Everything A FinTech Startup Should Know Before Launching an ICO

by Andrew McGuinness     Sep 04, 2019

One of the most interesting things Bitcoin brought to the world by placing cryptocurrency into the limelight is the access to capital for startup companies. Terms like ICO, which stemmed from that development, may still not be taught in traditional trading courses. ICO stands for Initial Coin Offering, which actually isn’t too different from a normal IPO seen in a stock market. A fintech startup, or any startup really, can release its own cryptocurrency in exchange for cash or other cryptocurrency.

This has become a fast and cheap way for startups to raise capital which they would have a hard time getting access to through more traditional means. It also means that investors also have the opportunity to invest in high growth startups which they would not have been able to invest in otherwise. Let’s narrow it down to the brass tacks on what your need to add to your trading 101 knowledge to get into ICOs.

1) Changing your mindset

ICOs are inherently different from IPOs. While raising capital is traditionally based around pitching ideas to venture capitalists or angel investors, this is not the case with ICOs. It is generally recommended to pitch to them first as it can take less effort to prepare for one good pitch compared to building your own cryptocurrency. ICOs are a faster way to raise money if you know how to navigate the ICO world. In the end, an ICO could actually be the best way for your startup to raise money – especially when it comes to scaling your startup operation from just yourself to more people.

ICOs need to be approached as opportunities to get in on the ground floor of a startup. While they’re not a guaranteed way to succeed, in order to get the most out of it, a proper mindset is required. An ICO is a strategic tool just like an IPO. If it is treated like such, it will have the best chance to raise the most capital.

2) ICOs are extremely competitive

ICOs are not an end-all measure. Similar to many other IPOs, the success of an ICO depends more on just having one in the first place. ICOs are extremely marketing-driven and given the increasing popularity of cryptocurrencies, there are plenty of startups looking for funding by creating their own currencies. It is unwise to assume that investors will flock to your ICO without the work being put in to attracting them in the first place.

Over $100 million were raised using ICOs per month since the Bitcoin boom hit mainstream news. This is simple proof that the concept works and that there are enough investors and people out there willing to buy coins at an ICO.

Since ICOs are getting fiercely competitive with many startups vying for the attention of investors, entrepreneurs need to invest the time to understand how to professionally and successfully execute their ICO as it may be their only shot at raising capital in that market. There are many ways to differentiate an ICO from the rest but it requires careful planning and great execution. Companies have sprung up which offer consulting on ICOs, which might be worth the investment.

3) Communication is the lifeblood of a successful ICO

Startups are a dime a dozen and over 90% of them fail within a 5-year period. However, no two companies are the same and this is often the key factor to differentiate a startup from a potential failure to being a good investment. Effective communication needs to be part of an ICO’s marketing strategy – from technical details to company direction and profit projections need to be marketed and communicated to potential investors appropriately. Treat an ICO like you would an IPO or pitch to a famous angel investor and your likelihood of doing well increase tenfold.

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