How to Fund Your ICO 8 Steps to Success
If you’ve found this article you are currently looking for information on how to fund your ICO. Considering the numerous players in this market, its not a decision to be taken lightly.
Like any business decision, it would be best to do the most thorough research possible, to ensure you chose the right partner or partners.
Changes on the ICO scene
A lot has changed in the ICO scene. The “spank” or “boiler room” mentality of 2017 has left potential investors wary of continual exit scams. There are a lot of rich people in the world who basically stole investors money. Many of the ICO firms that are long in the tooth were also part of that culture so don’t buy into the number of ICO’s as the single defining factor.
The Status Quo
Also many things have stayed the same. A lot of business owners with blockchain based ideas are scared of the figures involved for successful ICO’s. It’s not cheap and it’s not easy. A huge number of factors need to be considered and catered for to get to the best position for success.
ICO Marketing Payments
When looking at how to fund your ICO, payment to the agency or consultant(s) must be considered. Do not think any agency or consultant will work for 100% of your incoming tokens.
In fact, look at what you are asking.
“Will you share 100% of the risk with me and get paid in my tokens only?”
To me the answer is a simple no! That question can also be answered like this
“Sorry, I can’t pay my bills in your token so 100% not at all!”
And so the consultant or agency should be right. As an ICO startup, you have to factor in fiat cash payments in that consultants domestic currency, not just $USD.
In certain situations, a portion of your token could be accepted, but let’s say for example we agreed an 80/20 split on Fiat vs Token. I would expect 40% in tokens to account for the risk I am taking on myself.
But these are trivialities in the bigger scheme of things. You pay out on what the agency or consultant brings, it’s that simple. Potentially bonus tokens can be offered for success levels within the ICO fundraise.
How to fund your ICO
Now we’ve covered the basics of non-funding issues, let’s look at how you can run your ICO and fund it stage by stage.
If you can onboard your technical, marketing or sales team for sweat equity from the outset then this of course is a major break through. Typically those willing to take sweat equity 100% believe in the project and will work harder to help you achieve results.
The downside to this is that a number of people are disingenuous, signing up for equity and knowing full well they cannot deliver on what they promise. The legal issue is that unless it’s written into the initial contract you can’t just write them out. They effectively become a dead weight that you have to carry so be astute on your negotiations.
Always have equity delivered based on achieving the milestones that person is responsible for. Make sure the equity is signed over upon full completion and that there are no partial equity releases.
“You either deliver or you get nothing, that’s the offer!”
This is a key strategy when your considering how to fund your ICO.
Investors want to see an MVP, minimum viable product so your technical team are far more important than sales and marketing at the outset. Keep that in mind.
Friends & Family
Friends and family are important to your success in the very early stages. If you believe in your project and you have a viable business plan as well as a technical specification, you should be able to draw early investment.
Treat them as you would expect to be be treated. Offer equity incentives as well as super bonus tokens once the ICO goes live. However, I would urge you to advise them that the ICO could fail and the investment could be lost.
Like professional investors, you need to be realistic at all stages of the projects fundraise.
Whether or not you are very successful or mildly successful, astute management of the budget is what you need. Once you have exhausted the investment from your family and friends you can look to crowdfund.
There are a number of crowdfunding platforms out there but three I’m aware of are:
I’m sure there are more, feel free to message me to update this article if you have any to add.
EIS / SEIS
EIS – The Enterprise Investment Scheme is designed to help smaller, higher-risk companies raise finance by offering tax relief on new shares in those companies that qualify. For the investor, it’s a tax efficient way to invest in small companies.
The EIS is aimed at the wealthier, sophisticated investors. People can invest up to £1,000,000 in any tax year and receive 30% tax relief. However, they are locked into the scheme for a minimum of three years. EIS seeks to encourage investment into unlisted companies
SEIS is an incredibly generous derivative of the Enterprise Investment Scheme (EIS) and was introduced in April 2012. Its aim is to encourage seed investment in early stage companies. Investors, including directors, can receive initial tax relief of 50% on investments up to £100,000 and Capital Gains Tax (CGT) exemption for any gains on the SEIS shares.
The maximum amount to be raised for each company is £150,000.
Whilst I added this in here, it’s also a great way to get investment from family and friends as they can use the tax benefits awarded too.
This is where it gets fun. By now your MVP or your full product depending on how much you have raised will be ready. Having another round of fundraising from friends and family at this point could be beneficial as you can offer tokens for a low value, maybe 80% cheaper than your full ICO listing price. This gives you the ability to offer better value off the token value.
Doing this will enable you to raise funds to further expand your team and get the right talent for the next stage of the ICO, the pre-ICO.
Whilst I am now talking about adding extra staff, when focusing on how to fund your ICO, you need the right experience at the right time to get you to the next stage.
You need someone who can code smart contracts and tokens as well as strategise a bounty programme for you.
This is where you provide super bonuses for investors who come on-board early and buy your tokens. This will also be the stage that the tokens are at their lowest set price. Oh and I forgot to mention you have to have already worked out your tokenisation figures.
The private token sale needs promotion. Make sure you list on the right ICO platforms and where possible pay for sponsored listings. Where possible exclude countries that offer a lot of sign ups for free tokens but offer little value post the ICO.
The ideal scenario is your private sale customers are not just profiteers and your airdrops and bounty programs don’t just attract token hunters. This however is typically not the case.
If you get to the pre-ICO stage congratulations. So far so good and things are looking bright and rosey. You should have surplus funds ring-fenced and you can employ a marketing agency or consultant.
We have a platform that enables you to manage the whole ICO including bounty, tokens and smart contracts that starts at $15,000 + Tokens to get going. It really is a comprehensive solution using advanced KYC and you should check it out if you get the chance.
You can upload your previously distributed tokens to the platform and bring this all together in one place.
During the pre-ICO, you will attract the profiteers but if your social media community manager has been doing their job this can be mitigated. You do this by having an engaged community around what you want to do.
Also, try and work your token or coin delivery through your MVP or finished product and do not release tokens until the full ICO has completed.
At this stage of your ICO, your marketing and PR campaigns have to prove their worth. The more you spend, the better the results will be. Don’t assume a tight budget will bring you success.
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.
Operating along these lines will go somewhat towards helping you raise further investment. But when contemplating how to fund your ICO for success, you must spend big to get results.
The one thing you can relax about is that you can work your marketing spend out of the money you raise on a tranche by tranche basis. At least you don’t have to raise it all in advance.
Post ICO Bounty
The post ICO bounty isn’t so much designed to raise funds but to keep interest piqued and to reward your community for helping you find bugs and potentially to re run some new social media activity.
This could attract new investors into the coin or token or bring you new business to your launched product.
Let me know your thoughts?
So there you have it. My 8 steps to success when considering how to fund your ICO. Do you agree? Disagree? I’m open to discussion.
This is how I see the plan working across the board and I’ve tried to add other perspectives to give context at each stage.
As an ICO marketing agency and crypto advisor to major brands we have a good focus, but like all blockchain enthusiasts know, the landscape changes daily.
With the oncoming regulation in the UK, it’s in your best interests to be as compliant as you can be just in case retrospective laws are passed.