs. You then want to define the token and describe the rights associated with the token. Include prices and timing of the ICO (this should also be on your website, but it never hurts to write it twice). State whether or not all the coins will be available at once, or whether the release will be staggered. Finally, make sure you outlay how you will use the proceeds of the ICO. You may want to outsource writing the terms and conditions to a lawyer.
Step 6: Scout for Your ICO Team
This is extremely important for any Initial Coin Offering. A decent team will help you spread news of your ICO further than you previously thought and ensure that it is carried out efficiently. You need to bring together a team made up of people with significant experience and expertise.
Ideally, your peers should share the same values and ethos as the project. Try to keep the team small and skilled. When choosing staff, you always want quality over quantity. Make sure you hire people knowledgeable about blockchain technology and various cryptocurrencies. LinkedIn can be a great resource for social networking and hunting the perfect team members.
Step 7: Choose Your Blockchain Platform for the ICO
After you have your team together, a whitepaper drafted up, your terms and conditions laid out and any big legal hurdles far behind you, it’s time to decide which blockchain platform you use to launch your tokens. There are a number of platforms you can use, including:
All of these platforms provide a multitude of solutions for your ICO. The most popular platform is Ethereum’s ERC-20 token, which is quickly becoming the industry standard. It’s advisable to ensure someone on your team is familiar with one of the major blockchain platforms.
Step 8: Set up Your Website
If you don’t already have a website, then you should set up one before reading any further. Any cryptocurrency project relies on the internet so your online presence is of the utmost importance. As your digital footprint/calling-card, a badly designed website screams unprofessional and can start raising eyebrows among a community that has grown out of technology. Your website gives your supporters the chance to interact with the project and learn more about your ICO. Ensure your website is streamlined and delivers all the information that prospective supporters require. All navigation aspects of the website must be clear and concise.
Step 9: Create the Issue Calendar
Write up how and when your coin will be issued. It’s very common to have a presale available to a small, dedicated number of supporters. Subsequently you can host a private sale, the principal coin offering to the public and then a general sale. The number of sales you have can be determined by your project’s requirements. You should announce your calendar on multiple platforms, including your website, forums or through a press release.
Step 10: Smart Contracts
You’ll need to create the token sale contracts for the ICO. Essentially, supporters send the Ethereum or Bitcoin to specific wallets before the smart contracts execute themselves, which in turn sends you the funds. The supporters are given the token coins during the process. Throughout the exchange, you’ll have to perform rigorous testing to make sure that everything is totally secure. If your transactions are hacked, both you and your supporters can potentially lose everything and your reputation will be permanently damaged.
Step 11: Setting up the Hardware
Right, now it should all be coming together. Your team have hashed out most of the ICO and your plan is just about ready to go. The last piece of infrastructure you need before launching your ICO is the hardware itself. You need a dedicated computer, a digital wallet and a node.
– Your Computer is essential for hosting the ICO website. As a rule of thumb, you should be looking at powerful computers for anything blockchain related.
– A node should be synced with the test and the primary net of the ICO platform. It is best to delegate setting this up to your ICO platform expert. The node will be very handy when launching and testing your smart contracts.
– A Wallet for safely storing your digital tokens is essential. Go for multi-signature cold storage for optimal security.
At this point, you should test all of the hardware diligently before thinking about a launch and then move on to the marketing and PR.
Part 2: Marketing an ICO
Good marketing is everything. People need to know about your project if they are going to support it. Outsourcing a marketing strategy can be extremely profitable if you have the capability and initial funds to pay for it, but if not, you can promote yourself for nothing more than a little hard work. Ultimately, you want to use multiple channels to influence other people to spread word of your coin. Reach out to the media and create an online community to generate a buzz around your ICO. The tips below should get you started on drafting your own marketing strategy, but by no means are these steps exhaustive. Spend time on your marketing plan and promote your product comprehensively to ensure that you generate as much hype before the release of your coin as possible.
Step 1: Legal Loopholes
Firstly, be careful of marketing or advertising bans in your target countries. Advertising laws can be very forceful around the world and you might have to jump through a few legal loopholes. Consulting an advertising lawyer or legal expert can speed up this process, though admittedly at a price.
Step 2: Brand Identity
Develop your brand image and advertising campaign. You have to get the public hyped about your project, and the majority of your token sales will be driven by this starting momentum. If you successfully create an online community of enthusiastic supporters, driven and informed by an intricate marketing strategy, word of your ICO campaign will spread through the vast reaches of the internet to more investors than you can dream of encountering.
Step 3: Develop a Story for your Coin
Every marketing expert will agree that a strong story sells products. If you can develop a narrative for your project then you’ll rake in more interest and as a result, more investors. In the beginning, the narrative creates a need for the product, then the product is introduced and the story ends with the result. Pressfarm encourages entrepreneurs to create a strong story for marketing purposes. If you are planning on producing a press release and getting in touch with journalists, it will greatly aid them in publishing a meaningful news story or review. Essentially, creating a decent narrative will help you get journalists, prospective supporters and contributors interested in your ICO.
Step 4: Reach out to Journalists and Develop A Press Release
Once you’ve set up your website and created a strong brand identity you can take the narrative that we mentioned in the last step and approach a journalist. There’s a huge number of technology journalists hungry for stories regarding cryptocurrencies at the moment, and a lot of them are constantly looking for the next big ICO to write about. If you can convince a journalist with links to the cryptocurrency community that your project is going to be a major hit, then they’ll open the flood gates to all kinds of positive press. You can find a list of journalists at Pressfarm, or by looking on cryptocurrency forums. It’s always advisable to contact journalists directly with a succinct description of your ICO and your narrative.
Step 5: Spreading your Media Coverage
If you’ve done every step thoroughly up until this point, then hopefully this step won’t be necessary. Even so, you need all the help you can get when launching your ICO and this is no time to be lazy. You’re at the final stretch, and if you pull this off, then your ICO could even be oversubscribed and some potential supporters could be left out. Once you have a press release ready and you receive some positive press reports, you need to spread those articles as far as you can. Most potential supporters will already be comfortable in the cryptocurrency world and so it’s probably best to target people who have backed ICOs before. Target websites like Twitter, ICO news websites and Reddit.
Support positive news stories with videos, meet-ups and public talks and for heaven’s sake, please control your own blog on your ICO website and repost any articles about your token sale. Use the full force of all social media at your disposal. Ask friends to share your articles, but be careful not to breach any advertising regulations or rules (a lot of social media websites have them!). A list of social media platforms that have imposed regulations on ICO advertisements include:
Unfortunately, this is due to the large number of ICOs that were revealed to be scams. So make sure that you’re one of the good guys who can actually deliver on promises and avoid any website related to scams. Guilty by association is a very real worry in the early days of an ICO, so ensure you aren’t identified as similar to any scams. Research some of the bigger scams so you know what to avoid.
Develop a presence on well-known forums. Social media extends further than Facebook and Twitter. As Blockchain is still a relatively new and niche industry, there are plenty of extremely active forums you can reach out to. Bitcointalk and Reddit are popular forums for ICO news and information.
Part 3: Launch!
So you’ve got your team together, created your coin, published a whitepaper, drawn up a marketing strategy and started to generate a sizable buzz with the media and forums. Everything is live and ready to go, all you need to do, is say the word and your ICO is underway.
At this point, you have to reach out to ICO exchanges and request them to carry your coin. ICO exchanges host your coin and enable supporters to buy and sell your cryptocurrency on the open market. This is why it’s essential to get your coin onto the most established and trusted exchanges available. Hopefully, if your media hype is strong enough, the people running the exchanges will know about your coin before you make the request!
You can find a list of exchanges on Best Bitcoin Exchange, whilst tokens will be listed on CoinMarketCap, which tracks sales of various digital tokens. ICOs that fail will find themselves at the bottom of CoinMarketCap’s list, or deleted from it entirely.
The process of listing a coin on an exchange depends on which exchange you have applied to. Some exchanges like Bittrex and Poloniex refuse to host tokens that might be considered a security. It may be best to avoid these exchanges in the growing number of countries that are making tokens illegal if they’re considered to not be a security. Most exchanges will request an ICO to provide:
- The coin name
- A trading symbol
- A description of the project and token
- The logo for the coin
- A launch date
- A Github link
- Third-party reviewed source code
- A compliance fee
Another option is to check out Coinlist and this popular spin-off from Angellist is a host for digital token companies. As you might expect coinlist can connect you with investors and help you navigate some of the trickier regulations.
Are you getting started? What else do you need to know? We have the tools and the know-how to kickstart your ICO!