ICOs: Communicating the Wild West of fundraising
Instincif's Lewis Hill asks whether firms considering an ICO can do more when using the new - and often misused - fundraising method.
The hype surrounding cryptocurrencies and ICOs reached fever pitch in late 2017. Since then, the furore has died down, along with the price of Bitcoin which has slumped from over USD$19,000 to USD$8,000. But in recent weeks, there has been increasing speculation that the world of cryptocurrencies is gearing up for its Second Coming, which might well spark another run of ICOs.
Currently, ICOs are very much the Wild West of fundraising. They provide companies with a new way to raise capital – outside the traditional methods of debt and equity.
The ICO’s distant cousin, the IPO, is currently enjoying a strong run of its own, especially with the recent high profile listings of Dropbox and Spotify in the US. In recent years, communications has taken an increasingly important role during the IPO process. Companies know they have to get their equity story right and communicate a clear proposition, otherwise, they risk losing potential investors and harming their valuation.
In the case of ICOs – getting communications right is of paramount importance. The space is unregulated, noisy and confusing to both first time and experienced investors. At any one time, there can by hundreds, sometimes thousands, of projects looking for funding to take their business “to the moon and back” – to quote a popular phrase.
Companies launching their own ICO have to be crystal clear. What is their project? What problem do they solve? How do they solve it, and do they have a fully functional product? Answering these questions in a clear, succinct manner will go a long way to convince potential investors to purchase tokens.
With so much to communicate in an unregulated space, companies gearing up for an ICO have to control where they disseminate this information. The majority host information on a microsite, which usually contains links to a white paper (the ICO equivalent of a prospectus) and infographics highlighting key information, for example, use of proceeds.
A microsite provides investors with a focal point for that ICO, and because it’s becoming the unofficial industry practice, it also gives an ICO creditability. This is especially important since the space has become crowded with scammers looking to make a quick buck, typically by selling companies false marketing.
Companies launching an ICO also need to ensure their social channels, such as Telegram, Reddit and Twitter link to the microsite clearly. This provides potential investors with a clear user journey to the source of authentic information and prevents them from drowning in countless messages of FOMO, FUD or HODL.
If companies provide potential investors with clear messages, hosted on a credible microsite, which is easily accessed via their social media channels, they will help them cut through the noise and navigate a complex and ever evolving fundraising environment.
Ultimately, clear and well delivered communication will boost their chances of a successful ICO. And who knows? Maybe a trip to the moon and back.