BLOCKCHAIN, Features

No ads ICOs. Leaders’ best practices

ICO hype which marked 2017 is seemingly approaching its end. In September 2017 companies raised at ICOs approximately $850 million (the record of the year), in October $600 million, in November about $120 million and in December under $30 million. These days, some companies distribute their cryptotokens absolutely free, just to attract public attention. Even NEM (the ninth by capitalization), developer of a banking blockchain platform, does that. Still, organizers of the largest ICOs, including ICOs of Russian businesses, managed to raise dozens and hundreds of millions of dollars without spending much on advertizing their projects but just telling reporters about their plans.

RIAN | Vladimir Trefilov

Success story

But apart from hype, “sizeable capital can only be raised by companies which do something others have not done”, Sergei Sergienko, Chronobank.io’s CEO, believes.

He cites SingularityNET’s example. It is a decentralized blockchain platform for developing Artificial Intelligence and creator of the most advanced humanoid robot Sophia. At its pre-ICO SingularityNET got $150 million investments, even though the anticipated amount was only $36 million. The matter is, the platform itself is already used, according to the company, by over 50 entities including Cisco and Huawei. So SingularityNET limited its activities on ICO promotion by presentations at international conferences on AI and meetings with reporters. Sophia the Robot became a world celebrity due to the statements that in the future robots may destroy humans. Even though Sophia’s creators have denied a possibility of such an AI development scenario, after these statements Sophia has been drawing close attention of media and even politicians.

SEC, ICO’s best friend

Filecoin, a decentralized storage network, raised $262 million – and $252 million of those within just first half an hour after the ICO started. It was the largest ICO in 2017 due to, among other things, participation of institutional investors from the US. It was also the first regulated ICO. The ICO took place at CoinList, a platform operating under the regulations of the US Securities and Exchange Commission (SEC). It was therefore SEC and not a broad advertizing that contributed to the success of Filecoin.

According to Coinschedule, in 2017 the biggest money was invested by cryptoinvestors in the projects of building cryptoeconomy infrastructure totaling 34.5% of the aggregate investments which at the year-end reached about $3.7 billion. Along with Filecoin and SingularityNET, these projects included Tezos ($232 million) which boosts the security of the most sensitive or financially weighted smart contracts, EOS ($185 million) powerful infrastructure for decentralized applications, Bancor ($153 million) ERC20 standard cryptotokens converter, etc.

“Still, in cryptoeconomy large investments do not guarantee success of a project”, Alexey Voronin, founder of Smart Valley, says. “Ethereum blockchain platform allowing to create any decentralized applications, raised merely $18.4 million during a 2014 crowdfunding effort, whereas today Ethereum, a cryptocurrency created at that platform, is the second in capitalization, immediately following Bitcoin”.

Ethereum succeeded by attracting major investors such as Peter Thiel of PayPal. The protocols of Ethereum are currently used by dozens of applications (Backfeed, FreeMyVunk, etc.) and for developing Masterchain blockchain software. Many business people, such as Sergey Gorkov, Bank for Development and Foreign Economic Affairs (Vnesheconombank) Chairman, treasure friendship with Vitalik Buterin, a co-founder of Ethereum Foundation.

ICO atop the news

At its ICO, Russian Mining Company (RMC) owned by internet ombudsman Dmitry Marinichev and businessmen Sergei Bobylev and Boris Zyryanov raised $43.2 million. RMC raised funds to launch production of cryptocurrencies mining equipment branded Sunrise, and of a new miner named Multiclet. This is a record amount raised at ICOs in Russia.

“The entire campaign of selling cryptotokens was arranged without any bounty – when discounts may reach half of a token’s face value, – advertizing and respected advisors”, Sergei Bobylev says.

In social media where ICOs are usually promoted, there was no advertizing of RMC’s ICO. Elyna Sidorenko, the head of the work group on cryptocurrency circulation risks assessment at the Russian Federation State Duma, was the only invited expert. But the interest to that ICO was fueled by the general excitement of media and investors about the new business, mining of cryptocurrencies. While most of miners in Russia were cautious about even identifying themselves, RMC’s mining rig set at the site of a former automotive AZLK plant in Moscow, was in the news of all major Russian TV channels and even of CNN. Concurrently with that, even before RMC’s pre-sale, the value of Bitcoin skyrocketed. All that well substituted the marketing efforts for the ICO.

“Nevertheless, over the last few months ICO costs have substantially grown due to the general hype situation. For an ICO now marketing campaign is about $1 million and legal support is over $100 thousand”, Artem Tolkachev, director of legal services for technology projects at Deloitte Russia, notes.

“The situation is complicated by two factors. First, regulations in China, US and South Korea evolve fast. Hence copying and pasting a legal replica of a previously successful project may become a total disappointment. Second, the most recent precedents evidence that regulators -SEC in the first instance – thoroughly analyze entire ICO promotion campaigns, what is promised to investors, in what countries and in what languages it is promoted”, Professor Artem Genkin, CEO of Consulting & Analytical Union, believes.

Obtaining resources for small Mayak satellite is an example of a successful crowdfunding when funds were raised through news and posts in social media. The team of its developers (engineering students at Moscow Polytechnic University) raised some RUR 2 million ($30K) to fund Mayak, even though they were neither Roscosmos State Space Corporation nor a large private rocket manufacturer like Elon Musk’s Space Х.

By Natalia Kuznetsova

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