The number of initial coin offerings (ICOs) being launched each month has seen a decline over the past three months. However, the new crypto market is still full of tremendous possibilities in the last quarter of 2018 for projects which can successfully communicate their message to potential investors. Businesses and individuals considering this fundraising method only need to adjust the approach for holding ICOs. Though there is no way to guarantee the success of an ICO, industry insiders identified 10 basic factors to keep in mind while launching an ICO right now.
Best practices for crowdfunding in the last quarter of 2018
1. The token economy
As an ICO involves the sale of tokens, it is the quality of these tokens and the ‘tokenomics’ of a project which will be the best determinant of the project’s success or failure.
Tokenomics refers to the incentive structures created within distributed ledger protocols which ultimately allows for an exchange of information and value between people. A good project will account for various cryptoeconomic metrics which ensure that the platform is robust such as having a high fault tolerance.
Interestingly, this would not necessarily have been a requirement for a successful ICO until recently. Many ICOs managed to raise funds both during and after the crypto bull run of late 2017 despite not having any underlying value. Thankfully, the market is far more discerning than it was only a few months ago.
2. Implement KYC/AML procedures
In the present regulatory environment it is important for an ICO to have a secure, rapid process for fulfilling know-your-customer and anti money laundering (KYC/AML) procedures. Due to heightened regulatory activity, online exchanges also increasingly consider whether a project fulfils KYC requirements before listing it. Likewise, banks and investment funds are keen to see AML certification before engaging with ICOs. While many believe that cryptocurrencies herald the advent of a decentralised global economy, we are still living in a world dominated by traditional financial institutions. Therefore it makes sound business sense to consider this and ensure that these measures have been met.
Unfortunately many KYC providers do not provide a user-friendly interface and require significant time delays for the verification process. So be sure to utilise a provider who has experience working with ICOs and can verify a person’s KYC application in seconds. When working with cryptocurrencies, remember to keep the marketing funnel lean and prevent any road bumps for investors.
The dashboard of tokenware.io provides an integrated AI powered KYC/AML verification feature, which allows users to effortlessly prove their identity and fulfil compliance requirements in any country.
3. Use the right standardised token
Another common trait among successful ICOs is the use of ERC20 tokens for fundraising. The reason is that development teams are often dependant upon the funds raised for the implementation of their project via an ICO. The ERC20 token is ideal in this situation.
ERC20 is a standard token issued on the Ethereum blockchain which does not require it to have its own distributed ledger. A team can thus raise funds on the Ethereum blockchain before transferring the value of the tokens bought onto their own chain or simply keep it on the Ethereum blockchain and setting up a dApp on top of the base chain. Further this token offers a rapid rate of transaction and it is easy for a web client to communicate ERC20 transactions with a blockchain.
Due to its acceptance among a wide range of cryptocurrency exchanges and wallets, the ERC20 token is accessible by most cryptocurrency investors and provides the largest pool of developers who can work with the token. Through tokenware.io you can also offer the contributors of your project a multi-signature wallet that will give the new members of your community the ability to purchase your tokens without setting up their own wallet or making an account on an exchange.
4. Airdrops are your friend
When discussing marketing strategies for ICOs the first tool which must be considered is the airdrop, where tokens are distributed to large groups of people in order to raise awareness of a particular project.
While at first this seems like giving away money for free, a well executed airdrop can lead to an increase in the overall value of an ICO. Also a token is only valuable if it is used as an exchange of information and circulated among many people. An airdrop can help a cryptocurrency achieve the network effect needed to obtain value.
Even if the project does not see an immediate benefit from the network effect, it can be a cost effective means of marketing. Carrying out an airdrop can be akin to a traditional pay per click advertising for example if participating in an airdrop requires a user to visit the ICO’s website.
Airdrops can also allow ICO campaigns to tap into existing communities of cryptocurrency holders. For example, holders of ether (the underlying token powering the Ethereum blockchain) may be given a token with the knowledge that they are more likely to have a network of like-minded people interested in new ICOs.
5. Implement bounty programs
A bounty program is another excellent addition to the marketing strategy of any ICO. It is, in short, the provision of incentives for community members to add value to the project. Referral programs are a common example of bounty programs, and the crypto space now seeing a large amount of increasingly creative campaigns.
For example, a social media oriented bounty campaign, wherein individuals are incentivised by free tokens to engage with the project’s social media accounts, can quickly garner a large online community. There are also a lot of bloggers and crypto influencers who can be incentivised to mention a project on their online profiles through the use of such a campaign.
Bounty campaigns can also be used for a variety of other purposes which help the global visibility of an ICO. For example, there are many translators currently working in the crypto space who are willing to translate all the documents related to an ICO into numerous languages in exchange for some tokens. Considering all these potential benefits bounty campaigns deserve a permanent spot in the ICO marketer’s toolkit.
6. Plan your token metrics
Especially important is setting the right soft and hard cap for your project. The former refers to the minimum amount of money needed for the project to get off the ground, while the latter refers to the maximum amount required to execute the ICO’s aims.
Many investors are hesitant to contribute to an ICO until it has reached its soft cap so this should not be placed too high. However, keeping a very low soft cap can put pressure on the development team to create a MVP without sufficient capital. A soft cap should ideally be 10 % higher than the amount needed for a MVP to account for any unexpected costs.
An ICO’s hard cap is a far more important determinant of its success. Most successful ICOs have had hard caps of no more than 25-30 million USD, with many keeping the figure even lower. Analysts view low hard caps as a representation of a team’s commitment to setting achievable goals and this makes them promising for investors.
When considering token distribution during an ICO, a good strategy is to lock the tokens distributed to team members for at least a year or until the project has been actualised. This will result in greater confidence among potential investors and signal the ICO team’s faith in their project.
When designing an ICO make sure to take the time to consider the token metrics of your project. While they may vary depending on the ICO in question, the intuitive ICO dashboard of tokenware.io has been designed for use by any ICO. Token metrics are all fully customisable to give you the easy campaign you deserve.
7. Community building is crucial
Unlike most other means of raising funds, a good ICO also involves the creation of a community of users who invested in the development of a particular distributed ledger, dApp or cryptocurrency. It is the value of this community which determines whether an ICO is successful.
There are many social media platforms which can assist a development team in connecting with the community. While each ICO should use the tools best suited to it, there is a certain level of engagement which the crypto community and ICO investors have come to expect.
The most important platform for the ICO marketer is Telegram, and it has become a standard for ICO teams to have a Telegram group in order to communicate project updates to the community and receive feedback on what users feel is the right direction in which to develop the project. Other options also include online forums such as reddit and Bitcointalk. Medium is the most popular website for setting up blogs on which development teams can post detailed articles concerning their ICO. As always it is the engagement by the ICO team which determines the success of any social media strategy
8. Vet partners thoroughly
The high number of ICO scams has also translated into an abundance of fake companies hoping to cash in on what they see as a way to profit at someone else’s expense. Add to that the lack of transparency in a market constantly adjusting to the latest regulations, as well as the young age of many firms providing crypto related services, and it can be hard to determine which agencies are more than a shoddy website and an Ethereum address (if you have run an ICO this will be an all too relatable experience).
Against this background, it is extremely important to exercise due diligence and make sure that any partner firms dealing with issues such as KYC/AML or community management have a solid track record in the crypto space. Sometimes even the most respected agencies can have trouble engaging with the crypto community and the unique nature of ICOs as both a product and means of raising funds. A quick way to determine the credentials of a potential partner is to see if they are named.
9. Go beyond just good tokenomics
While investors should not expect a minimum viable product (MVP) until an ICO reaches its soft cap, there is now an expectation for ICO teams to be able to provide as much evidence as possible to show the viability of their vision.
Having an experienced and well-known team behind an ICO can on its own provide much assurance for investors. Though this route is tough for a team comprised of individuals who are unknown in the crypto sphere. Other ways of overcoming this trust deficit is by making your platform’s code open source and getting established crypto personalities involved with your ICO.
10. Sufficiently educate your community
As much as we would like it to be otherwise, the truth is that the cryptocurrency market has still not matured to the point where an ICO team can predict with any certainty as to how the market will respond to their ICO or even if new regulations are to be imposed in a particular jurisdiction.
It is important for ICO teams to understand this, and to convey the risky nature of cryptocurrency investments to the public. Large institutional investors are already well aware of the risks in the market and it is only small scale investors, especially those unfamiliar with blockchain technology, who are hurt by ICOs promising unachievable returns. ICOs which sufficiently educate their community about their product and cryptocurrency market will ultimately benefit from a loyal base of users in the future.
If you have an idea for a great crypto project and are positive that this is the right time for you to enter the market, it may be worthwhile to consider tokenware as your ICO service provider.
tokenware.io is the leading full service ICO provider. The Berlin based company has developed an incredible dashboard which allows you to focus on your product. The dashboard allows ICO teams to plan and execute airdrops, bounty campaigns and provides detailed statistics on token sales and the health of your token economy.