According to a report by Investopedia, 80 percent of all ICO sales are scams with over $9 million lost every day.
The fraud sales and global regulations have affected the popularity of ICO funding, and after China banned ICO’s back in 2017, the business model has only seen a downward trend.
However, a new model named IEO (Initial Exchange Offering) is gaining popularity among blockchain startups to obtain funding.
What is IEO (Initial Exchange Offering)?
Unlike ICO, which happens on the token issuer’s website, IEO is conducted directly on a cryptocurrency exchange platform.
This means that investors will directly pay money to the exchange’s wallet and in return, the exchange will deposit the tokens into the investor’s account.
Binance, which is the largest cryptocurrency trading platform in terms of volume, launched the first-ever IEO platform back in December 2017. Since then, the popularity of IEO has increased among cryptocurrency startups to seek funding.
Top 5 Advantages of IEO Funding
Let us now look at a few factors that make IEO’s more preferable than ICO funding.
- Easy KYC Process: As IEO funding happens through a cryptocurrency exchange, you do not have to go through the KYC (Know Your Customer) process for each IEO funding project.
- Secure Transactions: Crypto exchanges functioning as an IEO platform will already have a reliable and stable payment structure which makes it easier and trustable for investors.
- Various ICO Projects Under One Roof: Investors will get the opportunity to find and research among various ICO projects before making an investment which increases confidence.
- Low Marketing Requirements: With the ICO approach, startups need to focus heavily on the marketing front to create hype around their launch. On the other hand, reaching a larger audience becomes easier through IEO funding, as exchanges have an established user base.
- Credible Projects: Exchanges scrutinize the credibility of IEO projects before listing them on the platform to maintain reputation. This ensures investors that there are no scam projects listed on the exchange.
5 Important Tips to Launch a Successful IEO
If you are planning to launch an IEO funding project, then here are five tips that will help you make the launch successful.
Have an MVP or Prototype
Most of the investors won’t be confident to invest if your pitch only contains concepts and ideas. Having an MVP (Minimum Viable Product) or a prototype will help in building trust among investors.
If a prototype is not available, then you should at least be able to show a remarkable progress in the development phase to get better funding chances.
Prepare a Detailed White Paper
The next most crucial aspect of a project is the white paper. The white paper is the detailed documentation that investors will go through before making any investment choices.
An ideal white paper should contain all details about the business and technology of the project, and how it will improve its value with proper funding resources.
Build a Content-Rich Blog
Having an official website for your project is essential, and equally important is to have a blog attached to the site. Make sure to update the blog frequently with informative content and not just promotional material.
Establish a Clear Funding Goal
There must be a clear cut funding goal in terms of total tokens that will enter sale and the maximum funding requirement. Having a properly laid out hard cap for funding will assure investors that the business goal is tangible and is not an attempt to raise as much money as possible.
According to Artur Boytsov, VP of Priority Token, which is one of the strongest and top-rated IEO/STO consulting agency, $6 – $7 million is the sweet spot for hard cap in IEO funding.
Have a Reputable Team
The qualification, experience, and reputation of the team behind any business directly influence investor confidence. Along with technical and business expertise, it is always an advantage to have legal experts within the core team of a project so that investors know that professional opinions will be present in case of any legal troubles.
I have tried to include all the essential details about Initial Exchange Offering in this article. In case you would like to add some information to the article or have any questions in mind, please feel free to leave a comment below.