Multidimensional Initial Coin Offering analysis

Stefano Virgilli –
stefano@virgilli.com –

When a few months ago I started writing about ICOs, I always felt the need to spell it in the long form, as in Initial Coin Offering. But as of now, I sense that the majority of the readers would know what an ICO is, without specifically spell it out. However, not everyone, even among the experts, might have a clear roadmap of how an ICO is prepared, assessed, launched and managed.
First of all, an ICO analysis should have a chronological progression, from the preparation, through the launch, to the continuation. So I envision in the immediate future the necessity of CCO as Continuous Coin Offering. From the ICO Inception to the Post-ICO, each stage is crucial to success.
ICO Inception
This is when the team decides to go for an ICO. The ideal scenario is to do it “in the Emperor Caesar sylte”. Romans were famous for invading other kingdoms by burning the bridges after crossing them, so that none of the soldier could have “U-turned” back home.
Preparing an ICO changes — although for a period of time — the goal of the start-up. From the moment that the decision is taken, everyone in the team is committed to sell tokens.
Every action should then be directed to make the project appealing for both small and big investors.
Hence, rather than carrying on with the “business as usual” mindset, start-ups should dedicate all efforts in promoting the investment opportunity.
At this stage there are usually 5 pillars that are crucial to the success of the ICO: Strategic plan, Legal advice, Financial structure, Tech and development, Marketing and communication
ICO-launch
After preparation has been completed, the team is now ready to bring the token to the world. In this phase, everyone is involved in making or breaking the chance of attracting the desired investment capital. A usual structure for an ICO could be the following:
Private talks
Only big investors can participate. Usually it requires a minimum entry ticket.
For instance, some ICO issuers allow access to Private talks, only to investors ready to commit $5 million and above.
In Private talks, investors can get high discounts applied to the price of the token, for example 50 per cent.
Pre-ICO sale
Although the ICO is not public yet, access is allowed to a large group of investors, able to invest, for example, starting from $1 million.
In the Pre-ICO phase, investors are given a smaller discount, but still quite “juicy” compared to the Public sale, for instance 40 per cent.
Public sale: Stage A
Anyone can participate, but since it is still considered as an early bird phase, participants are offered an interesting discount, such as, for example, 25 per cent.The duration for this stage, as for Stages B and C, could be one week each.
Public sale: Stage B
One more week of discounted token sales, but this time at a lower discount, such as 15 per cent for example.
Public sale: Stage C
The last week of discounted tokens. Usually discount is just symbolic, such as 5 per cent for instance.
Public sale: Stage D
This is the last part of the Public sale and could be addressed in multiple ways, depending on the results achieved up to that point.
For example, if the Hard Cap set during the ICO Inception has been successfully reached, then the Stage D of the Public sale might not be necessary. On the other hand, if the Hard Cap is still far, or worse, the minimum investment stated had not yet achieved, then Phase D could be extended past the canonical one week.
The 6 (2 private + 4 public) stages described above are just for pure illustration. Some ICOs that I came across recently have used a 3 + 6 formula of 2 weeks each. In general I would conclude that having a Private sale followed by a Public sale, is the most common pattern identifiable in the ICO world.
Post-ICO
Lastly, once the ICO is concluded, issuers find themselves with the crypto-wallets full, but with the bank accounts empty. So a proper crypto-finance management would be strongly recommended.
In addition, some of the ICOs have simply over-promised and they fear under-delivery. In 2 cases that I have recently analysed, the issuers had not foreseen a major partnership cancellation.
In both instances the start-ups has signed a partnership before the ICO, but once the ICO was completed the partner stepped back. This is particularly negative when the partner is a giant company or even worse, close to a monopoly.
For instance, if a startup announced a partnership with Mastercard before the ICO was launched, and after the ICO the card provided steps back, there are less than a handful of alternative options in the market, which would make then the goal very complex to achieve.
Conclusion
Similarly to our day-to-day life, when we evaluate our Present based on our Past experiences and Future projections, the startups launching ICOs should be able to think beyond the mere achievement of an investment goal, in order to make the right choices once the trust of the investors have been granted through token acquisition.
At the same time, looking back to the past, can dramatically increase the chances of reducing room for error, hence planning decision based on what history has proven to work or fail, is one of the best safety nets when it comes to ICO.