Over the course of the past several months we have received dozens (close to hundreds) of requests like:
“Should I choose the IEO or the ICO route?”
“Will it be cheaper to run an IEO or an STO?”
“Will an IEO launchpad take care of costs associated with the launch of my token?”
IEO stands for Initial Exchange Offering, which says it all right there in the name, your token offering event will be hosted by an exchange.
This means that building, auditing, and securing your tech infrastructure for a crowdfunding event, and then distributing your tokens, is out of your list of concerns. As an added bonus your token will automatically be listed on the same exchange.
The other added benefits include:
Increased credibility — your project will take advantage of the reputation the exchange has built with their past projects
Decreased risks for your contributors — the token will automatically be tradable after the successful crowdfunding event.
Frankly speaking, it sounds like an IEO is the best way to run a crowdfunding campaign, from the perspective of both project founders and potential contributors — so why doesn’t everybody do it?
I. Listing Process
Not every company can pass the scrupulous screening process designed by the exchange launchpads. This process is done to provide the best possible value for the crypto community, protect them against fraud, comply with legal requirements of local jurisdictions, and of course to make money. There is no clear finite set of requirements, since every exchange has its own ways of making sure your project is worthy to be there. We have reviewed the 15 most popular exchanges and analyzed their listing process. Here are some suggestions on what launchpads are looking for.
- Referrals. It will help if you are referred by their team members or somebody they have already worked with.
- Mature projects. If you are raising funds before having a working demo or an MVP (fully working products will be best), you most likely won’t hear from the exchange.
- Size of community. A large pool of supporters or customers is a must.
- Momentum. Projects that have already attracted investments or at least angel money will be in priority.
- Legal compliance. Your project will need to have a proper registration and company structure, and comply with local laws. This will be verified.
- Strong team. Ideally at least some of your team members have to have a track record of successful past projects in the crypto or fintech niche.
- Funding to pay for launchpad services.
Services provided by exchange launchpads are not free. Quotes can reach up to 30 BTC (price varies based on BTC value) and oftentimes there is a success fee of up to 30%.
This means that launchpad exchanges can really work with well-funded startups or established companies with a stable income. If you are bootstrapping, then an IEO is out of reach for you. An ICO will also require funding — but with certain knowledge and a hardworking team these costs can be drastically reduced.
By committing to fund-raise through the framework of an IEO you lose the flexibility that is granted by an ICO developer to tailor your project needs. Your crowdfunding event will be run in accordance with the rules and regulations of the exchange, and their screening procedures for contributors, which may turn away a certain percentage of potential project backers.
A great point was brought up by Jeff Dorman, a partner at ARCA , a Los Angeles-based investment management firm. The point of crypto projects powered by blockchain is the decentralization philosophy. Having an intermediary negates it all.
“The irony of course is that this is directly at odds with the decentralized ethos embedded in crypto, but this has been conveniently ignored as long as it’s working.”
In terms of reach, IEOs are similar to IPOs in the crypto world. Startups cannot go public (run IPOs), only established, profitable companies can. Luckily, fundraising options are available for companies of all stages of development.
At BigBreak101 we can help companies — who we believe qualify to run an IEO — get a referral to one of the exchange launchpads. We will also help early stage companies get the necessary media attention and press appearances to facilitate growth, and subsequently, crowdfunding success.