Unsurprisingly, we at Tokeny think that ICOs are great. Token sales allow new businesses with killer ideas to solve the chicken-and-egg problem of growth – they can quickly reach the critical size needed to make their network function.
By issuing tokens, contributors are incentivised to use the network (since that’s the utility of the tokens they’ve purchased) and there is an economic ecosystem that keeps the gears moving. It would be difficult to grow a video streaming service like Verasity organically as there simply wouldn’t be enough users at first to make it viable.
Yet, not every project is right for an ICO. That’s why we take the time to vet every project plan that applies to our platform against our rigorous Sustainable ICO Protocol (SICOP). If a project achieved SICOP compliance it means we’re confident that the idea will work and it’s right for an ICO, rather than another fundraising approach.
So, what do we look for in an ICO project? What gives us confidence it will be successful?
A Clear Vision
A good ICO project is about more than having a good idea. While a good idea might work in the short-term, a great project will have a realistic long-term vision for success. It is very easy to be caught up in the small details of a business idea or project and a lot of people get emotionally attached to their idea which makes them unable to see the drawbacks of their ideas. This is why Voltage Control offers their services to businesses because their fast-paced problem solving allows for business ideas to get off the ground quickly and without any of the usual delays of the business planning process. This is why it’s so important to make sure the ICO project is well thought out and can provide benefits for every party involved.
ICOs often aim to raise millions of dollars, creating a network that will grow in value over time. It’s what gives contributors confidence that their token purchase is an investment, not just a donation. If the business idea only has a short-term vision, it probably isn’t right for such a large-scale raise and we would recommend ‘traditional’ crowdfunding instead.
To demonstrate your vision, start by clearly defining your Mission Statement. Is should cover:
- What you do
- How you do it
- Whom you do it for
- The value of your product/service
It should be concise – two sentences at most – yet be clear and easy for a layperson to understand. If it’s overly long, complex, waffly, or packed with jargon, it will become meaningless.
The good news is, once you have a good mission statement, it forms the backbone of your elevator pitch and future marketing materials.
Solving a Problem
A great business idea solves a problem that currently exists within the market; some sort of malfunction that can be solved with your solution. In the case of ICO projects, these problems are usually solved by the clever use of modern technology.
Take Keypasco, for example. They’ve created a solution for securing digital assets using customer verification technology. The problem they were solving was the mass of keys, wallets, digital accounts, etc. that users of decentralised services have to manage. Their solution is to apply blockchain technology to allow people to verify their identity and pay for services using cryptocurrency.
Note that the solution is relatively simple yet elegantly solves multiple issues at once. It is also very forward-thinking: the issue of verification and crypto micropayments will only increase as decentralisation and web anonymity become more widespread.
Start by defining the core problem(s) you plan to solve and their root causes. Then ensure that your mission statement addresses these root causes, using technology to solve all of your core problems in an elegantly simple way.
Creating Value & Revenue
Value is the difference between what you put in and what you get out. If I sell lemons and you sell sugar water, by combining forces we could double our profits by selling lemonade. That’s creating value.
To work as a business, especially as an ICO, your idea needs to clearly demonstrate how it creates value. After all, you’re asking contributors to part with their hard-earned cash on the basis of your idea. So, it needs to be easy to understand by everyone.
You also need to show that your proposed solution doesn’t face any insurmountable barriers, such as legal issues or strong monopoly on the market. Not only could this torpedo the project, it could leave you in legal hot water.
Once you have demonstrated how you’ll create value, it should be pretty easy to define your revenue model – how you will actually make money. Not only does this make your business a worthy investment, it also means you can fund future developments without having to seek lots more investment, which could potentially dilute the value of the original tokens.
You can have a great idea, that solves a problem and creates value, but it will still flop if the market isn’t ready for it. In fact, when it comes to ICOs, you need to demonstrate that there is already a pretty big market waiting for your solution.
A big market usually means global relevance, which attracts a global contributor base. Since ICOs often raise tens-of-millions, you need a global audience to be successful in your token sale.
Often, new businesses will try and play down competitors, thinking that a big market with strong competition will undermine their project. Yet, what it actually shows is that there is already money, investment, and users in a similar platform. It shows that customers are ready for your idea and that it is relevant for a growing market.
The key is to make sure your idea, your way of solving the problem, is better than your competitors. It’s your secret sauce. The thing that makes you special. If you can define that and show how it will create value, you’re onto a winning idea!
So, there you have it! If you have a long-term business idea and have completed the steps above, you will be well-prepared for your ICO.
If you’d like Tokeny to complete your SICOP assessment, get in touch with us today. Through SICOP accreditation, you signal to contributors that your business is prepared and ready for a successful ICO.