In Chapter 8 of the Ultimate Guide to Blockchain Marketing and Cryptocurrency, we break down initial coin offerings (ICOs), and why blockchain startups are turning to the crowdsourced funding tactic.
An initial coin offering (ICO) is a way to leverage the blockchain growth hack funding for your company without diluting equity.
Think of it like a Kickstarter campaign, only on a much grander scale. ICOs help companies raise funding for their projects through the sale of coins. With an ICO, companies can set a target date by which they’d like to raise funds, and how much they’re looking to raise. If the required amount is raised within a particular time frame, the tokens are distributed to investors – which they can trade on certain crypto exchanges.
For example, Ethereum managed to raise over $18 million in their 2014 ICO to fund their organization. In exchange for supporting Ethereum, investors received their token – ETH. Today, it’s worth over $1,100 (at time of writing), a pretty substantial increase from $4 when they first launched.
Their early investors saw a pretty big return, but since then, ICOs have become much, much bigger. In June of 2017, Bancor raised $150 million to fund their project, with venture capitalists like Tim Draper being one of the the investors.
ICOs help companies bypass the venture capital process by raising investment directly from the public. The process for raising money through an ICO works something like this:
- First, the company looking to raise money publishes a technical white paper. This is meant to show the public their plan for increasing the value of their tokens (and why the public should support them).
- Then, they share their working prototype.
- The company then starts promoting their token sale on platforms like Telegram, Reddit, e-mail, and more.
- Tokens get distributed to investors when the funding goal is reached in exchange for a cryptocurrency like Ethereum, or U.S. dollars.
How to Growth Hack an ICO
Cryptocurrency and blockchain technology is still in the early adopter stage, meaning that the masses don’t know a whole lot about the technology, or the companies that are leveraging it. It’s still uncertain how people are going to use blockchain technology in their everyday life or what governments are going to do about it.
But ICOs have gained traction relatively quickly. ICOs are a decentralized model of crowdfunding that provide returns to investors on a scale that venture capitalists are looking for in their investments. 1,000%+ returns are not uncommon here.
Our Ultimate ICO Marketing Checklist is coming up next, but first…
… Is Blockchain Marketing Scammy?
Eric with a word of caution…