Today we will look at some strategies for raising additional investment funds before the main round of an IEO. Toward the end of the article, you’ll find a step-by-step practical guide on how to do a Pre-IEO.
Initial Exchange Offerings have become the predominant method of decentralized crowdfunding in 2019. However, the average amount raised per IEO has been falling, and many in the crypto world have noticed it.
In previous articles we sorted out How to launch your IEOand talked about Innovative Strategies to Launch an IEO, even touching on the topic of Pre-IEOs briefly in the latter. Now we want to consider it in more detail, discussing why it often makes sense to pursue additional sources of investment to complement an IEO and how a Pre-IEO can help with that.
What is a Pre-IEO?
A couple of months ago, a Pre-IEO was most often understood as the process of preparing a project for the main IEO round — working on a marketing campaign, creating excitement and spreading awareness. However, during this process, some projects received offers to buy their tokens in advance, but at a lower price than directly at IEO itself.
So what is the essence of a Pre-IEO? The main idea is to take the IEO itself as an information base, and to build an additional fundraising campaign around it as a sort of private ICO. What exactly is needed for this, we will understand further down in the article. First, let’s understand why investors might be interested in a Pre-ICO to begin with.
Why investors are interested in Pre-IEOs
The main problem associated with ICOs was that many projects either ended up on very small exchanges without liquidity, or weren’t listed on exchanges at all.
Early investors bought tokens with huge bonuses compared to the price of ICO, but then they weren’t able to use those tokens in an application nor to trade them and get back some returns.
When a project holds an IEO instead of ICO, it always means that it will be listed on at least one exchange, but often even more than one. So for an investor who decides whether or not to buy tokens before the IEO round itself, they can be confident that they won’t be stuck holding an illiquid token and losing all of their money.
At the same time, having the guarantee of future liquidity means that the bigger the bonus compared to the IEO price, the more money is on the table here and now. As a result, we commonly see a surge in sales of tokens from our customers in the period before the main round of IEO.
How to launch Pre-IEO
1. Negotiate with an exchange
As it became clear from the article, the main driving force behind the private sales round is the IEO itself. Therefore, an agreement with the exchange is important. Depending on the project budget (yes, all exchanges charge an upfront fee for launching IEO), the project chooses an exchange. Often, consultants and advisors who monitor the current market situation have access to exclusive offers from exchanges.
Of course, the bigger chosen exchange, the better — but even with medium-sized exchanges, this strategy works.
2. Marketing and PR
In general, this should be a combined campaign targeting both the IEO and Pre-IEO. There must be content on social media platforms, activity on the Telegram chat of the project, efforts to get new participants (we have a special package for this called Community Engagement), PR should be widely published, and so on.
You can find more details about marketing and PR campaigns for IEOs in the Hacker Noon article I wrote here.
3. Contacting Investors
At this stage, the project begins to look for investors and make them offers. One of the easiest and most effective ways to do this is to make a list of crypto funds and contact them. Technically, the project does not need its own IEO dashboard — large transactions can be carried out directly through contracts (mutual agreements).
Another way to attract investment in Pre-IEO is ICO Pools. This kind of community was formed during the ICO hype, when many people were gathering together, most often in open and closed chat rooms in Telegram. The pool organizer negotiated with the projects about bonuses and all participants sent ETH, so that projects were collecting a solid amount of investment funds in return for good bonuses.
Many pools are now investing in Pre-IEOs and this is a good chance for projects to negotiate with them before the start of IEO.
Technically, everything usually happens through pool’s own smart contract. Participants send investments to it, which are then sent to the project. In return, the project sends tokens to the same contract, which are automatically distributed among the pool members in proportion to each respective investment.
Several approaches are possible to attract private investors — from the classic search through advertising, to the more effort-intensive method of searching for them in chat rooms and groups. Our experience shows that individuals who want to invest in Pre-IEOs of strong projects tend to appear after several quality publications in the media.
Sales with private investors can vary significantly from a technical standpoint. Some projects make dashboards implemented on their websites (like those that were on the ICO), while others work directly on developing a contract with investors.
4. Creating hype around the IEO
Of course, you shouldn’t forget about the main round(s) of the IEO either — it’s important to keep targeting it in your marketing and PR campaigns. Moreover, receiving lots of early investments and rapidly close in on your hard cap is the best advertisement and hype possible for any IEO.
Pre-IEO Main Strategies
It probably goes without saying, but any token sale begins with the preparation of the basics, including tokenomics. All rounds and bonuses should be taken into account there. In this regard, there are quite a lot of strategies, but I will quickly mention a few basic things.
Of course, for a Pre-IEO, there should be higher bonuses than for the IEO itself. This is one of the factors that will attract extra potential investors.
Minimum Investment Amount
With a bigger bonus, we advise you to have a bigger minimum investment amount on the Pre-IEO as well. A progressive model is possible in which the higher the investment amount is, the bigger the bonus it receives.
Lock-Up and Vesting
Tokens sold in a Pre-IEO may be frozen for a so-called lock-up period — (the period specified in the smart contract for which part of the tokens cannot be forwarded or sold). This is necessary so that when a project gets listed at the exchange, early investors can’t immediately sell all their tokens with bonuses, bringing down the token price. But at the same time, it’s not necessary to tighten too strongly by doing a lock-up for many months.
Vesting is also possible — to explain it simply, you do not send the entire volume of tokens right away, but gradually, for example, at 20% per month for 5 months. But again, the conditions should be both attractive and fair for investors.
The IEO market is changing and some exchanges are starting to raise less for projects. To the contrary, some projects have managed to generate loads of extra interest even as IEO difficult has increased. Nevertheless, successful cases show that there is still plenty of interest and money in the market. To access it, you just need to work on your strategy.
If you have any questions or if you need help with your IEO — you can write me inTelegram (@baloyan)or LinkedIn .