Crowdfunding market has been disrupting the finance industry where people from across the world can participate in the early stages of startups that were previously served only for ultra-wealthy. Initial Coin Offerings (ICO), Token Sales, have become the next step for crowdfunding campaigns. Previously Initial Coin Offerings were meant only for issuing a new blockchain platform like Ethereum, Monero, Litecoin. Today more and more startups are seeing an ICO as a great way to collect seed round or series A funding to their startups, where they can give away rewards or dividends to the backers by issuing a Security Token. Or by issuing an Utility Token that is backed by something with stated value and can be used to purchase some goods or services.
We believe that crowdfunding landscape as we know is currently taking the next step in its evolution and it’s becoming decentralized. What does it mean? Previously the funding industry for startups was disrupted by companies like Kickstarter or Indiegogo, but still using those platforms you are more dependent on dancing by their beat.
What blockchain and starting an ICO campaign allow us as, entrepreneurs, to do is to be our own Kickstarter campaign where we can use the whole global community to fund our ideas and businesses to get it to the next level. That on another hand creates questions that hundreds of ICO founders are pondering on, how are they going to build their crowdfunding platform?
Today we are going to talk about the infrastructure that supports the crowdsale. The main question that arises again and again is: should you hire a team that will build it for you and kind of re-invent the whole wheel or use Customizable SAAs solution for it that has already been tested and you can actually focus on building the real product that you are going to collect funds for. Let’s find out.
What do you need to build a successful ICO platform?
When we are talking about crowdsale we need to first think about what’s the timeline for the project. Usually, most of the funding cycles average from 3 to 6 months, where companies have collected all the necessary funds to complete their goal.
What were the functions that the most successful ICO platforms have?
Are you going to issue a Utility Token, Security Token or Equity Token?
If you want to raise money via the ICO, arguably the easiest way to go forward is by using Ethereum blockchain. This is a platform that enables you to issue an ERC token which is easily tradable on exchanges because it implements common functionalities.
This is the part where most crowdfunding campaigns win or lose their investors. After going through a huge marketing campaign where projects have set up everything perfectly with A/B testing, re-targeted ads, and full marketing package, it all comes down to the platform where an investor is going to make their investment. The platform is meant to convey confidence and to store investors’ data safely. Investors need to know that their funds and data are secured.
After reviewing over 300 ICOs this is the common place where most of the crowdfunding campaign platforms fail. They are full of security holes, that can be breached easily. Unfortunately, this is one of the aspects that gets overlooked. When you are running an ICO you need to be sure that the security is as bulletproof as possible, and it goes beyond the crowdsale platform. This means having a third party security audit services to review the platform & smart contract.
Anti-money laundering(AML) and Know your Customer(KYC) regulations
There is a white elephant in a room that no-one wants to talk about, and that is when you want to open up a bank account for your ICO project, at the least we can say it’s a huge headache.
The reason for that is if startups are meeting with banks to get their account opened, they will get series of questions about the origin of their funds. And when they are asked about their KYC and AML process, banks usually get an answer that doesn’t comply with their regulations.
If the verification process is fulfilled in-house, the probability is high that it’s performed by a small team with no previous experience or training, therefore the possibility of faked identities to be associated with the platform is higher.
That said, if you would use a KYC/AML service that other banks already use, it will make it easier for an ICO funded startup to get a bank account.
Setting up payment gateway that is secure takes some time and dedication. This is a place where you need to make sure that everything works perfectly from accepting funds, storing funds to releasing tokens to your investors.
Most successful ICOs have had their crowdsale platform integrated with a marketing system that makes it easy for their backers to share the project.
Hidden costs of developing an ICO platform
There are hidden costs associated with building your crowdsale platform: development time, correct market timing (Bitcoin, Ethereum, and other tokens’ value), money, gray hair. There is usually large pressure on a timeline because everything needs to be done yesterday, and that mindset naturally causes errors. When setting up an ICO you will probably outsource some functions from your pipeline, and figure out which parts are working and which are not. That said, it will be cheaper and less time consuming to use a platform that has all the functions in it, which are already tested and other ICOs are successfully using it.