When it comes to funding a new business, the world has changed a lot. Whereas before you had to go hat in hand to a bank and hope that your application got approved, crowdfunding has now changed the startup landscape entirely. ICOs, or initial coin offerings, are the latest version of crowdfunding and are based in the cryptocurrency sphere.
Here we will just focus on their value in fundraising. With all the excitement about trading in cryptocurrencies, this is the perfect time for a new business, or a business looking to expand, to get funding.
It couldn’t be much easier, but if you want to be successful, you will need to spend some time honing your offering and making it attractive to investors. That means getting down to business and actual research, thinking through the steps carefully, and coming up with a solid business plan.
You will then need to create a whitepaper with all of your research. Consider having this professionally drafted as this is the main thing that will convince investors that your idea is workable.
You will also need a well designed website and sound marketing strategy to get the best possible results when the fund raising begins.
The next thing to do is to create the tokens or coins. This can be quite easily done on the Ethereum network – they even have a blank template you can use. You will need to decide first what the purpose of the coins will be. Are they going to be:
- Purely a cryptocurrency, like Bitcoin?
- Will they be utility tokens used to pay for using the system, like Ether?
- Security or asset tokens, like Kairos? (This token is the closest thing to shares we get in cryptos.)
The security token is the best kind for investors because it implies they will have some right to returns, or some way to participate in the financial earnings of the company. As a company, though, these are more complicated to set up, so it is a good idea to review the laws regarding the issuing of securities in your country.
The SEC in the United States, for example, has been taking measures to regulate the ICO market, especially where it is deemed that these offerings fall under the category of securities. At the very least, the company would no doubt be required to comply with KYC regulations.
You should be very clear about what the rules regarding the tokens are and what right will be assigned to those buying them. Investors are not necessarily assigned voting rights as would be the case with IPOs on the traditional stock exchange.
Once you have decided on the type of token and the rights that these will entitle buyers to, you need to figure out when to hold the sale, and how the distribution will work. You can set this up automatically at a reasonable cost on the Ethereum network through smart contracts.
Once all the details have been handled, it is time to get started and market your ICO.