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How to run an ICO?

A guide for entrepreneurs planning to raise cryptocurrency to fund their project.

If you have a blockchain startup idea, you will obviously need funding to put it into practice.

There are various ways of raising funds from the market. This document will explain in detail how to organise alternative investment through an ICO.

What is an ICO?

ICO (Initial Coin Offering)

  • Firstly an ICO (Initial Coin Offering) is a tool for funding innovative companies.
  • Secondly, an initial release (issuance) of cryptographic tokens or coins on blockchain.
  • Thirdly, crowdfunding through raising cryptocurrencies: Bitcoin, Waves, Ethereum, etc., and sometimes fiat currencies: dollars, euros, rubles.

Advantages and risks of ICOs

Advantages

  1. Broad audience – direct access to an unlimited number of investors worldwide.
  2. Community – every dollar invested brings you a loyal user of your app.
  3. Low cost – the ICO arrangement will incur financial costs, but they are much lower than the classic search for venture funding and organisation of public offerings of stocks on an exchange (IPO).
  4. Preserving control over the company – the tokens released are not the same as the issuance of stock, and therefore control over the company remains with the owner.
  5. Liquidity – the issued token can be traded on cryptocurrency exchanges, and its price can grow along with the successful development of your startup.
  6. Launch speed – funds raised at an early stage significantly accelerate project development.

Risks

  1. Legal uncertainty – comprehensive regulation of cryptocurrencies in general and ICOs in particular has not yet been established. A number of countries tend to regulate this field as a standard IPO with all the ensuing consequences for issuers and investors.
  2. Insecurity for the investor – the investor risks losing everything due to the lack of legislation regulating ICOs and in the event of a project failure. The risk of loss is exacerbated if the ICO project founders knowingly have no intentions of developing it and view this tool as a method of illegal enrichment. Such ICOs are pure fraud or scams.
Vitaliy Tsigulev Vitaliy Tsigulev COO Waves Lab
@cigulev

You need to integrate the token as closely as possible with the core product, to make it as in-demand as possible and convince ICO participants to purchase it. The best option would be using a token that is sold within the ICO as an integral part of your system or app. The token must fuel the operation of the system.

What is a token?

So far, there is no single established definition of what a "token" is. Depending on the jurisdiction of individual states, it can be treated as a security, "digital commodity" or "digital property", a licence, a property right, or a new type of asset.

Token models

Utility Token:
  • Product

    The token records the right to demand the receipt of a product or service from the issuer. They can also include discount tokens and intellectual property rights tokens.

  • Cryptocurrency

    Token acts as an internal means of payment within the developed blockchain-based platform or app.

Equity token:
  • Securities (stocks – a share in the project)

    Token that gives its holder the right to vote in the management of the company and profit from economic activities.

  • Securities (bonds – a term loan)

    Token that records the issuer's obligation for buyback in a certain time with a markup to the nominal value.

Answer the following questions to make sure you really need a blockchain solution and an ICO:

  • Why do you need a blockchain token? Does your product need blockchain? What advantages of blockchain technology might your product enjoy?
  • How can you functionally link a blockchain token to a product? Can you integrate it into your app?
  • How can your token be of interest to investors? Is there a mechanism that links its value to the success of your product?
  • How will your offer fit into existing laws? Don’t forget that you can’t sell stocks within an ICO, otherwise it will be an IPO. You can’t guarantee any profit, as it will turn tokens into securities and you will need SEC approval for this.

After you figure out how the ICO works and which model suits you best, you can proceed to technical matters and issues of project presentation.

ICO target audience

  • Early adopters and admirers of the project

    This is the most valuable group and makes up the core of your audience. They are evangelists for your project who believe in it and its importance. They will form the initial community for your product by not only investing in it but also actively promoting it within the crypto community.

  • Long-term and short-term investors – speculators

    The former will enter the campaign on its first day and hold a token for a long time, betting on its future growth. The latter will try to buy a token with the largest discount and sell it immediately at the first price rise once it is listed on an exchange.

  • Venture capital and investment funds and large private investors

    These carefully analyse projects and invest only in the most promising ones. They can significantly increase project capitalisation in a short time and ensure the success of the ICO. It is important to maintain a balance between the share of funds and individual investors, in order to further ensure token liquidity on exchanges.

  • Gamblers

    Serial сryptoinvestors usually invest in a variety of ICO projects, making bets like in a casino, in order to diversify their investment portfolio and fully allocate their available cryptocurrency.

Issuing ICO project tokens on Waves

Waves is a decentralised blockchain platform that offers an interface for any ICO project to release its own asset tokens in just a few clicks.

Alexander Ivanov Sasha Ivanov CEO and Founder of the Waves Platform
@sasha35625

You should understand that funds raised through an ICO are more valuable than venture capital investments. One dollar from an ICO is equal to about three dollars of venture investment due to the following:

  1. You do not give away a share in the business to anyone, and retain full control over your company.
  2. Aside from investment, the ICO brings you an active community of like-minded people who are ready to become your first users. Due to this, marketing costs will be much lower than in the case of venture investments.
How to issue an asset on Waves:
  • Register an account in the Waves online client, available at https://beta.wavesplatform.com/.
  • Sign into the online client and go to the "Tokens Creation tab" section.
  • Fill in the form, indicating: the asset name (in Latin/Roman characters), information about the project, the maximum number of tokens, the divisibility of the token, and whether it is possible to issue further tokens.
  • Wait for the network to confirm the creation and automatically charge the fee for token issuance of 1 WAVES.
After token issuance, you are able to:
  • Store tokens in the Waves online client.

  • Send assets to other users.
  • Issue additional tokens within your ICO project (if this function is enabled when registering the token in the "Tokens Creation tab" section).
  • Burn unnecessary tokens in your wallet.
  • Listing tokens on the DEX exchange

    After the token is issued on Waves, the asset automatically becomes available to buy and sell on the decentralised exchange (DEX), which operates in the Waves online client. The ICO project tokens are traded on DEX in pairs with other cryptocurrencies – for example, against WAVES, BTC or ETH.

  • Listing tokens on other cryptocurrency exchanges

    You can list tokens on other exchanges after the asset is issued on Waves – for example, on Tidex or Binance. The procedure for asset approval varies across marketplaces. Exchanges require the following basic data: full and abbreviated token name, lowest fee, developerment language, type of the platform’s blockchain consensus, link to the ICO project page on Bitcointalk, link to the GitHub profile, etc.

ICO stages

The ICO process can be divided into several consecutive and interrelated stages: Preparation, ICO, and Post-ICO.

Preparation

An ICO starts with careful project preparation and presentation. All further marketing and PR activities to attract investors will be useless without this.

Vitaliy Tsigulev Vitaliy Tsigulev COO Waves Lab
@cigulev

There were about 10-20 ICOs held at a time in the first half of 2017, while at the beginning of 2018, there were 300+ simultaneous projects. Due to this, the average amount collected and what can be considered “successful” are blurred due to the growing number of projects. Successful ICO projects have a carefully defined token concept, an efficiently built marketing campaign and adequate requests for minimum and maximum amounts of fees (soft and hard cap).

  • Clearly defined architecture of the project and token model.
  • Exact ICO launch date and Roadmap of project development over 1-3 years.
  • Terms of the shared distribution of issued tokens.
  • Legal model of the project (Terms & Conditions).
  • Presentation materials: White paper / Executive summary / One-Pager / Pitches.
  • Website.

  • Established project team (CEO / CTO / CMO).
  • Invited team of authoritative Advisors.
  • Translation of advertising and presentation materials into major foreign languages.
  • Presentation video about the project.
  • Project prototype, MVP with a link to GitHub.

Investor personal account

You will need to develop and integrate a personal account for investors to enable ICO participants to deposit cryptocurrency funds directly from the project's website. The personal account is an interface built into the ICO project website that allows investors to easily deposit funds in the course of the crowdsale, as well as to track the token balance in their account.

  • Provide the investor with a selection list of currencies that will be accepted in the ICO.
  • Integrate the investor account with the addresses of cryptocurrency wallets the funds will be sent to.
  • Automatically adjust the rate of each accepted cryptocurrency at the time of investment.
  • Add the necessary project documentation for investors to the private account during the ICO.

ICO

This covers the main stages of fundraising, which involve all your different channels and tools for attracting investors

The stage immediately preceding the main tokensale can take two forms: preparation for the ICO or a ‘Pre-ICO’. The sequence of actions on the part of the organisers is similar. The main difference between a Pre-ICO and the main ICO is that projects arrange Pre-ICOs in order to test out investor interest in their project and the demand for tokens. To do this, the company sells a limited number of tokens – a small part of the assets compared to the main ICO.

The project will typically offer a discount for the purchase of tokens during the first days of the crowdsale, to attract investors to actively participate in the ICO early on.

Attraction of professional venture capital and investment funds

It is important to secure the support of large investors at the pre-sale stage, as this will signal to the entire crypto community that the project is promising and is worth participating in.

The tokens are often sold to large investors during a presale.

The pre-sale is an offer to large investors to reserve some of the tokens in advance. The ICO project plans in advance what share of the total number of tokens it is prepared to offer during the pre-sale. Organisers motivate early investors with substantial discounts, but at the same time they limit the pre-sale to a minimum amount of capital investment.

Creation and administration of a thread on bitcointalk.org

It is impossible to establish a high-quality relationship with a key audience for the project – blockchain enthusiasts, traders, investors, etc – without this activity. Administration of a thread on BitcoinTalk provides direct interaction with the target audience, enables you to answer questions, dispel doubts, and introduce your audience to the developers. Announcement of the campaign on Bitcointalk is a ‘must-have’ part of the program. You will receive many reviews – not all of them will be positive, but they will help you to improve your project.

Community management and organisation of the community and discussions on Slack and Telegram

Slack and Telegram chats are some of the most important channels for communication with the community, as users can communicate with the project founders, team members and with each other there. These channels must be monitored on a regular basis and all the questions raised by users must be answered in good time, dispelling any unfounded doubt or accusations.

Administration of communities on social networks and pages on blog platforms (Facebook, Twitter, Medium, Reddit, Golos, Steemit)

A decent ICO campaign requires comprehensive administration of social networks and timely coverage of all news, appearances in mass media and detailed campaign information in all the accounts. Using Medium, you should operate a blog for the project, tell people about the project, ICO terms and conditions, the market and the prospects of your project. The Medium blogging platform is also a good place to post your FAQ.

Bounty campaign

This activity enables you to motivate crypto community members to carry out various promotional activities for your project in exchange for a reward in tokens. A Bounty may include a Signature campaign on bitcointalk, administration of language branches on bitcointalk, social bounties, bounties for email subscriptions, as well as a bounty for blog and media publications.

It's better to consider specific examples for each bounty type:

Adding the project to ICO trackers

An ICO tracker is a website which lists current, future and past ICOs with all the relevant project data and enables users to subscribe to alerts about the launch of a specific ICO.

PR in the mass media

It is important for the ICO campaign to be covered in the media as much as possible. The most tangible PR effect is obtained from building long-term relationships with reporters. In this case, the launch of your PR campaign should be scheduled at least 3 months before the launch of the ICO. In a context of tight deadlines for ICO preparation (less than two months), it makes sense to cooperate with the mass media on commercial terms. The key PR instruments for ICO support are the following: press releases and post-event releases, publications in the media, speeches on the radio and TV, PR events, copywriting of information materials. Preliminary preparation of speakers for efficient communication with reporters is arranged, if necessary.

Event marketing, roadshow and participation in thematic conferences

Participation by the project founders in strategic events – conferences, meetups, hackathons, including foreign ones – ensures additional strong PR for the project. Repeated presentation of the project before the most important audiences and consistent networking will contribute to the greater support for the ICO project.

Email subscription
Evgeny Zaykov Evgeny Zaykov Project Analyst at Waves Lab
@zaykove

Buying paid traffic on the Internet is not sufficient. All marketing tools should be used together. Only community-based projects have a chance of success in an ICO. Marketing and PR opportunities are properly considered as a tool for involving new users in your community, who will participate in the ICO.

Buying traffic on the Internet
  • Contextual advertising in Google AdWords
  • Targeted ads on Facebook / Instagram / VK / LinkedIn / Twitter / Reddit
  • Retargeting by investor databases

  • CPA networks

  • Media and banner advertising

It's important to set up a Google Analytics counter to track conversions, volumes and sources of investment. This will allow you to optimise advertising campaigns as they are running.

It should be remembered that as the number of ICO campaigns grows, the cost of paid traffic will also grow. A balanced distribution of your advertising budget across various traffic channels will allow you to keep costs manageable.

International partnership

The key to a successful ICO is its focus to the global investor market. Therefore, it is necessary to involve international partners from local markets – active users and crypto enthusiasts who have access to an audience of their compatriots.

Vitaliy Tsigulev Vitaliy Tsigulev COO Waves Lab
@cigulev

It is important to understand that only fundamental and infrastructure projects are able to raise large amounts of investment (more than $10 million) in the course of an ICO. Such projects are able to qualitatively change the rules of the game in a certain market and attract the attention of broad groups of investors.

PostICO

Work on the project does not stop after the ICO ends, having raised the required amount of investment. People who have believed in the project and invested their funds in it will carefully monitor its development in the expectation that the plans announced by the developers will be successfully implemented and that issued tokens won’t lose their value.

The following activities should follow ICO completion:

  • Distribution of tokens

    Upon crowdsale completion, the issued tokens are distributed among investors in accordance with the amount of their investments in cryptocurrency accepted by the project. If the tokens are issued on the Waves platform, the purchased tokens will be transferred to the Waves e-wallet.

  • Information support for investors

    It is important not only to raise the required amount of investment in your project, but also to maintain constant feedback with all investors who have believed in your idea and invested their money. Prompt communication and interaction with the audience will support belief in the project and minimise the risks of negativity and, as a consequence, the risk of token depreciation.

  • PR support for the project

    To boost token value on the secondary market, it is important to provide as much information as possible to the community, indicating ongoing development of your project. PRs on various relevant websites give a positive reputational effect, and the public is more willing to purchase issued tokens due to their growth against the backdrop of positive PR support.

  • Listing the token on exchanges

    The value growth of the ICO project tokens, inter alia, is enhanced by their liquidity, which is ensured by listing on as many online exchanges as possible. It is important to list tokens on new trading platforms to boost their popularity and capitalisation.

Project team for running a fully-featured ICO

It must be said that an ICO requires significant labour and time efforts. The project team must be competent in a wide range of marketing and advertising fields. This ensures synergy.

Below is the list of the main ICO team members:

  • Project Manager – a person who monitors everything as a whole and is responsible for ensuring all the work is done to a high standard and on time.
  • Community Managers – people who respond to all community questions through all communication channels, 24/7.
  • A Bounty Manager – a person who leads the bounty program and communicates with all its participants (can be the same person as the Community Manager).
  • A PR manager – a person responsible for project promotion in the media and publication of information on appropriate channels.
  • An Editor – a person who prepares all the necessary content that draws the attention of various groups of the target audience to the ICO project. Types of content include press releases, articles, news, reviews and interviews.
  • Traffic Manager – a person who configures and optimises the process of attracting paid traffic to the website through various sources: contextual, targeted and display advertising.
  • A range of specialists who can be invited for one-off tasks: a web designer, a programming developer, an interpreter, a video editor, a lawyer, etc.

General recommendations

  • The mastermind behind the project should pay special attention to their own social activities, because it is important that the community can see their real participation in the progress of the project and interest in its success at all stages.

  • Decide on the duration of the ICO and discounts for the first investors. Do not stretch out the time – one month is more than enough. If you need to raise a certain amount of money, it can happen much faster – the ICO will be completed once you have reached your goal. Some projects achieve their goals in only 15 minutes.

  • Stay positive – you work with people and for people. Meet the demands of the community, and try to take all their proposals into consideration. Don’t forget that in the case of a successful ICO you may have several thousand investors, and all of them will express their opinions and ask questions. Never lose your temper. If you do not like communicating with people, an ICO is not for you.

  • Conduct a global international ICO campaign, because local campaigns are usually not that successful.

Airdrop

An Airdrop is the distribution of a small part of the project's tokens among crypto community members. The airdrop is distributed for free or as a reward for some simple actions – for example, for registering a personal account, following you on social networks and chats, providing a Waves wallet address in the account, etc. (Don’t confuse this with a bounty: the conditions for obtaining tokens from an airdrop should be as simple as possible).

This activity allows the company planning to run an ICO to test interest in the token among the community of potential users (primarily among Waves holders), receive community feedback, and to conduct initial marketing with minimal costs. Besides this, airdrop distribution contributes to the establishment of an ‘early adopter’ community.

You will need to do the following in order to issue tokens for Airdrop distribution:

  • Register an account in the Waves online client.
  • Issue a test number of tokens equivalent to 1% of the future cumulative issue using the tab "Token creation tab"
  • Fill in the form fields when issuing test tokens:
  • Name

    abbreviation of the future token

  • Description

    description of the project and the token model

  • Total tokens

    volume of the test issue of tokens (1% of total planned issue)

  • Token decimal

    token divisibility

  • Re-issuable

    this checkbox should be ticked, because you will issue the remaining tokens in due course.

After the test number of tokens is issued, they can be distributed among the crypto community – for example, among Waves Community Token (WCT) holders, in proportion to their balances.

Waves Lab

Waves Lab is a startup incubator for developers creating breakthrough solutions for the problems of the modern world using the Waves platform infrastructure. The main goal of the incubator is to support such projects and develop the Waves ecosystem.

Vitaliy Tsigulev Vitaliy Tsigulev COO Waves Lab
@cigulev

It is important to understand that ICO project founders should take an active role in the project and do not expect that third-party contractors will do everything "turnkey" style. The initial stage of preparation for the ICO will first of all require the customer’s expertise, as well as their active participation in conferences and attraction of large investors, such as funds and private investors. The ICO is a P2P investment, and personal participation of founders is of the highest importance here.

Waves Lab residents can count on help in the following areas:

  • Technical architecture review;

  • Product market fit;

  • Token economics;

  • ICO advisory;

  • Listing advisory.
  • PR & Marketing strategy;

  • Niche forum PR activities;
  • Complex ICO Community Management with SMM;
  • Personal connections with Key Opinion Leaders, Trendsetters, Influencers and Advisors;
  • 50+ ICO tracking websites with no waiting list.
  • Leveraging Waves’ connections, network and influence in the crypto space, we help you expand your reach in the industry.
  • We provide initial funding of up to $300,000 for your project.
  • Review and recommendations: Token legal concept, White Paper, landing page;
  • Set of legal documents, including Token Purchase Agreement, Terms of Use, and Privacy Policy;
  • Consultations on legal aspects by external attorneys experienced in supporting ICOs.

To apply for participation in the Waves Lab, the candidate will need to fill out an application form.