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Initial Coin Offerings, ICOs, are the cryptocurrency worldâs answer to Initial Public Offerings (IPOs). ICOs work by offering investors and the public a chance to invest at the very early stage of a project. If you put cryptocurrency, Kickstarter, and traditional startup funding into a blender, out will come a delicious ICO smoothie.
In 2017, ICO funding has shot past venture capital funding as the largest source of early-stage fundraising for companies [1]. Yet, most Americans remain in the dark about ICOs, with only 37.6% of Americans having ever heard of Ethereum [2].
Because there is now both a surplus of cryptocurrency projects and a small number of scam projects such as Confidoâââthe ICO that ran with hundreds of thousands of investor fundsâââit is more important than ever to do proper due diligence before investing in an ICO [3,4]. Furthermore, there are likely many would-be crypto entrepreneurs who are wondering what it takes to get into this place and be successful.
In that spirit, we have interviewed leaders from multiple cryptocurrency-based firms that have raised $10 million or more in order to answer: âWhat makes an ICO successful?â
Experts:
Shawn WilkinsonâââFounder of Storj Labs, $40m ICOJon ChouâââFounder of The Bee Token, raised $10m+ already, ICO at the end of JanuaryLuis Cuende, Co-founder of Aragon, which raised $25 million in their ICO.Can Kisagun, Co-Founder of Enigma, $45m ICOJan Isakovic, CEO and Co-Founder of Cofound.it, a company that has helped run multiple successful crowdsalesSource: Storj.io
Shawn WilkensonâââFounder and CEO of Storj Labs. Storj Labs raised $40m in an ICO earlier this year. Storj is a distributed cloud storage solution with more than 50,000Â farmers.
Storj Labs was able to achieve success with its token sale due to a number of factors. First, the company was well established and had a working product with paying users who could leverage the utility of the tokens to purchase services. We also had a large, strong and active community of more than 30,000 Farmers, who share their extra hard drive space with Storj in exchange for STORJ tokens, and similar sized group of API users, who rent storage capacity from the company as well. Since the token sale, those numbers have grown to 55,000 and 40,000 people respectively, showing we were able to successfully leverage the sale to accelerate adoption of the platform.
Companies that attempt to execute a token sale with little more than a white paper will likely face an uphill battle as they attempt to convince participants their idea will translate to real-world success.
Jon ChouâââCo-founder and CEO of The Bee Token, formerly on the Security team at Uber. The Bee Token is creating short-term housing rentals on the blockchain and a set of protocols that can be used to develop any blockchain-based sharing economy application.
Q. What things did you do to create such a successful launch?
A. Build the fundamentals well. Get lots of scrutiny from Crypto VCs and build out a prototype.
Q. What mistakes did you make?
A. Not moving fast enough. Crypto is so volatileâââyou need to be able to keep pace instead of bringing a traditional company building mindset in.
Q. What things did you not anticipate before?
A. How much the market affects everything.
Q. What were the most valuable things you did or couldâve focused on?
A. Getting everything done.
Q. What things ended up being a waste of time/resources?
A. Focusing prematurely on certain problems instead of ICO.
Q. What advice would you give to a company wanting to learn from you?
A. Whitepaper and Website done at 10/10 quality before anything else.
Luis Cuende, Co-founder of Aragon, which raised $25 million in their ICO. Aragon allows for the generation of decentralized autonomous organizations (DAOs) on top of the ethereum network. Luis is an alumni of Forbes 30 Under 30, and also a cofounder of Stampery, a timestamping and security platform on the blockchain.
Q. What things did you do to create such a successful launch?
A. In our case, being brutally transparent with the community really helped. These projects are to be community governed, and itâs very important to signal that very strongly. Having a fully-fledged product that people could download and play with was also key. Finally, being fair in the actual token sale, having inclusive and fair sales terms and not trying to abuse the market.
Q. What mistakes did you make?
A. Our sale was pretty much drama-less, so I cannot really think of any significant mistake. If there were, we would have been immediately called out!
QÂ .What things did you not anticipate before?
A. Communicating with a community takes a lot of time. Legal takes time too. Finally, itâs impossible to focus on building product while running a sale. The day doesnât have that many hours.
Q. What were the most valuable things you did or couldâve focused on?
A. Telling our community a story, explaining to them why Aragon and why now. Then switching to explaining how Aragon would be made possible, and finally releasing all sale details.
I also made sure the alpha we launched a few months before the sale was very easy to use. People get it much faster if they can just download it and play with it.
Q. What things ended up being a waste of time/resources?
A. The 2 months leading up to the sale were so extremely intense that I think they provided a very effective filter, removing all possible distractions and wastes of resources. I ended my days so tired after 14 hour work days that I made sure to focus on the core tasks. We had a very interesting strategy to achieve that focus, which was to predefine all the different steps and milestones leading to the sale, and exclude everything else that popped out of the blue.
Q. What advice would you give to a company wanting to learn from you?
A. We are constantly releasing new stuff on how to involve our community in governance decisions, so please do follow Aragon on Medium!
Can KisagunâââCo-founder and CEO of Enigma, decentralized data marketplace protocol built by MIT graduates. They recently raised $45 million during their ICO.
Q. What things did you do to create such a successful launch?
A. Because we are building a platform and protocol, our success depends on the support of the community; the people that will use our products now and in the future. We prioritized building a strong community from the first day, and we continually communicated our vision and development. Ideally, your community should understand your product and vision as well as you do.â
Q. What were the most valuable things you did? What advice would you give to a company wanting to learn from you?
A. Establishing frequent and open communication with the community was critical. Be available to answer questions and over-communicate. Go to where the audience for your project and product areâââjoin their communities and be transparent. We were constantly active in our social channels, and we built a Telegram community that is now one of the five largest crypto Telegram groups.
Q. What things ended up being a waste of time/resources?
A. Paying for exposure is not an effective way to cut through the noise in token sales. Work actively with your community to spread the word about what you are trying to achieve with your project. Crypto is a very tight-knit spaceâââpeople are much more likely to trust their friends and fellow contributors than any advertisement. We grew our social communities to 10,000+ users primarily through word of mouth.
Jan Isakovic, CEO and Co-Founder of Cofound.it. Cofound.it is a platform to support startups on their way to becoming serious blockchain businesses. Cofound.it teams go into their ICOâs well-prepared: with a solid business plan, a community of passionate early supporters, and an execution plan that complies with all regulations.
Q. What things did you do to create such a successful launch?
A. We focused on connecting with the community of blockchain believers. This was crucial not only in raising funds but to build an engaged community who have been the first users of our developing platform.
Q. What mistakes did you make?
A. Due to a technical hiccup we could not accept contributions for the first couple of hours of our crowdsale. With hundreds waiting to send funds we had a communication emergency combined with the technical work to start the sale. Fortunately, our supporters did not hold it against us. We worked especially hard so that Cofound.it projects do not have to repeat our mistake.
Q. What things did you not anticipate before?
A. The attention to every minute detail of everything a company does is characteristic to the world of token crowdsales. Instead of a couple of VCs, thousands of supporters examine, evaluate and comment on every stepâââand of course suggest alternative modes of action, typically with as many plans being presented as there are supporters. This requires extremely open and committed communication, but also periodically results in amazingly helpful feedback.
Q. What things ended up being a waste of time/resources?
A. We wanted to learn as much as we could from our crowdsale, both what works and what does not, so that we could optimise our service for the future Cofound.it projects. One of the things we tried out was banner advertising, but based on our data it did not really have any effect. In retrospect, being present at several key events and constantly communicating to potential supporters via Slack helped us build and expand on initial recognition.
Q. What advice would you give to a company wanting to learn from you?
A. Focus on the community. It is the key differentiator from the VC world and the main foundation for quick scaling of serviceâââsomething traditional startups find very hard. Instead of spending months pitching to VCs, token crowdfunding means you are pitching not only to potential supporters but future customers. Every hour spent pitching is also spent selling and gathering product feedback.
So there you have it.
If youâre an entrepreneur thinking about creating an ICO for your company, or youâre a prospective investor, be sure to keep in mind these lessons from entrepreneurs who have been on the front lines.
About the authors: Jeff Peterson is an MD/PhD student@University of Miami, Contributor@HuffPost Blog, Founder@The Thought Leaders Dinner, Advisor@The Bee Token, Advisor@Brain Wave Technology, and is a former dating coach.
Rob Peterson: Smart âContract âEngineer@ The Bee Token, former Software âEngineer@ShutUpAndTakeMyMoney, Rob âis âa âformally âtrained âMathematician âwith âprofessional âsoftware âdevelopment âexperience.
Dang Du: cryptocurrency writer, blockchain researcher, and cofounder@Better Health Platform, former policy professional@US Treasury and @Federal Reserve Bank.
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ICOs: Secrets of Success, Part 1 was originally published in The Startup on Medium, where people are continuing the conversation by highlighting and responding to this story.
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