ICOs (Initial Coin Offerings) have become one of the up-and-coming ways of raising money fast. According to CNBC, ICO proceeds in 2018 to date add up to more than three times the proceeds from 2017, at $11.9 billion in total. However, investors are very quickly becoming less enchanted by new ICO projects. Experienced founders that have previously run successful ICOs will tell you that it takes more than an idea and good PR to get funded today.
With a sea of new (and sometimes questionable) blockchain projects raising fast money, you’ll need to do much more to convince investors that your project is different and worth their Bitcoin or Ethereum or other currency. A persuasive ICO pitch is key to successfully selling your token regardless of whether you’re doing a private or public token sale.
Most teams end up overly focused on developing the product, only to find that they’ve neglected a critical part of a token sale: presenting a clear and compelling ICO pitch to raise funds from cryptocurrency investors. Below are five key questions that are at the top of the minds of crypto-investors that you should ask to get you closer to the perfect ICO pitch:
1. Is your blockchain solution solving a real problem?
It’s no surprise that new blockchain companies created everyday for a chance to raise hundreds of millions of dollars. What this means is that there are a lot fewer legitimate projects that actually solve real-world problems.
Be clear as to why you’re building the blockchain application and also illustrate the magnitude of the problem to get buy-in from discerning investors.
When asked on his opinion of ICOs, Jack Yeu, Co-founder and Chief Commercial Officer at Switcheo Network said: “ICOs have gotten a bad rep because many perceive it as a ‘cash grab’. If your identified ‘problem’ can be solved by using a database instead of your solution, is it really a problem worth investing in?”
Your pitch should also make clear that the solution is relevant to a problem that people are facing at this current moment versus something that people theorise to happen.
This video of the CEO from Switcheo Network (raised $8.7M) speaking at the NEO Amsterdam conference is a great example of how blockchain companies can illustrate current problems within the ecosystem with real examples.
2. Are the economics of your token sound?
Let’s be honest. Most crypto-investors are usually interested in one thing – the value appreciation of the tokens that they purchase.
To allay doubts of a dud token investment, blockchain founders need to be able to clearly articulate how their tokens are created, used, and why they’ll grow in value over time.
More popular as of recent, blockchain companies running ICOs mint a finite amount of ‘utility tokens’ that can be spent or exchanged for service, rebates or good. That way, tokens get destroyed after use and become more scarce.
The result? The token’s worth increases naturally due to scarcity.
Source: BOLT Token website
Making a case for the longevity of your token value means illustrating how the circulation of the currency will look like as well as highlighting scenarios for increasing demand, adoption and scarcity. Communicating how the tokens work in the grand scheme of things will greatly increase your chances of swaying investors.
3. Is your team the best for this project?
As with any company or solution, it’s the people and teams behind it that make or break the project. Ask yourself these questions:
- What are the technical strengths of my team?
- Do the members have any notable achievements or associations?
- Are their experiences relevant to the blockchain solution in development?
Cryptocurrency investors look for patterns in the form of these questions above that can indicate the eventual success of a blockchain project. Similar to any investment, potential holders want to know that there are a good mix of competent people behind the product that can sell, build and continue to sustain the solution.
According to Christel Quek, Co-founder and Chief Commercial Officer at BOLT and advisor to Ziliqa, token holders want to invest in not only the longevity of the technology, but also the people behind it.
“Identify the best strengths within the team even if they might come from a few individuals. Then, decide on a specific format and keep it consistent throughout members when showcasing your star team.” Quek adds.
Another tip is to avoid making general boastful statements like: ‘creator of multiple successful startups’. Instead, always use quantitative numbers or facts to substantiate any statements. (e.g. former CEO at X, 20 years in IT).
Here’s one example from LAToken (raised $20M). The format in introducing the team is consistent. It states their position and states their experience or describe their roles in previous companies.
4. What are your plans after the ICO?
Some investors buy tokens to HODL (formerly a misspelling that stuck into common usage, but now considered “hold on for dear life”) for the long-haul and not just sell immediately after the ICO is over in anticipation of value growth. As such, they’ll want to know exactly what founders plan to do in the months or years ahead.
This roadmap should include:
a. Marketing and Growth Plans
Community members want to know how you’ll continue to acquire and retain new token holders to bring added liquidity and value to tokens on sale. This helps to instill confidence in holders that the tokens they own will continue to stay relevant and valuable.
According to Tan Yi Sheng, Chief Commercial Officer at Inmediate: you need to have a concrete plan, and stick to it at all costs.
“Your early investors are backing your project in good faith, banking on its continual development. It’s only right that you deliver regular updates on progress and take the deadlines seriously,” Tan said.
b. Project Timeline
Having clear set dates (e.g. 2018 Q4) helps keep founders accountable for their promises made before the ICO and let holders closely track the progress of solution development. A simple linear illustration in these cases usually work best.
5. How will the ICO be financed, and where do proceeds go?
This is perhaps the most important piece of information for any token investor – how the company will finance and distribute ICO proceeds.
Prospective investors need to know the factors to consider in their purchase. This means including the token price, whether there are hard caps and limits to the number of tokens and also how these will be distributed to their wallets.
There have been numerous blockchain companies raising millions and minting billions of tokens via ICOs only to either participate in fraudulent activities or never get any closer to realising their solution idea.
“Investors have become more wary of ICOs with token caps that are too high. Hence, we decided earlier on that we’d only raise what we needed” said Yeu, “The question you need to truly answer as a founder is whether you really need that much money?”
A transparent breakdown like the above from Inmediate.io is a good example of accounting for proceeds to be raised during an ICO and what a successful token sale would entail.
Tackling this new world of cryptocurrency and blockchain can be confusing when you’re trying to get traction in the initial stages. However, as with any difficult endeavor, strategies that work will leave patterns and we can learn from these successes and apply it to our own projects.
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