Ico saurabh

INITIAL COIN OFFERING
ICOs are being marketed as a new way for companies / projects / groups of
people to raise money, and the characteristics seem to be a hybrid of the
traditional methods of fundraising, but currently without regulatory safeguards
appropriate to the risk that investors are subject to.
HOW ICO WORKS
Some technology startup companies are raising money in a new way, by issuing
digital tokens in return for funds. This is often colloquially called “doing an ICO”,
and this article aims to explain how this works.
Raising money
Traditionally, there are three main ways for a company to raise money:
1. Selling shares (the company sells ownership of the company for cash)
2. Issuing debt (the company receives cash and promises to pay back the
amount borrowed, with interest)
3. Pre-selling goods and services (this ranges from customers pre-
ordering a book or computer game, to kick starter-style crowd funding of
to-be-made items or services. Perhaps even package holidays, or aero
plane tickets fall into this category
Any of the above can be done with a small group of investors or a large group. If
it’s a large group, it’s usually called crowd funding.
In each case, it is very clear what investors get in return for their money. In
general, the higher the risk to an investor, the greater the regulation of the
mechanism. This is for good reason: it is a regulator’s job to prevent con artists
from scamming the public too easily.
How is money raised?
ICO funds are usually received in Bit coins (BTC) or Ether (ETH). The project
creates a Bit coin or Ethereum address for receiving funds and displays it on a

web page. This is like opening a bank account, and displaying it on a web page
for people to send money to.
Example: Ethereum’s crowdsale bitcoin address
was 36PrZ1KHYMpqSyAQXSG8VwbUiq2EogxLo2
Investors send BTC or ETH to the published address, in return for the new
tokens. The project uses the BTC or ETH to pay staff, or sell the crypto currency
for fiat currency on a crypto currency exchange to fund the project.
Usually the website will also contain some details about what it will use the funds
for, and why investors should invest.
Where are the new tokens stored?
The tokens issued by the project to investors are generally created and tracked
in one of two ways:
• as the intrinsic token of an entirely new block chain (for example Ethereum
was funded by exchanging wallets funded with ETH tokens in exchange
for BTC from investors)
• or as a token on top of an existing block chain
• e.g. as a Colored coin on Bit coin’s block chain
• or a token held in a smart contract on Ethereum’s block chain
CHARACTERISTICS OF AN ICO
There are seven characterizes of an ICO.
1. The project is usually a technology project related to crypto currencies
or decentralization. These projects tend to appeal to those investors who are
familiar with or already own crypto currencies, and so are familiar with how crypto
currencies work.

2. Investor documents are usually a webpage, a whitepaper (usually not
peer reviewed), and some internet forum posts. Rules or laws that compel
fundraisers to make accurate statements in documents are often ignored or
worked around. Often ICO ‘whitepapers’ (prospectuses) exaggerate benefits, do
not identify risks, and create unsubstantiated hype.
This is different to traditional forms of fundraising where fundraisers attempt to
comply with rules and regulations, knowing that investors have recourse if
investor documents are wildly inaccurate.
3. Usually identification is light on both sides. Investors often do not need to
self-identify; nor do the people running the project. Often the projects will not
perform identity checks on investors or the investors’ source of funds to
determine if the project is complying with global sanctions, or if they are
accidentally laundering the proceeds of crime, or funding terrorism.
This is different to traditional forms of fundraising, where the identities of
investors are usually known or broadly vetted.
4. The amount raised is transparent but can be gamed. BTC and ETH
payments to a ICO deposit address are logged on public block chains, allowing
anyone to see the quantity and amounts going to an ICO address. Although
the amounts invested are transparent, it’s hard to know who sent the funds. This
means it is almost impossible to tell if the project itself invests, without disclosure,
to give the illusion of popularity and momentum, and create hype and fear of
missing out.
Traditional forms of fundraising share the characteristic of “seeding” the round
with big names and commitments, but the investors are known and identified.
5. Tiering / early investor advantage. Often the crowd sale is offered with
tiering, where early investors are offered a better price than later investors. For
example, in Ethereum’s initial crowd sale early investors received 2000 ETH per
1 BTC and later investors received only 1337 ETH per 1 BTC. This can be done
by creating limited investment opportunities: either time-bound, where the best
price is available for the first week; or amount bound, where the best price is
available for the first 2,000 BTC invested.

This is similar to traditional fundraising, where early investors get a better deal
than later investors by tiering the company valuation. However, ICOs operate at
a different timescale, where price changes can happen in a matter of minutes
rather than months for a traditional series of investments.
6. Coin retention and price discovery. Usually the project will hold back some
tokens (e.g., 60% will be sold in the ICO, and the project will retain 40% of the
tokens). This gives the project a valuation of their token holdings based on the
price of the token ICO multiplied by the number of tokens they retain.
Sometimes the project will state how they intend to use these retained coins, e.g.
compensating staff.
This is similar to traditional investments – the price of an illiquid chunk of equity
is usually determined by the company valuation of the most recent funding
round.
7. Minimums and maximums. There are sometimes minimum and maximum
total amounts to be raised. If the minimum is not reached, investors are refunded
and the project doesn’t continue. When the maximum is reached, no more coins
are given out; any additional (late) investments are refunded. With crypto
currencies this can be done automatically, without the ICO managers needing to
know the identity of the investor.
Investor expectations
Profit. Although hard to prove, there is an expectation that if the project is
successful (loosely defined), the value of the tokens will appreciate and investors
can sell the tokens at a profit. It is unclear what proportion of investors buys ICO
tokens for their stated use (e.g. file storage, access to a computer game, or
running smart contracts etc).
Liquidity. The expectation is that the tokens will be listed on crypto currency
exchanges soon after ICO, and often much before the tokens becomes usable
for their stated intent. This provides the secondary market where early investors
can sell their tokens.

These investment rounds are sometimes called “donations” or “presale tokens”
instead of using the “ICO” terminology, in order to disassociate with legally
sensitive words and phrases.
The risk profile of an ICO is more similar to the risk profile of equities than to a
kick starter project for the following reasons:
• Investors can buy large dollar amounts of tokens
• Investors hope that the value of the asset will go up by multiples
• Investors can lose all their money
Currently ICOs fall in a regulatory grey area. At least one ICO (Ethereum’s) has
created large profits for early investors. Con artists are taking advantage of
these success stories to cheat investors who have little recourse. Some well-
meaning ICOs have completely failed, leaving investors with worthless and
useless tokens; though it is hard to tell if a project is really well-meaning or a
well-orchestrated pump-and-dump.
GUIDE TO LAUNCH AN ICO
There has been a lot of confusion on what an initial coin offering is (ICO—also
sometimes called a token generation event or token sale), what kinds of
companies an ICO can be used for, and what goes into launching an ICO—from
a project’s perspective. This is not to be construed as investment or legal advice,
but rather meant as a template to show the process behind an ICO, and what a
project’s stakeholders (team, board, and stakeholders) should think about when
conducting an ICO.
There are 5 steps for launching an ICO:
1. Pre-Planning
2. Planning (Token, Whitepaper, Website, Communication, etc)
3. Before the ICO
4. After the ICO
5. Running the project post-ICO.

PRE-PLANNING
The biggest two questions you need to think about first are:
1. What is the purpose of the token?
2. Are you sure you want to do an ICO?
Token
• What is the purpose of the token?
• What function or utility does it perform?
• Is the token absolutely necessary?
• Why does your project need to be on the block chain?
• Can you describe a viable economic model behind it?
If your application doesn’t need to be built on top of a block chain protocol, you
should think hard before moving forward. For example, the computational costs of
building an application on top of Ethereum is much more expensive than
something like AWS. You need to have a strong reason for why you are building a
decentralized application vs. a centralized application. Building a decentralized
application is fundamentally different than an application using client-server
architecture, and you’ll need to fully understand the components of a block chain
and what can be built on top of this new architecture.
ICO
An ICO is fundamentally different than raising money through VC’s or other
traditional means.
On one-hand, you are selling future usage of your platform (not giving up equity).
On the other-hand, you are becoming a public company on day one. You’ll have a
huge community you’ll need to manage post-ICO, and you need to make sure you
want to deal with this burden beforehand.
Here are a few things to keep in mind while thinking through whether your project
should do an ICO in the first place:
• Everything you do and all the actions you take will be reflected in the price
of the token.
• Your team will get bombarded non-stop, multiple times a day, with
questions about the price of your token.

• You’ll need to be an international company from day one.
• All of your internal team discussions will likely be pushed publicly.
• There will be great stress in trying to build things that are long-term
valuable vs. short-term valuable.
• If your product isn’t open sourced already, there will be a huge backlash to
become completely open sourced. There is a strong expectation that many
block chain projects are open-sourced projects.
• In general, crypto currency projects are way more public/transparent than
typical startups, or even traditional public companies.
• In general, good block chain projects look and function much more like
open-sourced software projects vs. traditional tech businesses. You and your
team will have to decide both whether your application makes sense to be
built on a block chain + you want to operate as a transparent and open
company.
PLANNING
Once you are ready and committed to doing an ICO, the core components in
planning are deciding on the offering, whitepaper, token design, legal, precautions
against the inevitable hackers, and being prepared for communication (website,
slack, social, press, interviews, etc).
Offering
1. The most important question is: How much do you want to rise? & Why?
2. The second most important question is: What do you want to accomplish
with the particular distribution method you are choosing?
Considerations:
• For your ICO—are you trying to raise the most amount of money? Are you
trying to build a broad base of supporters? Are you trying to target a specific
profile of potential users? Are you trying to incentives developers to build on
top of your platform? etc.
• Other questions to think about
• Allocation—what % are you giving to your team, investors, partners,
reserving for the ecosystem, reserving for the company/foundation?
• Where will the money that you raise go to? You should have an annual
budget for the next 5 years.
• Do you want a cap? If so what cap will you set? This depends on the
amount you are targeting to raise (see the first question).
• Do you want to do a pre-sale?

• Depending on the goals of your raise, a pre-sale can be used as both
social proof + getting tokens to the people who you most want to align in your
ecosystem. The downside of a pre-sale is it does favor certain people/groups
over the participants in the general crowd sale.
• If you are doing a pre-sale, you should look into building a specific
reservation contract for the pre-sale to reserve a specific amount of allocation
for each of the pre-sale buyers and being transparent about who participated
in the pre-sale and at what price.
• If you do decide to do a pre-sale, you’ll also need to think about what % of
allocation is distributed in the pre-sale in relation to the % you are selling in
the crowd sale.
For the ICO itself
• What currencies will you accept? (BTC, ETH, anything else?)
• Do you want to do a pre-registration? (It’s becoming more common for
crowd sales to do some form of “Know your Customer” (KYC) for people who
want to participate)
• Do you want to do the KYC process yourself or use a service like Civic?
• Depending on your goals, do you want to split an even number of tokens
for all registrants or via first come first serve? With first come first serve, you
run the risk of having a small number of people buying up the majority of your
tokens.
• Will you be offering rewards for getting in early? Tiered pricing?
• How long will your offering be for? (1 day, 3 days, a week, etc).
• Will you be geo-fencing? (excluding specific countries from participating
e.g. sanctioned countries—seeing more projects exclude both US and
Chinese investors)
• Will the tokens be released right after the token sale is complete? If not,
when?
• Will you allow funds/institutional investors to invest or only individuals?
In general, you want to have a well thought out and crafted offer in which all of
the information is presented to the person looking to participate in your ICO.
Whitepaper
• The whitepaper is where everything above comes together and is
synthesized in one key document. The whitepaper should cover all of the
inner workings of your application, how the whole system works, and how the
token will be used within the system.

• Ideally your whitepaper would include all of the technical information about
your project, all of the token allocation information, and all of the relevant
information about your team.
• This one document should give a prospective contributor a full picture of
your application and give them enough information to make an informed
decision.
Legal
• You’ll need a reputable law firm who has experience with incorporating
block chain companies/foundations and running an ICO process—to
advise you on your process.
• The biggest legal question you’ll need to answer is: Is the token you are
offering during the ICO a security or not?
• What do you need to do to alleviate the concerns that the token may be a
security?
• Will you be using a SAFT?
• Are you geo-fencing the offering?
• Are you setting up a foundation to be a steward of the token?
Communication
In general, the communication strategy for your team will encompass of all of the
channels you will use to communicate about your project (website, whitepaper,
slack, social, etc). All of your channels need to be in sync, your whole team needs
to be on deck, and you need to respond to people on time.
It’s a huge task, and here are some of the key components:
Website, which includes:
• Landing page for the crowd sale (separate from your main product page if
you have one already)
• In general well designed pages do better in ICOs
• Whitepaper (See the whitepaper section above)
• Team—each team member needs a clear and updated Linked In profile
because potential contributors will be doing due diligence on each member of
the team.
• Advisors—each advisor needs a clear and updated Linked In profile
because potential contributors will be doing due diligence on each member of
the team.
• A potential red flag to contributors is when there are more advisors than
team members.

• Previous investors (If any)
• Budget—can include in whitepaper or as a separate section on the
website. Need to have clarity on where the funding is going towards, and how
long it will be projected to last.
• Roadmap—can include in whitepaper or as a separate section on the
website.
• Token allocation—can include in whitepaper or as a separate section on
the website. Need to be transparent about what you are selling, terms of the
ICO, and terms of the pre-sale (if applicable). At a minimum, potential
contributors need to be able to calculate their effective market cap and
understand what the circulating & total supply will be.
• Contribution details—to be released when the ICO/pre-ICO is ready. (Be
careful as this section could be hacked and the contribution address could be
changed to a hacker’s address.)
• Links to social accounts
• Translations
Internal communication channel (Slack, Rocket Chat, Riot, etc)
• Need to have a main communication channel and the team needs to be
active there.
• Strongly consider hiring a community manager full-time to moderate the
communication channel you choose. This community manager can also act
as the bridge between the larger community and your internal team.
• Need to setup the channels properly and moderate heavily. Examples
channels: Announcements, Developers, General, Random, Support, and
Scam Alerts (to be able to notify all users of potential scams)
Public relations
• Press—getting into both crypto publications + general news.
• Interviews—Q&A, speaking engagements, tech talks, etc.
• Events—Conferences, meetups, technical talks, dinners, online Q&A
sessions, etc.
• Pod casts—Epicenter, Unchained, Ether Review, etc.
Translation
• Foreign language translations require real commitment.
• Not only do you need to translate your whitepaper and website, but you’ll
need to translate all of the changes and announcements going forward. You

might even need to hire someone to manage the translations for Q&A and
inquiries on various social channels.
• If you do decide to translate—what languages will you be targeting?
(Chinese/English seem to be the most common.)
Community Management
• Need to have extra people on staff ready to answer questions. On all
channels, all of the time.
• The more successful your ICO is, the more community support you will
need.
• In general, you want to have a sustained presence on the web well before
your ICO, during your ICO, and well after your ICO. Potential contributors
need to know that your team is serious and in it for the long-term.
• What block chain will you be using? ERC20 token?
• Need to create the smart contract well in advance.
• If you do a pre-sale and ICO, you’ll need two smart contracts plus
additional considerations if you are planning to do a reservation contract.
• Security audit on the smart contract—you need to do this well ahead of
time and publish the results. Your entire fundraise is predicated on this
smart contract so it needs to be 100% correct. If it’s only 99% correct,
you leave yourself open to potential hackers.
• To be extra safe, some projects now have multiple parties do their own
independent audits and publish all of the individual results.
• Setup a bug bounty.
• Need to setup the wallet you will receive the ICO payments. The safest
options are hardware wallets.
• Depending on what currency you accept, you might need more than one
setup.
General security tips
• Buy all of the website domains that look like yours, and all of the various
TLD variations of your name.
• Hackers will try to re-create your landing page with a domain name that is
similar to yours, using their own address instead of yours. You need to be on
the lookout for any potential scam leading up the ICO and even after the ICO.
• Register all of the social media accounts of all of the names that look like
yours.
• Similar to a website, hackers will also try to copy and spoof your social
media accounts and point them to a different landing page than yours. You’d
need to be on the lookout for this even after your crowd sale is over. One

move scammers try to do is “extending your crowd sale” and tricking potential
supporters.
• Setup cloud flare on your landing page.
• Your website is a huge vulnerability. Be sure to internally setup two-factor
authentication to make changes to your website and monitor your site
extensively.
• Restrict the ability to change/commit to your page/github/social
media/everything. Have two factor auth setup on everything—even for your
own internal team.
• Turn off the Slack API. Slack isn’t set up for public groups that are raising
funds. There are so many scam attempts involving direct Slackbot messages
which admins can’t turn off and a lot of people fall for—despite all of the
warnings. Even though Slack is the default communication channel, I would
consider using another method of public communication or at least heavily
control the inflow leading up to the token sale.
• Tell people to bookmark your site, don’t click on links.
• Don’t release your wallet public address until the day of the ICO (Release
simultaneously on all of your communication channels at once).
• Remind people NOT to send in their contributions from exchanges like
Coinbase. Needs to be from a wallet they control (e.g. Metamask).
BEFORE THE ICO
• Registration —if you are doing a registration system based ICO, release all
of the details and have people register beforehand.
• Create a tutorial for the registration.
• Release a tutorial video and tutorial blog post on how to participate.
• Create explainer videos to show how to purchase tokens. You need at
least a semi-professional 2–3 minute video with professional voice talent. Set
this to private and don’t release it till the day of the ICO.
• Watch out for all potential hackers.
• Write blog posts about every step of the process.
• Livestream video Q&A
• Community management x100 is ready—you will get an enormous amount
of questions leading up to the ICO.
Day of the ICO
• Community management x1000 is ready. On the day of and the days
leading up to your ICO, the whole team is basically going to need to be on
call 24/7.

• Watch out for all attack vectors—shut down Slack if you need to.
• Remind people to NOT send in their contributions from an exchange, they
need to send it in from a wallet in which they control the private keys.
• Keep sharing the tutorial videos you have created for how to participate.
Limit the sources of truth to one place where people find the information
they need to contribute.
• Live stream at the completion of the ICO.
AFTER THE ICO
After the ICO the top two questions you will get are:
1. Where are my tokens?
2. What exchange are you going to be listed on?
Where are my tokens?
• This is easily the number one question. Create a tutorial video (for all
combinations of wallets) and post it to all of your channels.
• For the people who sent their contribution from an exchange, you’ll need to
respond back to them. Unfortunately their contribution is most likely gone
because they needed to send their contribution from a wallet that they
controlled.
What exchange are you going to be listed on? When?
• Most exchanges have an application page, if you wish to be listed on them,
start building out these relationships early.
• At the same time, various exchanges will list your token for sale regardless
of whether you want to or not. For example: EtherDelta is a peer-to-peer
exchange, where anyone can offer any tokens or currencies for sale
without your permission.
• Write a blog post afterwards.
• Give an update shortly after your ICO is completed. The worst case is to
not communicate at all and look like you took the ICO money and ran, don’t
do this.

RUNNING THE PROJECT
Constant communication—Now that you have a community of 1,000’s of people
(if not more) with their own money invested in your project, you will be
bombarded daily with questions. The blessing and curse of a community that
really cares, is now you have very high expectations to live up to.
Fiscal policy
• Fiscal policy is the buying, spending, and freezing, discounting, and
burning of tokens. If you retain a lot of tokens in the treasury, people will
wonder when those will flood the market. If you pay people in tokens with no
vesting, they can dump them. If you pay in locked-up tokens, you will also
have to supplement those with some cash. All of this requires clear
communication, so people know what’s coming.
• In addition, how the tokens are taxed for the team, advisors, investors, etc.
need to be communicated early on. You need to think about compensation
plans for employees and advisors early on.
• Moreover, if large institutional buyers participated in your pre-sale, there is
a large risk they will dump a large portion of their holdings depending on how
well the ICO goes. If you do allow institutional investors, you need to decide if
you will enforce lockup periods for them or not. Above all, the most important
thing is you need to be transparent on what is going on.
Monetary policy
• Monetary policy is: How many tokens there are, how divisible they are, and
the inflation/deflation policy you have set. Need to be clear and transparent
with the policy you set, and if you ever make any changes to it.
Money management
• Once you rise your funding through an ICO, you’ll need to decide how
much of your contributions cash out into fiat, and how much to stay in
crypto (if any). You should decide this before you complete the ICO.
• You should also start the conversations with banks early on so you don’t
run into issues when converting funds from the token sale to fiat or wiring
funds for company expenses, taxes, etc.

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