2018 is set to be an even bigger year for Initial Coin Offerings (ICO) than 2017, with more and more startup’s turning to the fundraising method to remain in control and transparent in the process. According to a report by CNBC, around $100million a month is raised via ICO’s, showing the demand is increasingly prominent between investors and individuals.
However, as with many emerging trends, ICOs have been met with some scepticism and criticism. Before new businesses start jumping on this trend to become the next blockchain success, it is important to understand the challenges it might face and why trust should be built into the core of its offering.
Whilst there can be fraudulent ICOs, businesses and mainstream audiences need educating and to be made aware that ICOs are a viable fundraising mechanism.
The fastest growing form of investment
There’s no denying the fact that ICOs, “the fastest growing form of investment” carries numerous benefits for businesses looking to generate significant ROI without having to seek out venture capitalists. An Initial Coin Offering can be created by just about anyone, and offers businesses an efficient and streamlined fundraising opportunity.
Aside from the obvious benefits like being able to streamline a fundraising campaign, by conducting a decentralised application, users will be offered a much better experience. Therefore companies will see a significant increase in their user base, subsequently resulting in sustainability of the application.
There is also the added benefits of online marketing, where an ICO can be marketed to a large, global targeted audience with little effort and cost. Potential investors can therefore research about a particular ICO via online ads, social media and websites no matter where in the world they might of originated from. The ICO investment model is open to everyone and free from the geographical restraints associated with IPOs.
An unpredictable market
It’s widely known that the blockchain and cryptocurrency market is an unpredictable place, where the majority of business see is as a sure fire way to attract investors who are looking for the next big blockchain score. Yes, an ICO looks to be an easier and more cost-effective way to raise funds for your business but it can be just as challenging as as securing a venture capital; but you do have more control over the process.
One of the biggest challenges a new business can face when journeying down the ICO route is the sheer amount of competition biting at its heels. In an interview with Business Insider, the founder of Evercoin announced there were around 30 new ICOs launching everyday, and raising as much as $200million per ICO. Businesses need to make sure they are distinguishing themselves from such a saturated market with a strong unique selling point that will not only put them ahead of the game, but generate interest and a buzz amongst investors. With so many ICO projects not having an effective marketing plan and channels to promote themselves, they can get lost in the sea of other ICO scams that take centre stage.
Due to the lack of regulation, there is no formal process to audit ICOs, and more often than not there is always a risk of projects being abandoned or underperforming. Many businesses choose to conduct ICOs straight after finishing their whitepapers, whilst uncertain whether their projects are truly compliant. A lack of understanding of the security measures and regulations ICOs must follow could be the difference between success and failure, so it’s important to get educated or risk coming under fire.
ICOs can be just as challenging as as securing a venture capital; but you do have more control over the process
Transparency and trust
To be able to thrive in this market, ICOs need regulatory safeguards to be implemented and investors need to be educated. Trust should be at the forefront of any businesses fundraising project, and one of the first steps to building trust is for businesses to create an extensive whitepaper and detailed roadmap. An ICO whitepaper should include a detailed report of the businesses background, benefits, token sales and a roadmap so investors can feel like they are joining a legit business.
For any ICO, offering certain levels of transparency throughout the entire process is crucial for generating investment and trust. Due to the volatile nature of the blockchain technology, it can be hard to understand the true nature of the transaction during an ICO sale. Businesses should ensure they offer a safe and secure platform to boast legitimacy can help to instill trust among investors.
Communication is the key to success with generating trust among the cryptocurrency market. By using social media to engage and update its audiences, investors will start to feel empowered and as if they are a part of the process. This will promote a higher level of transparency and result in more investment.
A solid vision for the future
A strong and clear marketing message will put businesses in good light with investors. Make sure you are offering a clearly defined company strategy and backgrounds on the people involved, to create the sense that this business is in it for the long haul.
Businesses should make sure they have a solid vision for the future, and how they can shape the future of the cryptocurrency economy. Aligning its short term mission with the long term goal is essential to providing a positive trading experience for investors that maximises their profits.
In today’s volatile and saturated cryptocurrency market, it is essential that businesses looking to start on their fundraising journey are putting security, transparency and trust at the forefront of raising capital to maintain solid investment and build credibility amongst investors.