$36M Later, This Blockchain Start-up Dishes Out How To Run A Successful ICO
Make sure to lawyer up, advises AirSwap co-founder Michael Oved
PHOTO CREDIT: Getty Images
New, decentralized cryptocurrency exchange AirSwap sold the equivalent of USD $36 million in its ICO (initial coin offering) last week, with the token sale covering 9,447 people from 135 countries, according to the company. With AirSwap Token (AST) owners able to buy and sell AST as they please, a market for the AirSwap cryptocurrency was thus created.
Token launches enable start-ups to sell tokens to access their platform without having equity stakeholders breathing down their necks on spending, prioritizing financial returns over the general good of the product or service itself. The process often involves lawyers, purchasers, and a final public sale, and is at once a virtual roadshow and a community-building exercise.
Following the success of AST’s launch, Michael Oved, AirSwap’s co-founder, shares the three factors that drove their ICO to run smoothly.
1. To avoid future migraines, lawyer up
Dealing with other people’s money means you need to make sure you aren’t breaking any laws along the way, so Oved strongly recommends hiring the services on an actual lawyer as you prepare for the ICO.
Last July 2017, the U.S. Securities and Exchange Commission (SEC) ruled that some digital coins are actually securities. As the law covering Securities can be complicated, you need to make sure you at least know the basics. Oved recommends securing strong legal counsel, and running a responsible token launch from start to finish, even if it takes extra time and effort. The result will pay off in the end.
“Currently, there are a lot of new, interesting and difficult legal questions surrounding blockchain technology, and because of this, we allocated a good portion of our resources on a team of top-notch internal and external legal advisors,” says Oved. Acting in good faith, with full transparency and proper disclosures, will reduce the risk of any sort of SEC enforcement.
2. Get down with regulation
AirSwap implemented a Know Your Customer (KYC) process wherein “each person had to pass before being able to participate in our token sale.” There are two reasons for this: First, the SEC is preparing to prosecute token sales without KYC procedures; and second, cryptocurrency exchanges are beginning to exclude cryptocurrencies that do not implement KYC.
Regardless of how you approach the token creation, Oved asserts that it is important to be as accurate as possible with disclaimers and disclosures to purchasers as an act of good faith. This is also why AirSwap decided not to allow Chinese nationals to participate in their token sale because of the country’s ban on ICOs. “We have full respect for the Chinese government, and all governments, and we want to give them time to refine their regulations,” says Oved.
3. Engage with your community
Start-ups will most likely be speaking to two distinctive audiences as the ICO approaches — those with a breadth of digital currency knowledge, and those who do not understand cryptocurrencies at all — so create marketing and PR materials that speak to both sides of the spectrum.
Slack and Telegram chats were some of the most important channels in AirSwap’s communication with its community, as users can communicate with the project’s founders, team members, and between each other on questions to do with the ICO. “We focused a lot of effort on growing our Telegram, Twitter, and e-mail lists. We found that these channels offered the most engagement and organic growth with our target audience,” says Oved.
It’s crucial that communication channels are monitored on a regular basis, with all questions raised by users answered in record time, dispelling any erroneous guesses or unfounded accusations. It’s also useful to have content and marketing not only in English, but in Chinese, Arabic, Russian, Korean, Japanese, etc., as people will be buying from all over the world.
A best practice is to make sure community guidelines are in place ideally before one starts building, but at the very least, before the community grows too large. “We did not allow trolling or insults — by quickly asking the individual to participate in creating a positive community, most people followed the guidelines. Another tip I recommend is to not focus too much on the numbers, community engagement is a much more important metric,” says Oved.
In terms of timing, Oved says, “there really is a sweet spot for when to begin community building efforts. If you’re too early, the community may burn out, but if you’re too late it may be difficult to grow the community to the size desired.”
Remain genuine, constantly keep in touch with the contributors, and update them on the progress of your project. These are some of the most important things you can do to market your ICO.
4. Get the right advisors
In an ICO project, it is also important to have an advisor who is well-respected and known in the industry, and who has no vested interest in the company. “The best place to find advisors is to tap into your network, and start making connections with potential advisors early on,” says Oved.
Executing a successful ICO is no easy task. It is important to remember that ICOs are meant to be more than a quick cash grab. They are a disruption to the market with genuine staying power — failure to consider their long-term implications can have negative effects on every aspect of your business model.