Blockchain-enabled fundraising was first made in the form of Initial Coin Offering (ICO), a form of crowdsourcing through which crypto selling organization raises funds. The token sales from ICO were open to all or to some limited investors. The fundraising technique proved fast and cost-effective for organizations as compared to traditional fundraising methods such as IPO or Initial Public Offerings.
The ICO became very popular in 2017 but as blockchain technology evolved, IEO or Initial Exchange Offering came into existence in 2019. Just like ICO, the IEO helped organizations or new investors to distribute new tokens and cryptos to the worldwide audience. However, in IEO, the crypto distributing company can raise funds only after partnering with an existing crypto exchange that acts as a facilitator for token sale and distribution.
What is an IEO?
Initial Exchange Offering is one of the best ways through which companies or investors can raise funds by selling tokens or coins through a cryptocurrency exchange. The crypto exchanges ensure that the project has been well-scrutinised and valid. The first IEO was organised in 2019 through Binance Launchpad which launched BitTorrent Token. The initial offering was sold as early as 15 minutes after release and raised more than $7.1 million.
One of the reasons which made the IEO more popular than ICO is its simple and time-intensive process. The IEO does not require participants to go through an on-chain transaction processing across multiple blockchains or wallets rather it offers users to have access to a reliable project and involvement in a fund exchange program under a platform. The project developers are too benefitted due to immediate exposure to the exchange’s user database without having to fork out millions of dollars to execute marketing techniques.
How can you launch an IEO yourself?
Verify the market scenario and analyse your data
Once you decide upon launching an initial exchange offering, you must first look at whether your project is feasible enough to suit the present market scenario. Analysing current market trends is very important to ensure your coin value addresses the market gap. Look for your competitors’ weaknesses and leverage issues in hand through your project.
To plan a good marketing strategy, you must think about how you can present your token or crypto to potential investors in an appealing manner so that they show an interest to buy them. Have a backup of every fact or research you have made throughout your coin development journey to make it look legitimate in front of exchange platforms, users and investors.
Keep your minimum viable product ready
Crypto exchanges will accept those tokens or coin projects only that have progressed to a significant amount or are developed to a great extent. Before approaching the exchange platforms to launch an IEO, keep a functional app ready, if possible, to make your project look compelling.
Look for a good crypto exchange platform
Once you have solid ideas and coin development underway, the next step will be to choose a reliable exchange platform. There are a few reputed exchanges that allow new project IEO in their platform but all of them follow a set of rules and policies which you will have to go through.
Drafting a white paper
Once you have selected an exchange platform, you will have to draft a well-researched white paper written professionally. The white paper helps investors in understanding the project and how it can benefit them in the long run. The white paper looks much like an academic paper but serves the purpose of selling or pitching. It contains actual facts, and investigations, written formally.
How to write a white paper?
Breaking content into the smaller and easy-to-understand way
Although white papers ought to be written formally, they must contain simple language which can be easily understood by investors. Alongside, the white paper must be informative and engaging so that the readers remain hooked and complete reading them till the end.
Highlight areas that show investors benefits
The main reason why investors will put money into your project is to earn money. Therefore, while you or your team write a formal white paper, highlight key areas such as project success, or how investors will be remunerated. Since your main audience will be crypto investors, ensure to highlight the token sales summary sheet.
Make a separate section underlining the current market gap and how your project will address them
One of the most important things an investor looks at before investing in a new project is the vision and mission of the project. Make use of diagrams, tables, flowcharts or pictorial representations claiming and illustrating the market gaps and how your project will be beneficial for the crypto realm. Define your points clearly and support every technical analysis with respective source references.
Mention your team and members’ credibility
A key component of your white paper is introducing the backgrounds and educational experience of your personnel. It will give investors more faith in you and your project. One of the things investors look for when funding a business is a solid, experienced staff. Therefore, be sure to include specifics about prior similar accomplishments that might help establish your reputation.
Advantages of initial exchange offering (IEO)
- IEO provides new investors with a better experience than other fundraising methods.
- Fraud risks are very low since the IEO is governed by exchange rules.
- When you launch your project on a reputable exchange, investors will have more confidence in your project. This also makes your project look legitimate and credible.
- IEOs are essentially conducted with third-party exchanges who are usually good at running new projects smoothly due to past experience. They take the responsibility to oversee transactions and may offer marketing or development-related support.
- With IEO, your projects can reach both existing and new members of the platform but not the public.
Drawbacks of initial exchange offering (IEO)
- All crypto exchange follows a different set of rules which might confuse users during the exchange selection process.
- Many exchanges charge a high listing price which may be a hindrance for start-ups with a limited budget.
- Crypto pump and dump are a great risk with IEO even if you choose a reputable exchange for your new project. The scams are usually carried out by scammers who create false hype about crypto. When it drives interest among investors and drives prices, the scammers dump their shares as soon as possible.
Tips and suggestions for a successful launch of IEO
Make a sound marketing plan
Robust marketing is the key to every project’s success. You can use website promotions with blogs and articles or use your PR team to create an interest in the public. Use correct channels and involve some influencers who can reach your target audience and generate interest among them.
Target audience diversification
Leading crypto exchange uses multiple languages to attract several communities under one platform. You must also hire community managers from different areas to get knowledge about what different communities seek.
Build a community
Even if your crypto gets listed on a reputable platform, it is necessary to get support from communities since they are the ones who will ultimately invest in your project. Try to get as many supporters as you can before you initiate a fundraising program. This can be done through social media platforms, marketing channels or with the help of PR teams.