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Crypto Daily Topic

How to Cash Out Your ICO Proceeds

Almost every week, we hear of another new crypto project being launched that will solve an existing problem or fill a gap in the crypto ecosystem. Even if it’s not geared towards the crypto space, entrepreneurial types may be interested in starting a crypto-related business.

The common practice to raise funds is through an Initial Coin Offering (ICO). An ICO is a lot like an Initial Public Offering through which traditional companies raise funds. In an ICO, a project sells freshly minted tokens so as to raise capital to start the project. People can invest in the project by receiving the tokens and giving away other cryptos such as Bitcoin, Ether, Litecoin, and so on.

Of course, after receiving the funds, the next step is to cash out and inject it into the project by paying for bills, talent, PR campaigns, legal processes, office equipment, and so on.

None of the above things would be an issue in a normal environment. However, in a world where cryptocurrency is still treated ambivalently, things have to be done differently. There is also the issue of cryptocurrencies not being accepted for everyday use.

Cashing out cryptocurrency for Fiat can be daunting, least of all, when doing so in large amounts. We’re going to take a look at why this is, as well as explore the best strategies to use when cashing out your ICO proceeds.

Why is the Process so Complicated? 

As blockchain continues to occupy more space in finance, a lot of banks and financial institutions are exploring ways in which to incorporate the technology in their operations. While this may be so, the vast majority of banks are not exactly lining up to embrace cryptocurrencies. Not only are cryptocurrencies in direct competition with banks, but they were also created to replace them. As such, it’s only natural that banks will treat cryptocurrencies with suspicion.

Reports are rife that banks are reluctant to do business with crypto-related businesses. Influential figures in the traditional finance space have been on record calling cryptocurrency a fraud. And for the few banks that are willing to engage crypto projects, paperwork upon paperwork and jumping through countless legal hoops is to be expected.

The reason for this is banks have to comply with Anti Money Laundering (AML) and Know Your Customer (KYC) regulations. Banks will be trying to ascertain your source of the funds – and whether it’s legitimate or not. Also, every single transaction has to undergo rigorous verification.

After all these procedures, it is not guaranteed that you will have a smooth sailing relationship with the bank. Due to the regulatory uncertainty of cryptocurrencies, your account will always be at the risk of being shut down. Some words such as Bitcoin, cryptocurrency, ICO, Ether, BTC, and so on can get your transactions flagged and your account shut down.

Also, cashing out via a crypto exchange may have fewer obstacles, but it’s also complicated. Assuming you find a legitimate exchange that’s also legal in your jurisdiction, the first thing you should do is ensure you have a bank account that you will withdraw your money to. You also need to undergo layers of verification processes in both the exchange and bank. Then you’ll have to contend with long wait times and high transaction fees.

Storing your funds in a crypto exchange wallet is not an option, either. Crypto exchange wallets are custodial, meaning you’re not in full control of your funds. Also, exchange wallets constitute online wallets  – which are prone to hacking and other types of fraud.

Withdrawing Small Amounts

Now, if you were to try cashing out the entire amount of funds, not only would it be a logistical nightmare, but it would also raise eyebrows with the bank and the authorities. The best approach would be to withdraw the amount of money that you actually need for various steps of the project, once in a while.

Here are a few ways to go about it: 

  1. Exchange the right amount of crypto for Fiat in an exchange and withdraw the money to your bank account
  2. Make use of peer-to-peer exchanges (exchanges that don’t utilize a third party), e.g, LocalBitcoins and LocalEthereum. Such exchanges provide high security for your funds and protect you from transactions censorship.
  3. Skip the bank altogether by using payment processors such as CoinPayments, CoinGate, SpectroCoin, BitPay, SpicePay, and others. These processors allow you to take things through direct crypto to bank transactions.
  4. Get a prepaid Visa or MasterCard that will allow you to load crypto and directly and use it for payments online and offline payments. These can be obtained at com, TenxBitwala, and other blockchain banking services.
  5. Pay your staff in crypto and instruct them on how to cash out in Fiat

Taking advantage of relaxed jurisdictions

Currently, there is no solution that directly allows you to withdraw large amounts of crypto. But some while cryptocurrency is frowned upon in many countries. Some countries have a rather open approach. In these jurisdictions, it’s possible to open a bank account and operate with crypto without being censored:

  • Singapore
  • Malta Islands
  • Switzerland
  • Estonia
  • Germany
  • Bermuda
  • Cayman Islands
  • Luxembourg
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Cryptocurrencies

What Does it Take to Launch A Successful ICO?

For the last three years, Initial Coin Offerings (ICOs) have been compared to the dot-com bubble of the early 2000s. The two are much alike in that they led to significant loss of investors’ money. The only difference being that ICOs caused an 85% drop in the crypto market cap, which is steeper than the dot-com’s bubble – 78% crash.  

Well, the ICO bubble may have popped as recent data suggests, but there are valuable lessons to be drawn from its failure. These lessons can be used to form the basis of what it takes to launch a successful ICO despite the prevailing skepticism around such projects. 

How to launch a successful ICo

i) Formulate a Sound Business Model

Similar to traditional businesses, most ICO projects fail due to the lack of a strategic business plan. As such, ICO investors are willing to invest in a project that has a sound business model with a concrete idea of the product or solution the project offers to the market. To achieve this, you need to objectively study the market, know your audience, and weigh your project’s contribution to the crypto community. 

Once you have all the relevant data, it is always recommended to write a whitepaper for the investors to review. Essentially, a whitepaper is a comprehensive description of your entire project and its goals. Be sure to also include crucial details such as development strategies, legal issues, and available resources. Sure, a well-crafted whitepaper isn’t a guarantee of success. But a poorly written whitepaper with an impractical approach to achieving the project’s goals will certainly turn investors away. 

ii) Create Value for Your Token

Ideally, an ICO campaign will launch its own tokens that give investors access to the service or product set to be launched. If your token is to gain value, it will need to be in high market demand to attract more investors. Note that demand can be created only if your business model offers better solutions than your competitors. Besides, there are numerous project offerings in the market, so you have to make yours stand out. 

Provided you have a solid business plan, there are two main approaches to increasing the value of your token. The first is designing a token distribution plan, and the other one is deciding on the exact number of tokens to be issued. To start with, the token distribution plan is done through private sales pre-sales or crowd sales. Private sales are closed ICO sales targeting high profile investors and professional investors. The idea here is to raise a significant amount of funds and leverage the influence of wealthy investors to gain the attention of others during the public sale. 

Pre-sales are usually held in preparation for the main public sale. They are usually done to raise awareness of the token among the general public. The crowd sale targets investors, including those with limited amounts of investment. 

In each stage of the token sale, decide in advance how many tokens will be issued in total. 

You should also create room for issuance of additional tokens just to maintain market equilibrium. 

iii) Build Your Team

Much of an ICO’s success depends on the team behind the project. From the marketing team, product developers, engineers, to the initial investors; they all need to be in sync with the objectives of your ICO project. It is also wise to include a lawyer in your core team to help you streamline the legal process of launching the ICO. Currently, there aren’t any lawyers specializing in crypto space, but an experienced lawyer in corporate formation can serve you just right. 

Other members of your team, such as financial experts and developers, should have a good reputation in the blockchain industry. This goes a long way into giving your project the credibility it deserves to win reliable investors. A good team should consist of members who can complement each other’s skillset and even bring like-minded professionals on board. 

You might also consider having well-known advisers and promoters in alliance with your team. Although this doesn’t always translate to success, these individuals will help vouch for your project. 

Keep in mind that a team doesn’t entail those tied directly to the project only. Your target customers also have a place in your team. Advertising might win you some customers, but it’s an expensive approach considering that not everyone is interested in ICOs. A good place to start is by interacting with your customer base is through established online crypto communities such as Bitcointalk, Steemit, and Reddit. You can also work closely with YouTubers specializing in cryptocurrency. This way, once you start your marketing campaign, the audience will already be familiar with your offering and be likely to be swayed into investing. 

iv) Build an Online Presence

Having an online presence is not only a viable marketing tool but also a good way to give your project a touch of legitimacy. 

You can start by creating a website that showcases the necessary details of your project. As such, it makes sense to post an online whitepaper of your project on the website. Most importantly, remember to create a ‘team’ section on your web where all the project stakeholders appear. This section should be detailed, explaining the role of each team member, including their previous work and the milestones they have achieved. Be sure to include a passport size picture of each member above their profile. 

You also need to know that only a handful of investors read the whitepaper to the very last page. For this reason, it is a good idea to have a ‘roadmap’ section on your website to concisely outline realistic goals of the project, including the set timeframes to achieve these objectives. 

Your online presence wouldn’t be complete without creating social media platforms. You should have one platform for your entire project, and several others for every member of your team. The platforms provide an interaction medium between your brand and customers. 

v) Launching Your ICO

Launching an ICO is a pretty straightforward process, especially if you observed the aforementioned procedures. But there are a few twists and turns to navigate before you can put your ICO out to the world.

The first hurdle to overcome is deciding the location in which to launch your ICO. Different countries have varying policies regarding fundraising, particularly in the crypto space. For instance, offering your ICO tokens to U.S residents may not be a good idea since the tokens will be subject to the Securities and Exchange Commission (SEC) regulations. This will come with its share of legal problems given that the U.S government hasn’t exactly warmed up to blockchain. Instead, aim to launch your campaign in ICO-friendly countries such as the British Virgin Islands, Singapore, Hong Kong, Switzerland, and the Cayman Islands. 

Lastly, determine the token pricing strategy to use based on your goals. Generally, there are four token pricing strategies: 

  • Undetermined price: This method is divided into several price stages, whereby the token price in the initial stage is fixed. As more investors come in, the price increases as the stages advance. 
  • Fixed price per token: In this method, the tokens are offered at a set price that doesn’t change with the number of investors. This is to say that investors can buy as many tokens as they wish without affecting the price. To avoid market overvaluation, the tokens are frozen for a pre-set period, after which they are made available for trading on the market. 
  • Random price token: This strategy doesn’t have a fixed price for the token. Instead, tokens are issued to investors as per their amount of funds. 
  • Price decreases over time: As the name suggests, the tokens are offered at a higher price than decreases as the sale period passes.

Conclusion 

ICOs are a revolutionary way through which the average investor can access investment opportunities that would be otherwise reserved for venture capitalists and institutional investors. This provides blockchain entrepreneurs with a platform to actualize their business goals and contribute to the advancement of the entire blockchain space. However, setting up an ICO project and finally raising funds isn’t as easy as it was a couple of years ago. As such, the above-mentioned guidelines will help you adjust to the changes in the ICO market, bringing you closer to the objectives of your ICO project.