ICO: Business Idea Evolution
Today the term ICO does not impress anyone. More and more entrepreneurs prefer this method of fundraising, and this is quite understandable.
The first ICO was held not so long ago, in 2014. Back then, seven projects could attract $30 million in total. In 2017, more than $6 billion was raised by 800 projects. The difference between these numbers is huge. However, half of these projects have failed.
What’s the reason? Yes, there were cases of ICOs that were scam originally. Still, the biggest part of new projects have nothing to do with fraud. The answer is simple — the lack of organization.
It takes much effort to create and issue a token, to get money to develop a project, to implement an idea. The more effort you make, the better the result and the higher chance of success. The correlation between effort and success is obvious. So, what does an ICO consist of? First of all, it is an idea.
Forming an idea
Any idea should be first and foremost viable. In order to see the development prospects of the ICO, the project should be objectively evaluated by independent people. And the best candidates here are crypto enthusiasts, who can be found on specialized resources.
The purpose of the presentation is to understand how to complete the idea for its successful implementation. The eventual result can be far from the original idea, and this is normal.
What should be done?
- Present an idea in international profile communities and forums: Reddit, Bitcoin Talk.
- Get feedback from readers, see weaknesses.
- Answer the questions of interested users. Perhaps, these are potential investors.
- Finalize and submit the idea again. Most likely, you will need to do it several times.
Basically, readers should not have blind spots on the project map. The ultimate goal of the idea presentation is to form a real working business model. It will set the course the project will follow. The next step is a good team.
A strong team is able to turn even an unattractive and unoriginal idea into a successful product. Often, large crypto projects have a person who is well-known in the crypto sphere. This is one of the factors that can inspire trust in the project. But it is not the only one.
What team can be called reliable?
- The one that does not hide. Photos and links to an open social network profile that reveals all main achievements — this helps a reader to understand that the creators are real. Of course, fake profiles and photos must not be used.
- The one that has the specialists in different fields. If the project is built on blockchain, the team should have a blockchain adviser or better an engineer.
Sometimes, you can meet teams that have founders, directors and other managers, but there are no engineers. Naturally, this will raise questions from investors like ‘Who will actually develop the product?’
The main document of any ICO is whitepaper. This is the "face" of the project, and potential investors will take it into account when evaluating your product. If the ICO doesn’t have a compelling documentation, it will likely stay invisible in the highly competitive market.
What should a whitepaper consist of?
- Brief description and introduction, which is the first and often the only chance to attract a reader.
- Description and purposes of the product. People tend to invest in things that can bring some real benefit.
- Everything about the project’s token: its economic model, functions, distribution method. This information will help investors to estimate the viability of the business model.
- Analysis of business rivals. Many startupers ignore this step, which is a big mistake. It is a strong move, if the product has advantages over analogues in the market.
- Marketing analysis, that includes market analysis, current trends, related niches, focus-tests. It increases the attractiveness of the product.
- Technical part that contains information about technologies used to implement the project. Ideally, it should look as transparent as possible.
In addition, a whitepaper should contain information about the team and the project’s roadmap.
However, not everyone understands the importance of this document. Often people make mistakes that spoil the impression of the project.
The main mistakes when creating a whitepaper:
- Too much marketing and the lack of idea.
A reader does not understand what the project is made for, but only sees its numerous advantages. This won’t work, because the whitepaper has to show the real problems the project can solve.
- Too many technical details.
The document should be understandable and clearly explain all details of the project.
- Documentation mistakes.
No matter how creative you project is, this is business that has its own standards when writing documents. A well-defined structure of the whitepaper, the market analysis, the representation of the internal project economy — all these stages have to be properly described.
The project's documentation will be updated more than once, but the final version should contain all information for understanding the product you release. If the whitepaper lacks it, a reader will ask a logical question — ‘Do the founders themselves know what they create and why?’
Of course, the well-created whitepaper with all necessary details does not guarantee the success of the ICO, but the chances are higher.
In fact, this is one of the most important points. Nobody wants to invest in a project that may have legal problems in the future.
- Legal status: the company must be registered and the project must have a legal status. As a rule, founders tend to register their projects in a zone with loyal conditions for ICO (Great Britain, Switzerland), or offshore zones (Cyprus, the Cayman Islands).
- A user agreement that contains details on the token purchase and all conditions, rights and obligations of the parties.
- Escrow agents — disinterested persons, who will defend the interests of both parties in different jurisdictions.
Some teams do not involve escrow agents, but it is necessary for large projects. It shows that the company cares about the financial security of its investors. In addition, this implies a step-by-step financing, which also inspires confidence.
The issues described above are just preparations for an ICO. After that, the creators of the project are to solve more practical tasks: to determine a sales plan and a marketing strategy, to start developing and testing the product before the first version is released. These are covered in the second part of the article.
Alina Vorobiova, Blockspoint