February 22, 2024

IEO: how not to repeat the fate of ICO

Almost 9 out of 10 ICO projects showed negative returns. Initial exchange offerings that came toreplaced by those who are mired in fraudulent ICO schemes, they risk repeating their fate. We've put together 5 tips for planning your IEO.

1. Hype passed

Initial Exchange Offers (IEOs) arean obvious analogue of the initial coin offerings (ICOs), which survived their boom in 2017, but then, due to the abundance of fraudsters in this area and lack of investor confidence, they went into decline.

According to analyst Larry Chermak, for all time inmore than 5600 ICOs were conducted in the world, during which projects managed to attract, according to various estimates, from a modest $ 14 billion to a record $ 64.5 billion. At least 89% of ICO tokens have shown negative returns by now. The peak of the ICO bubble occurred at the end of 2017-beginning of 2018, coinciding with the growth of the cryptocurrency market.

IEO differs from ICO, first of all, inIn the case of IEO, the cryptocurrency exchange, which will conduct IEO, is partially responsible for checking the project for an obvious connection with fraudsters. The idea is simple: if it is a large world-famous crypto exchange, then it is not interested in being noticed in the marketing promotion of scam. Exchanges also guarantee the listing of coins after IEO, which allows you to withdraw the coin faster for open trading.

After stagnant 2018 IEO as a methodfundraising has given a second wind to many projects, especially those related to blockchain and cryptocurrencies. It all started with the overwhelming success of the initial BitTorrent exchange offer on the Binance Launchpad platform, when the token sale was completed in 18 minutes, during which 59.4 billion BTT tokens were sold and about $ 7.2 million was raised. Other major crypto exchanges followed Binance, launching their own platforms for IEO. But the boom, like an ICO, did not happen: perhaps investors do not trust crypto-exchanges enough in choosing projects, maybe they do not trust projects and are waiting for a breakthrough in the industry. One thing is clear - the hype around IEO has passed, and projects should not wait for easy money.

“Given that at least 89% of all ICOs havenegative returns in US dollars and that IEO is beginning to show the same trend, it can be said with confidence that the vast majority of all ICOs are not able to hold on to value in the long run. This means that winners can get a big jackpot, ”concludes Larry Chermak.

2. Product Bet

How to hit this jackpot? The simplest answer from the captain. Evidence - to create a product that will meet the most "hot" needs of a wide range of users. A product that will not be limited to one market and the borders of one state. A product that, even before a full-scale launch - that is, only by description and MVP - will be understandable and interesting to investors. If after a wide marketing campaign you have not received the desired response, it means that your product is not sufficiently interested in market participants.

Entrepreneur and investor Arkady Moreynis in his Telegram channel suggested replacing the term “minimum viable product” with “minimum delicious product”.

“It's about the minimum we need to do to verify that our product is not just sustainable, but delicious.”

According to him, the idea for a product should not be liked or disliked, but it "should be one that no one can do without."

“Only the lazy one doesn't kick Windows. Although their share of installations on computers is 88%. As the saying goes, the mice cried, pricked, but continued to eat cacti. "


3. Betting on the community

IEO is not a round of financing with participationexclusively “angels” and venture funds. This is an offer to a wide range of - most often - retail investors. And in this case, the project needs to invest in marketing in advance and grow the audience.

Successful products always have powerfulecosystems with developers and users. Communicate with the audience, train it, talk about how the product is created, don’t be afraid to contact users and ask them to test the new version, but don’t expect their condescension if your product does not seem to be necessary.

For example, if you create security systemsfor “smart homes” in the USA, one should not count on high interest in this platform in China, which is in a state of trade war in the USA and is generally quite closed as a market. If you still need to have a desire to enter the Asian market with a similar product, then you can’t do without adapting the product and first creating a strong supportive community.

Community is not about cashbacks, airdrop’s orloyalty systems. Community is a community of like-minded people united by one passion, idea, interest. This is especially true for decentralized platforms, which by their architecture already presuppose a more active participation of the community in the process of creating the product.

Lara Lee, former vice president of Harley Davidson Motor Co., a company known for its consumer community, wrote in a Forbes column in 2009:

“When companies provide this, they createcommunities that bring tangible and emotional value to users, through employees and customers working together to solve collective problems, they create strong bonds of loyalty and open up new sources of growth. Good marketing always puts people at the center. ”

4. Do not forget about regulation

You can preach about the future for years withoutnational governments and advocate for going cryptoanarchy and underground, but if you are conducting an initial exchange offering, think about how legal you are - and most importantly, choose what jurisdiction that "field" is in. On the one hand, digital technologies open up a truly global market without borders for the creators of new products, on the other hand, national regulators are not asleep. Even if you are registered in the British Virgin Islands and conducted an IEO on an Asian exchange, the American regulator will consider itself entitled to initiate an investigation against you if it discovers that one of the US citizens has purchased tokens of your project.

So far, the position of the US Commission on Valuablesecurities and exchanges (SEC) is such that almost all tokens of ICO projects (with rare exceptions, for example, Ethereum) are considered as securities. “There are none of those that I saw that are not securities,” said SEC head Jay Clayton, speaking at a hearing on the Appropriations Committee of the US House of Representatives in April 2018.

It is the presence of users among US citizens that gave rise to new charges against the crypto exchange operator Bitfinex and the issuer of stablecoin Tether - iFinex.

5. Be cross-border - learn intercultural interaction

The digital asset industry is reducing cross-borderbarriers, opens the door to the world market for small young projects. But technology is developing faster than we are: in the digital world, boundaries may be almost erased, but in our heads – when it comes to communication – collective social attitudes still rule. “Doing business across cultures brings a new level of complexity. But the reality of modern business is that we have to work with people from different parts of the world and in different countries on the planet,” notes intercultural communications specialist Darren Menabney, a native of Canada living in Tokyo. The differences in business communication and approach to doing business are especially striking when we talk about the West and the East: for example, in China it is not customary to clearly demonstrate one’s feelings and show strong emotions in business communication, and such behavior on the part of Western partners can cause rejection.

CYBR cybersecurity project from the USAintended to raise up to $4 million through an IEO in the Asian, predominantly Chinese, market. After a fairly successful start of the IEO, when about 40% of the tokens were sold, sales dropped to almost zero. The founder of CYBR, Sean Key, contacted Coineal, where the IEO was held, and demanded that the crypto exchange transfer the funds that had been raised by that time to the project. When the exchange did not agree to this, Key in a conversation questioned the information about the sale of 40% of the tokens and accused Coineal of falsifying data. The cryptocurrency exchange later announced the cancellation of the CYBR listing and the return of funds to pre-sale participants. Coineal's explanation was Asian-dry with emotion - "due to inconsistencies in the collaboration process between the CYBR project and Coineal."

“Differences in culture and mentality often interfereinternational projects to be successful,” Egorov from Coineal shares his experience. “When a project from one country wants to succeed in the global market or the market of another country, it should make every effort to get in touch with potential investors, and not count on the easy formation of a community around an idea that is most likely unfamiliar to them.” .

Following these simple rules will help you moretake a conscious approach to conducting an initial stock exchange offering. But they also do not provide any guarantees: despite various investments in marketing and promotion, you can never say in advance which projects will “take off” and which will not. In any case, a successful IEO is a joint positive work of both project teams and the exchanges on which they place their tokens.

Posted by: futuretime