Blockchain startups looking for ICO success in 2019 must up their ante with transparency, starting with tokenomic alpha test documentation that establishes a use case based on an easily leveraged network effect. Blockchain innovation must be essential to the project’s functioning and scaling, not just arbitrarily layered on or under the project’s digital infrastructure to make it marketable.
Token investors are no longer interested in profiting from speculative bubbles. The ICO industry has relinquished its fixation on pump-and-dump hype cycling and zeroed in on underlying asset value appreciation and scaling. There are new standards for security, compliance, backer protections, and clarity on developmental progress and company health.
Below are transparency strategies and tactics that you can use to engender the level of trust needed for ICO success.
An ICO’s white paper must transmit the details of the technical specifications and security protocols, and the strength of the business proposal and the problems it intends to solve while meeting its own needs as a tokenomic ecosystem.
Set clear, achievable goals, and detail three timelines in the white paper roadmapping:
- Short term (6 months) market research plans, blockchain technology feasibility.
- Middle term (6 to 12 months) alpha and beta versioning.
- Long term (12+ months) platform launch, token sale, liquidity provisioning.
ICO transparency marketing is about communication that is open and honest. Think and act with the ethos, “Our private backers and the community who supported us deserve the full picture at every step of the way.” After all, continually dealing with anxious and uncertain token holders who feel left out of the information loop hurts productivity and token value.
Although blockchain is well known as a “trustless” technology, credibility and transparency are what holds a token project and its ecosystem together. If you are going to be honest and forthright throughout the development and launch of your project, then you might as well communicate this transparency to your community. Talk about your commitment to transparency and reporting in your marketing campaign to cement trust among investors and the broader crypto community. Talk about you talking about it.
Instead of growing a community on Telegram, make it announcement-only channel. Save the $8,000 or so per month that it takes us to moderate a large Telegram channel 24/7. Instead, make it easy to reach your leadership team via Twitter, a contact form, and monthly AMAs. Keep your community engaged and enthusiastic by making its members part of your journey. Send out newsletter update every 3–6 weeks. Share ideas, foster debates, and ask for feedback.
Don’t count too much on showcasing your advisors to gain any real credibility for your project. Focus on branding your in-house team; what they did before and what they specialize in now. Founders and key employees should be visible and open on social media and wherever else they can interact with your community, raise their visibility in the larger crypto community, and gain trust. The team should cross-talk on social media, sharing progress and marking milestones in a way that transmits competence and know-how.
Tie everything together with a high-level overview roadmap on your homepage, with occasional roadmapping updates offering granular detail on current and upcoming activity via your newsletter and Twitter.
Demonstrate project proof-of-concept with testnet and beta versioning of your platform well before the first token is sold. ICO proof-of-concept can be further defined by your project’s level of GitHub contributor engagement as demonstrated by a high level of repository and commits activity. Your open-source code should be well-documented and then peer-review and tested by GitHub contributors who are separate from your in-house development team.
ICOs can no longer launch successfully without a running product sandbox, basic MVP (Minimum Viable Product), or public code repository. Encourage some of your community members to become beta testers who share posts, screenshots, and videos.
Coin and project governance
You can engender and build trust along the way by launching your ICO in phases instead of one big token sale. Consider roadmapping and executing smaller token sales held for specific funding goals aimed at accomplishing well-defined project milestones.
Protect investments through smart contracts that unlock capital only if specific milestones are achieved (a DAICO model). “Oracles” verify the successful completion of each smart contract milestone. Smart contracts can be coded to unlocked funds so that investors can withdraw them if milestones are not met.
Place most of your project’s bankroll in a multi-signature wallet so that the whole management team must agree on when and where funds are to be spent, thus significantly reducing the risk of misallocation of funds.
SAFT, or Simple Agreement for Future Tokens, is a security instrument and an investment contract. Anyone who conducts a token sale with a SAFT or any similar agreement must abide by security laws in their respective jurisdictions.
Build your ICO token purchase portal on an ultra-secure subdomain that is regulatorily compliant with regards to the sale, distribution, and trading of tokens within the users’ dashboards.
Establish a formal board of directors responsible for holding the executive team accountable, and for other proactive governance duties for protecting the interests of all stakeholders.
Perhaps the most critical trust-building component of token offering community transparency is keeping members apprised of how funds are being used.
When people invest fiat or cryptocurrency in an enterprise — traditional early-stage private equity raise, token sale, or IPO — they entrust their capital to the company with the belief it will be used to scale a product that will create monetary worth.
Provide clear insight into the health of the project and document what you have accomplished with the funding. Detail your treasury’s mix of Fiat, Bitcoin, and Ether, and year to date expenditures by category, and current burn rate and next quarter’s expected burn rate. If a third-party accounting firm hasn’t fully audited the figures, note that they should only be viewed as your best approximation.
Here is a sample template that may help you construct a semi-formal quarterly update and next quarter forecasts on where and how much money will be spent.
|Between April 1, 2019, and June 30, 2019, User growth has led us to _._ million registered users.
During that period, __Our_Project__ has spent approximately $__.__ million. The breakdown includes:
$__._K spent on marketing/advertising/public relations/events
$__._K spent on salaries for employees and contractors
$__._K spent on legal, compliance, and accounting
$__._K spent on general and administrative costs (office rent, utilities, accounting, development tool subscriptions, employee computers, etc.)
$__._K spent on travel which includes roadshow, a conference in _ in which we had an expo booth, two events where founders traveled to __city___ and __city___.
$__._K spent on __________, etc., etc.
Looking forward to 2019 Q3, we have several partners secured and intend to launch monetization during 2019 Q4. By our calculations, average burn rate for Q3 is planned to be ~$___–___K per month and average burn rate for Q4 is expected to be ~$___–___K per month.
We believe we can maintain a proportional-to-user-growth burn rate throughout 2020–2021.
_our_project_ has a total of ___ employees and __ contractors.
The average salary for an employee at is $____K with the potential to earn a 15% yearly bonus. Salaries are based on role and experience within that role. The bonus calculated on 7.5% employee performance and 7.5% company performance. All employees have full benefits.
Our two co-founders and executives, _____________, CEO, and _____________, CTO, each earn $___K in salary and have the potential to earn an additional 25% of their salary as a yearly bonus. Their bonuses are calculated on 12.5% employee performance and 12.5% company performance and are paid accordingly.
In addition to both salary and bonus, each employee will also get a package of _our_project_ tokens. Once distributed, tokens will be earned each month over 4-years as long as we employ that employee.
Over the next 8 months, _our_project_ is targeting to have the following ___ positions filled, bring us to ~___ employees sometime in 2019. Roles we’re looking to hire in the next eight months: VP of Product, VP of Operations, Backend Engineer, UX Designer, Android Engineer, iOS Engineer, Business Development Lead, Mobile User Acquisition Lead, SMM Manager, Content Producers, Accounting Manager, General Counsel.
Continue here with a discussion of milestones reached so far (number of GitHub commits, test-netting data, token launch platform tasks completed, regulatory hurdles crossed, etc.) and the roadmap ahead.
No matter how much you try to discourage them, there will be speculators and fast-profit seekers amongst your community. You are likely to get many questions about the predicted valuation of your token and the exchanges on which it will be listed. Answer these in a matter-of-fact manner and in no way add fuel to any speculative fire. State that yours is a long-term project, refer to the roadmap, highlight accomplishments, and emphasize near-term goals. Furthermore, whenever challenges like this arise; stay calm, communicate effectively, and, above all, remain transparent.
Meet with regulators
Launching a regulatorily compliant ICO is legally complex and expensive. Tell your community about that and what you are doing to meet the challenge. Additionally, meet with regulators if for no other reason than to ask questions and offer insights, and document your meeting through your blog, press releases, and social media channels.
The window of opportunity has slammed shut on ICO exit scams. The days of founders burning up their much-needed runway funding on unnecessary conference sponsorships and lavish parties are at an end. A blockchain project playing with anything less than a strong hand and a clear intention to do right by investors has no business launching an ICO in 2019.
ICO success now depends upon the careful cultivation of trust built on a foundation of transparency. The emergence of a more secure, transparent, and trustworthy ICO industry is bringing in private equity and institutional players to the benefit everyone working in the space.