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8 whitepaper key points for ICOs in 2018. Points #5-8

07 August 2018 11:35, UTC
8 whitepaper key points for ICOs in 2018. Points #5-8
By Richard Shibi, Denis Goncharenko

In the previous article we have reviewed the major four parts of the whitepaper which are essential to attract investors’ attention and gain their trust in the project. Today we are going to take a closer look at the other parts of the WP and provide valuable advice on how to create them. This is what you need to know when starting an ICO in 2018.

5. Crowdsale details

This is one of the most important parts of the WP. The process of funding and budgeting is the cornerstone of success for any startup. Pay special attention to the points given below:

  • Currencies that can be accepted in order to participate in the ICO: BTC & ETH are a must, and having few more is definitely a plus. The price of the token in BTC, ETH, and all other accepted currencies should be clearly depicted in the document.

  • Soft & hard caps: The soft cap represents the minimal amount of money that the project must raise in order to go live and deliver a properly functioning product. While the hard cap represents the maximum amount of money the ICO would like to raise in order to deliver a fully functioning product with all possible features that the project team wish to implement. As a matter of practice, a project can develop a minimal function product for ~5 to ~10M USD and a fully functioning product for ~15M to ~30M. Some projects ask for a 1M softcap and 40M hardcap. Such practice indicates that either the team behind can’t really calculate how much money they need to raise or that they have no intention to deliver anything. Investors believe that if you need 1M to deliver a functioning product, you may not need more than 5M to add additional features.

  • ICO sales details: private sale dates, pre-sale, public sale, flash sale, final round, etc. Make sure that all dates are explicitly mentioned for every single round. Needless to say that no two rounds should intersect, nor have more than one week gap between them.

  • The distribution of the issued tokens: Everything needs to be as transparent as possible. For example, 60% to be sold publicly, 10% to be sold to private investors, 10% to the founders and core team members, 2% for bounty, 5% for strategic advisors and partners, etc. Pay attention that no more than 15% should be allocated to the founders and core team. Otherwise, investors will fear the moment when this team will dump their holdings and crash the price of the token.

  • Use of raised funds: You should describe the destination of every dollar raised: how much should be used for the development, marketing, legal, operations, etc.

6. The roadmap

The roadmap must be realistic. Having a very aggressive roadmap will raise a lot of suspicions. Investors will believe that the founders either have no experience with real-life project management, or they are overpromising scammers who want to stimulate investors and get away with the raised funds. Make sure that the project does not extend way too long to get it going; investors want to see a semi-functioning product the soonest possible. Seek the golden middle and release early versions for testing by strategic adopters of the project, this will give them the comfort that actual work proceeds and the funding are relevant.

7. The team behind the project

Try to have the following three teams covered as a minimum:

  • The founders, co-founders, and executives. Exposing the real identity of the founders will assure the investors that the ICO is not a scam. There is nothing worse than clicking on the LinkedIn profile of the founder and having that link non-functional, broken, leading to a wrong LinkedIn account. The worst situation is when the account has no picture, has few contacts only, has been recently created and is poorly presented. People want to see the founders as leaders — people with relevant experience, a strong network, have their profiles maintained. The profiles must be linked to the ICO; if not, investors will justifiably think that this is an identity theft attempt.

  • The development team. Having a development team in place before starting the ICO will assure the investors that the founders have the right team to build their product. Relying on the fact that money can buy you everything, is surely wrong. With the thousands of ICOs and a handful of experienced blockchain developers, securing the team before starting an ICO is becoming more critical over time.

  • ICO Advisors. Although many ICOs hire “dummy” ICO figures with zero contribution to the project, make sure that you never hire someone if they are not going to participate in the project actively. Having their profile picture on the website will yield no value. Seek partnership with the interested advisors and key players. Seek influencers who can bring positive changes to your project. Hire those who can introduce you to people who you would not reach otherwise. It is so easy for investors to spot those advisors who play dummy roles within ICOs, and this would be very discouraging for them.

8. Legal compliance and requirements

In this section, you should explain thoroughly all the legal issues surrounding the ICO and its token. Special attention is to be paid for the countries which have blanket banned ICOs like China, so a disclaimer should indicate explicitly that citizens of China and similar countries are strictly not allowed to participate. The USA on the other side has not banned ICOs, but the SEC believes that any ICO is by default is security, regardless whether the ICO owner and the whitepaper describe the token as a utility. This means that if USA citizens are not excluded from the ICO, the ICO owner should file a request to the SEC and get all necessary paperwork sorted in order to be able to target non-Accredited Investors.

Lastly, if the token is SEC approved then provide all needed documents or reference numbers which can be verified by investors to prove that the SEC indeed approves the token. Also, make sure that the company numbers and country of registration of the company launching the ICO are explicitly mentioned in the WP. This is the minimum you must do to avoid harsh problems with the law in the future.

The summary

Having all the eight sections thoroughly covered will make it much easier for the ICO investors to have all their questions answered. They will get the confidence about the project by learning the very small details of how it is going to function. There is nothing worse than having a great project failing due to a poorly written WP. After all, investors don’t know the whole background and can’t differentiate between serious intentions and scammy ones from the first look. The whitepaper is the “ICO Bible” and reference, so make sure that it is correctly written in the most professional way.

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