Why your startup should take advantage of ICOs

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Consensus 2018 was the Super Bowl of blockchain conferences, writes Kyle Asman, co-founder of US-based blockchain and crypto business consultancy firm Bx3.

Compared to last year’s reported figure of 2500, it boasted over 8,000 attendees, and attracted swaths of top-tier companies such as Airbus, Boeing, Goldman Sachs, Facebook, LinkedIn, just to name a few.

As a self-proclaimed ‘digital nomad,’ having attended over 10 blockchain conferences this year, Consensus 2018 was the first one that I saw that could claim the majority of its attendees came from Fortune 500 companies. This speaks to its increasing importance in the marketplace, and the fact that myriad industries are adopting blockchain technologies at unparalleled levels.

It was very interesting to hear Fortune 500 companies talking about issuing their own tokens. I believe we are at the forefront of a revolution in capital markets. This is a shot across the bow of the equities and debt capital markets. The idea that you can issue tokens with no debt or equity and raise capital is truly exceptional. (Although those issuing tokens still face problem of limited demand for security tokens because the market is very illiquid, and if you decide to issue a utility token, then you run into regulatory risks since the laws aren’t clearly defined.)

As the token markets gain more investors and become more liquid, I believe we will begin to see further appreciation in price. Companies need to be patient in the fundraising process and target the right investors. But now is the time to be a part of the revolution.

This is the perfect time for companies considering issuing tokens to jump into the marketplace. We’ve witnessed a flood of institutional money on the sidelines looking for high quality projects to invest in. ICOs are fundamentally changing the way capital markets operate. Never before in history have startups been able to raise such incredible sums of money without giving away a large percentage of equity at an early stage. An ICO allows anyone the opportunity to fund a business without having to sell a single percentage of equity or issue a single dollar in debt.

As the industry begins to become dominated by larger financial firms, it is more important for new token offerings now than ever to get the right advisors and do things the right way. We are still in the early stages of the blockchain revolution and there is plenty of opportunity for startups to become the industry leaders.

If you’re a startup considering an ICO, here are some guidelines:

To launch a successful offering, you have to first have to develop a white paper or business plan which answers four basic questions:

  1. What problem are you trying to solve?
  2. How are you solving the problem?
  3. Why is your solution the right one?
  4. Are you the right person or can you find the right people to bring your token to the market.

New businesses are created to solve problems or provide services that existing businesses don’t. In order to attract investors and customers you either need to create a product that the market needs that isn’t already existing, or if it is already existing, you need ensure it is 1,000 per cent better than the current competition in order to have success.

Your solution has to be able to add significant value to the industry. As the co-founder of Bx3, a business advisory firm for startups launching ICOs, I see a lot of companies that have great ideas, but their product or idea isn’t really needed in the current marketplace and they will struggle to attract users or investors.

The toughest question to answer is why your solution is the right one. Too many businesses make the mistake of only telling people that they’re better than their competitors, or that their product is superior. A successful message highlights the unique value proposition being brought to the market. Monarch is an example of a project that is solving a unique problem of recurring payments, since currently nobody allows them using cryptocurrency. They have been able to set up a system that allows users to make payments without ever converting to USD.

Finally, the most important aspect of any successful project is to have the right team and advisors in place. I often see projects promising innovation using machine learning and artificial intelligence, yet those teams have nobody with AI or Machine learning experience on board. You aren’t going to be able to sell to anyone if you don’t have the right team with experience in the industry you are attempting to break into.

In addition, bringing on experienced, knowledgeable advisors who can help you navigate thorny issues, including lawyers, accountants, tax advisors, developers, and marketing and PR professionals, is critical to the success of your offering.

If you’re considering launching your offering, I am available to help answer any questions you may have.

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Passionate about the vibrant tech startups scene in Africa, Tom can usually be found sniffing out the continent's most exciting new companies and entrepreneurs, funding rounds and any other developments within the growing ecosystem.

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