Initial Coin Offerings (ICOs) have significantly changed in the last few years, and they are continuing to evolve. Here, financial technology expert Harvey Kesner provides insight into the basics of launching an ICO for those with little to no prior knowledge. Mr. Kesner discusses in detail the key areas of consideration and the resources available to assist with the launch.
What is an ICO?
An ICO is an alternative to traditional venture capital financing for blockchain projects that need capital for start-up operations. An ICO is a means for raising funds by which a company releases a digital currency and typically exchanges for an established cryptocurrency like Bitcoin or Ethereum. An ICO usually looks to attract investors who are looking for a new cryptocurrency that has a strong potential for significant growth.
What You Will Need to Launch an ICO Effectively
ICO competition is intense, so careful planning and understanding of the ICO investment marketplace are critical. There are no quick and easy paths to a successful ICO. A start-up must develop a large social community among crypto companies and investors and must possess an excellent white paper in which it presents itself and its plans and other materials.
Most importantly, your proposed coin must be supported by a quality blockchain development plan. Your company’s coin will never be any more valuable than the use case that supports it. Your project white paper should be just as readily in an ICO launch as it would be for a complete proposal to any venture capitalist, with industry metrics, use case, management and development team and risks plainly spelled out. Investors are not likely to be enticed by potential and dreamy goals; they want to see real market applications and routes for success for your company’s blockchain project.
You will also need effective market research. You must consider that you are competing against every other ICO that is underway at any time. You will need the best information about your competitors and their products that you can obtain to promote a successful ICO.
If your company is getting off the ground, a “pre-ICO” strategy may be an option. Reach out to known “angel investors” for some amount needed to get product development underway, use a SAFE (Simplified Agreement for Future Equity) contract for initial funds to get into a position to conduct a successful full ICO launch.
Professional and Legal Advice is Key
An ICO launch is not an undertaking to figure it out as you go. Harvey Kesner warns that when considering accepting money from investors, under the guise of an ICO, SAFE, convertible note or stock offering, you should be sure that you are doing things according to known legal rules and best practices and that this is an ever-changing landscape. For example, if your token can be seen as a security, as it most likely will be under the current state of the law, you face a significant risk of regulatory issues if you do not comply with specific rules governing the offer and sale of securities. You need to begin with competent legal advice and guidance that you can rely on going forward. The jurisdictional choice is also important, according to Kesner, who says that foreign jurisdictions such as Singapore and Switzerland, have cleared the way for token projects that would be very difficult or impossible to launch in the US under present law.
There is an excellent value in working with a lawyer who can provide reliable legal advice, sound guidance, competent consulting, and insight into successful ICO launch strategies. In any situation, you must begin the process with solid information about the legal framework within which your anticipated launch must work.
About Harvey Kesner
Harvey Kesner is a results-driven executive consultant in the corporate finance sector. He specializes in capital markets and securities laws, initial public offerings, reverse takeovers, restructurings, acquisitions, leveraged buyouts, and other transactions. Mr. Kesner brings ample expertise and experience across various industries, various types of transactions, and even across continents. Mr. Kesner is keenly interested in emerging cryptocurrency technologies and consults with start-ups as well as established companies.