Initial Coin Offering a.k.a ICO is a fundraising tool used by startups working on new blockchain projects. An ICO is akin to an IPO, but with some notable differences. An ICO provides a chance to trade future crypto-currencies against crypto-coins having current liquid value such as bitcoin or Ethereum. Most new digital assets and currencies mainly traded against bitcoin and ether. They also trade against other digital assets and fiat (USD, EUR, GBP) as well.
Crowdsale, crowdfunding and token sale are among other popular terms for ICOs.
The first requirement for participation in ICO is the possession of cryptocurrencies. At the beginning she should deal with the ICO. Read all information about the specified tokens. Normally, the ICO website has an address that people can use to post their messages. The project team proposes a new offer of token contributions to the purse of the investor.
The main aspect is understanding the offers in advance and reading the whitepaper for each project before investing.
Find out about the risks and benefits of the project and take a careful look before investing money.
Starting with the risks involved in ICO investing, first one is the complete or absence of regulations. Unlike IPOs which are monitored by regulatory bodies, ICOs neither follow any regulatory requirements nor is it easy to regulate them. ICOs do not fall under any particular geographic location, making it a challenge to regulate them.
ICOs hardly go through professional due diligence or vetting. In the financial industry, due diligence is the first step taken before making any investments at all. It helps investors understand the investment risks, offers a comprehensive view of the company's financial condition, and analysis the business model of the company. ICOs, on the other hand, have an equivalent of an investment prospectus in the form of a website or whitepaper.
Most ICO projects do not have a proven business model and in most of the cases, not even a ready product. The industry experts agree that most of the ICOs are a longshot at best, which makes it risky to invest in them. ICOs are not restricted by geographical borders; in this case, if the issuer absconds with the money, there is very little an investor can do to retrieve their funds.
Is investing in ICOs right for you? To answer this question, it is important to notice that investing styles vary from individual to individual, and it is primarily triggered by their financial requirements and understanding of the investment landscape. Coming back to ICOs, if your financial life is in shape, and you are planning to leverage this growing asset class (cryptocurrencies), this could be the right opportunity for you.
-Define business goals and benefits for the contributors: Have a clear vision of your business goals and how it will benefit your contributors. It is critical to explain these goals explicitly. The key here is to have realistic goals and offer value to your investor.
-Prepare a roadmap: Starting with realistic goals for your ICO, prepare a roadmap for the project. You will require a whitepaper that clearly explains your business goals, what you intend to achieve with the project, and how you intend to achieve it. Discuss the technical aspects of the project in detail and it is even better if your project is under development. Investors prefer a project under development at some stage. Having a working prototype is the best play. Your entire ICO will revolve around your prototype.
-Investor security: One thing that investors deter above everything else is losing money. Provide an investor guarantee by using a multi-signature escrow wallet. Offer discounts to your early investors, decreasing them gradually as the ICO progresses. Mention a mechanism to return investor money in case of a failure.
-Get the word out: The success of an ICO depends hugely on its marketing and PR campaign. Spread the word out on all the primary ICO forums including Reddit and Bitcointalk along with a consistent promotion on social media platforms such as Twitter, Facebook etc. Be consistent with your ICO, communicating before and throughout the offering.