The first ever IEO conducted in the world by Tron’s BitTorrent stirred a massive storm in the cryptocurrency industry, as a whopping 59.4 billion tokens were sold within a mere two sessions, along with an acquisition of 100 million users to its blockchain protocol.
This IEO was a testament to the world as to how much more effective having an exchange as a launchpad to release your very own token was, leading to many following suit.
Yet, many have fell short compared to Tron, leaving many scratching their heads as to how Tron did it.
Today, Capital Raise Global will be breaking down the top 5 reasons why you should be organising an IEO for fundraising in today’s day and age, and our 10 step-formula in order to launch a successful IEO.
1. Shorter Marketing Timeframe and Costs
The good news about IEOs is that the marketing timeframe is now much shorter, allowing you to aggressively go after marketing targets.
In an ICO, it usually takes 4-6 months for approval before going on to market your coin, which is an immense amount of time and potential wasted.
For IEOs, however, it usually takes just one to two months of waiting time before approval.
2. Exchanges Help With The Basic Marketing
Doing an IEO means you will be able to leverage on the branding and the expertise of the exchange you are on. As of right now, most exchanges will quickly take your listing fee if accepted (which ranges anywhere from 5 to 40 BTC) and conduct very basic marketing to help you gain exposure.
This basic exposure includes social media blasts and newsletters to help get the word out to existing investors in the exchange.
That being said, you will still NEED a solid marketing plan during this crucial fundraising period. If you don’t do this, you risk blowing your marketing budget after the listing of your coin doing marketing for it as investors are the most sensitive and critical during this period due to price fluctuations of your coin.
3. IEOs Bring Security and Limit Jurisdictional Risk for Projects
IEOs are typically launched as utility token offerings and have built-in KYC (Know Your Customer) and country limitations within the exchange. Exchanges will require a legal opinion from the country of origin from the project. All of the other risk, such as country limitations, will be on the exchange as they are responsible for their user base.
This means you save on both legal fees and the hassle of conducting KYC internally, assuming the IEO is your primary raise vehicle. We strongly recommend allocating the saved time and money to marketing for your IEO as a form of reinvestment into growing your user base and the valuation of your coin.
Lastly, the benefit of an IEO vs. an ICO is the security that comes with a reputable exchange. Scams and frauds are vetted out in the selection process of reputable exchanges, saving investors from one of the major drawbacks of crypto crowdfunding. Can scams still happen? Definitely, especially if exchanges create a loaded deck scenario, but it is less likely.
4. IEO Token Prices Are Much More Controlled
It is important to note that IEOs enforce lockup restrictions on private investors so IEO participants are generally protected against whales or early investors. This is ideal as it prevents a scenario where big players purchase your coins in large volumes, and dump all of your coin once they see a small profit margin, which damages the valuation and reputation of your coin.
That being said, ICOs are often battling themselves and new token purchasers. A coherent go-to-market plan and marketing strategy is needed to gain long-term interest and support.
5. IEOs Are Arguably the First Win-Win-Win Situation
Right now the quality level of projects doing IEOs still tends to be strong, with exchanges having a tough vetting and selection process. It is important that projects looking to do an IEO have an existing brand or some traction that will provide value for exchanges and token buyers.
For exchanges, the value proposition is clear. They gain listing fees, but more importantly new exchange users who need to register with the exchange, conduct KYC, and oftentimes buy an exchange’s native token to participate.
The one problem with this is that this causes overwhelming demand in the exchanges involved which causes lag issues, but this process should improve with time across all exchanges.
Now that you know why you should conduct an IEO, we won’t want to leave you hanging without knowing what to do. These are our top 10 tips to a successful IEO:
1.Solid business model: The reality is that many IEOs have no business crowdfunding from knowledgeable and discerning investors. If the exchanges don’t see a clear path to success for a project, including a solid product/market fit, they won’t want to associate themselves with it and deal with the future blowback from their users when the project performs poorly.
2.Development underway or already have a working product: Looking at Binance’s IEOs, one of the things that stands out is that the projects had already made substantial progress on their products. For example, BitTorrent was already being used by 100M+ people before their IEO, while Bread had a functional and well-designed app with existing users before theirs. It isn’t necessary to be that far along, as others like Celer had only an MVP at the time of the sale and Fetch was still 9-12 months away from their Mainnet launch. But some noteworthy development work should have already started before approaching an exchange.
3.Proper documentation and token economics: It’s essential for any project looking for investors to have a clean website and detailed documentation (e.g., whitepapers, technical papers, token economic analysis, etc.) on how the project can succeed and why the associated token will increase in value.
Let’s go through the list of all the necessary items that you need to include in whitepaper:
Potential Project Market
A well-planned structure
Financial model of the project
Board Members & Team
Advantages of the project/description/Use Cases
Cases of competitors
Even with the sale of all tokens, it is essential to forge a mechanism which could satisfy the demand for tokens. This could be considered a rule of thumb for any tokensale event. It is the best strategy for any project and works on every aspect of operations, including those on exchanges.The purchase of tokens can then be done seamlessly when all of this is put into place.
At the same time, preparing the proper documentation and token economics enables for a more seamless legal process and approval so that your IEO can be pushed forth much easier.
4.A large and active community: It goes without saying, but any exchange isn’t likely to support an IEO project if the project hasn’t been able to generate substantial public interest and engagement already.
The benefit of hosting IEOs for exchanges is that it can attract new users to their platforms, as was the case with BREAD and BitTorrent’s large communities coming to join Binance. Celer and Fetch also had 10K and 30K users in their communities, which should be enough to appeal to exchanges.
5.Reputable team and advisers: Projects with an under-qualified founding team, and no real team to speak of will be immediately dismissed by exchanges. Also, consider that the more technically complex a project is, the more critical it is to have an experienced and proven development team. Additionally, having a few advisers can boost your chances as they show that industry experts see promise in your project.
6. PR and social media:
-Public Relations (PR)
Strong public relations begins with getting your project seen by as many investors and traders as possible. Publishing PR on leading fin-tech and crypto publications can also be a good bang for your buck and help expose you to new audiences. In total, you want to have 50+ publications leading up to your token sale.
From the very initial stage you need to start building stronger public relations in the domain where your project is going to perform. You need to start talking about the solutions and the technology that makes it possible. This particular channel is driven in a way that your project must get a plenty of mouth publicity by the time it is ready for launch. The effort must be on creating awareness around the project and making it known in its sphere.
It is recommended to publicise the project on the channels which are expected to give out better results. With media technology, it has now become very easy for projects to gain potential momentum and generate interest in its followers.
-Community Management & SMM
Social media has become an essential part of marketing today and in case of IEO, it is better that you start early. On various communities and social media platforms, you need to share updates time to time about your project. You need to start building a campaign by sharing the details such as the product and technical solutions offered through it. It is also important that you take it seriously and become active on all such channels. You can use all the dominant social media platforms such as Facebook, Twitter, Instagram, Telegram and LinkedIn as well.
Through chatting, blogging or querying, you’ll be able to build rapport with your potential investors and grow a successful IEO from scratch.
At this point, you might be asking: Which type of agency should I approach for the most solid PR and Marketing?
Top agencies are usually offering all in one marketing solutions in the $50k — $100k range leading up to and through an ICO. Make sure to pick a reputable agency that has a track record with traditional clients and blockchain clients.
7. Utility token: Security token offerings are a growing trend in their own right, but they are far more legally complicated than utility tokens, and major exchanges don’t yet support trading of security tokens. If you want to hold an IEO, the only way to do it at the present moment is to have a utility token.
In addition to the above keys, it’s also essential to have an independent legal consultant to make sure there won’t be any issues with regulations down the line. As it seems now, we advise setting a hard cap particularly for IEO around $6 – 7 million, as going much higher than that significantly hinders your chances of being considered by an exchange.
8. Be Careful about Exchange Dilution
Let me add one caveat. If you go through Binance launchpad, you should have enough organically generated interest from Binance to have a successful launch.
If the IEO wave is anything like the ICO wave, we should anticipate seeing exchange dilution by exchanges capitalizing on IEO interest (and associated fees) by listing more projects as interest grows. It is also important to note, that a project can do multiple IEOs across various exchanges and existing ICOs have also come back to life by doing IEOs.
This will create a scenario where marketing will become vital to stand out.
9. Maintaining Expectations
Keep in mind that most IEOs do and will not hit their IEO hard caps immediately or during the duration of the IEO. Even with a smaller offering consisting of 5–10% of circulating tokens, these sales are not guaranteed and are dependent on multiple factors.
Some IEOs conduct a private sale before an IEO, bringing hype, brand named partners, and additional investors. Others start their journey with an IEO and realize just how important community, PR, and social media engagement is. With the right marketing strategy in place, you can increase your chances of running a successful IEO.
10.Establish a Clear Funding Goal
There must be a clear cut funding goal in terms of total tokens that will enter sale and the maximum funding requirement. Having a properly laid out hard cap for funding will assure investors that the business goal is tangible and is not an attempt to raise as much money as possible.
According to Artur Boytsov, VP of Priority Token, which is one of the strongest and top-rated IEO/STO consulting agency, $6 – $7 million is the sweet spot for hard cap in IEO funding.
BONUS: Recommended Exchanges to start your IEO
There are now many exchanges for enlisting IEOs and each one of them have their different set of conditions. These conditions change as per projects and their dispositions and it also impacts the amount of tokens and their prices available for sale alongwith the listing fee. It is generally done within peculiar conditions that create an environment for executing transactions and payment of fee.
According to the standard listing procedure of any exchange, the partners and agencies of projects can also approach the exchanges and work out a deal. Although they may not decide every single thing, it gives a chance to get feedback from exchanges and their representatives. This feedback is pertinent as you will be able to find out if there are any changes you need to make internally. Otherwise, you can go ahead with your terms and choose the right exchange platform for launching the IEO.
See the list of exchanges that allow you to launch IEOs:
That being said, it is essential to understand the difference between platforms the support IEO and the ones that come up with their own launchpad.
Now that you know all the tips and tricks to launch the perfect IEO, you should be able to perform an amazing IEO and achieve your goals from here.
Moving forward, The Deal Makers hopes you organise a successful IEO! 🙂