Thinking of Starting an ICO Startup?
ICOs (Initial Coin Offerings) is very hot not only in Korea but all over the world. However, in Asia, it might be the hottest topic as there are blockchain/token conferences happening every other week it seems. Even though the South Korean government banned ICOs in Korea, there are a large number of Korean startups and entrepreneurs looking to get into ICOs one way or another. Starting an ICO startup is trending in Korea. This is because doing ICOs generate a large amount of money in a short period of time.
There is a reason why the Korean government is scared of ICOs. While they are able to generate a lot of money for entrepreneurs and companies, it also creates scams. There are a lot of fake ICO companies out there looking to take your money. So investing in ICOs can be a huge gamble. When startups look to start an ICO startup there are three tips they need to consider.
1. You don’t HAVE to do an ICO.
Just because a lot of startups and companies are doing an ICO, it doesn’t mean you have to. The key is how the blockchain technology can benefit your product or service. Are blockchains and tokens really the best solution? If your company is successful then there is really no need to change what is already working. Many blockchain platforms are slow and very expensive. You will have to put in a lot of resources to build it. Also, it is not scaleable at the moment since the technology is so new. As far as doing ICOs, there are many times when you don’t even need your own token. What value can your own token bring to your product or service? Investors will look for this so if you don’t have an answer, doing an ICO will be pointless.
2. How to allocate your tokens
Let us say you decide to do an ICO and feel it will be great for your company. The next step will be how you the tokens are going to be allocated. You will need to set the price of the token, as well as decide how many tokens will be in existence. Once you have set the price and the number of tokens. Then you will have to decide how it will be spread. How many will advisors get? The developers? How many will the company hold on to? How much will be used for bounty promotions? The more successful ICO startups give the majority of the tokens to the public. Only a small amount is given to the team and developers.
Also, make sure people can’t dump their tokens all of a sudden, this includes the founders. The key is to allow users to sell their token slowly over a long period of time. Also as we have learned from Steemit, there needs to be a contribution limit to prevent whales from getting too much power and take advantage of the market.
3. Stay away from Presales
If you are confident in your ICO startup’s product or service, there should be no reason to do a pre-sale. A pre-sale sells the tokens to investors at a very cheap price. This is terrible for investors later on as a large part of the company will have already been sold for a fraction of their investment. It just doesn’t look good. Also for pre-sale investors, their money will be locked up for many years. Pre-sales are early indicators that the company is not confident they will be able to raise the funds in a public ICO. They will make it sound like pre-sales will be for exclusive members but from my experience covering ICO startups, the bigger the pre-sale discounts the worse the ICO.