Whereas participating in an ICO is relatively straightforward – you choose to invest some money and receive some tokens in return – creating your own can be a lot more complicated. This article will highlight a few of the factors to consider before starting an ICO.
The first thing to consider – and the first thing many investors will consider before investing money in your project! – is this: does your project really need a blockchain-based, decentralized infrastructure? After all, building a particular software program on top of Ethereum, for example, is a lot more expensive than simply creating a centralized application the normal way. It is not a good idea to go for crypto-for-crypto’s-sake; your potential investors will expect, in the whitepaper, a good, strong motivation why you chose to follow this particular path.
Secondly, you should consider whether an ICO and thus a specific token attached to the project makes sense. If the token is absolutely crucial to the project – such as in the case of Ethereum, where the Ether works as fuel for Ethereum apps – then an ICO makes perfect sense. If the only purpose of the token, though, has very little to do with the actual gap in the market you are trying to fill, and is in fact mainly to be bought and sold on exchanges, then its value will likely crash very soon, and your investors will lose the money they put in. In that case, it would have been better to opt for a different crowdfunding strategy.
Even if you believe a token to be a good option for your project, though, there are a number of other factors to be considered before launching an ICO. Mainly, this is the fact that when you launch an ICO, this is a big step in the development of your project and company: you have essentially instantly become a public venture, with a potentially large number of international stakeholders who will expect to be kept up to date about any further developments, and who may contact you and your team about the project at any given time. They will expect a high level of transparency and adaptability from you – which can be a great thing, but which can also get stressful very fast.
Once you have decided that an ICO is right for your project, then, a number of other planning decisions need to be made. Firstly, you need to consider the actual coin offering: how many coins do you intend to offer, and what will be the price of each coin? It’s important to establish a reasonably accurate estimate of how much money you will require, so as to neither underfund the project, nor end up with a flood of overfunding – which means that everyone who might be interested in the project has already acquired tokens in the ICO, and the project may fall flat once it actually goes fully live!
In connection to this, and in order to arrive at this estimate, it’s also crucial to consider the allocation of the funds, in terms of the percentage that shall go to paying your team, the percentage to invest in software development, in PR, and so on. Once these big decisions are made, you can start thinking about the finer details – such as the currencies you will accept for payment, whether you will provide extra rewards for early investors and, of course, the length of your ICO. Once you have, in this way, figured out the exact logistics of your ICO, you can start adjusting your project paperwork accordingly, and make sure your project has a web page reflecting the specifics of your ICO. Investors will look for this in your whitepaper and road map, since it indicates that you, as a developer, know what you are doing, and that they stand a good chance to get a return on their investment.