Effective ICO Whitepapers
Initial Coin Offering (ICO) is certainly exciting and rife with opportunities. Finally…there is an easy, far-reaching means of getting your start-up business funded.
As groundbreaking as your new brand or service might be, there is one thing your fledgeling business will have in common with the myriad of other entrepreneurs who are venturing into the world of ICO; everyone needs a whitepaper.
So, what exactly is a whitepaper? Simply put, it's a document that outlines your business in a language that makes it easy for investors to understand your proposition. Since we are still in the dawn of ICO, there is no verifiable standard, universal structure, or best practice to refer to when composing a whitepaper.
However, you can’t go wrong with sticking to some basic principles. Below is a list of questions to answer that should be standard on any whitepaper you’re considering.
Every whitepaper should answer each of the following questions:
- What basic problem is my ICO solving?
- Who is on my team to execute the plan?
- What makes my product different (USP) and what is the competitive landscape?
- Is there a product roadmap and how will you bring it to market?
- What is blockchain?
- How do the tokens work with the product and how are they implemented?
- How will the funds be used?
- How will tokens be distributed, and when will they be offered on the exchange?
What basic problem is my ICO solving?
Most successful businesses solve a common problem at its core. With the exception of, say, pet rocks or diet water, most successful products address everyday pain points. Whether it’s B2B or B2C, you should be offering a solution to people. Outline how you aim to solve people’s problem in a simple yet impactful way, and you have taken a giant leap towards a successful ICO launch.
Who is on my team to execute the plan?
The team section is the most important section of any whitepaper. Period. If you are offering a new suite of software but the main stakeholders on your team don’t appear to have any technical expertise whatsoever, there is little appeal for someone to opt into your ICO over another entrepreneur whose team has bags of verifiable experience in their industry. If you don’t have a high profile thought-leader in your chosen field, get one.
What's my product differential (USP)/competitive landscape?
Unless your product or brand is completely revolutionary (congrats if it is), you are going to need to express why your offering is better or different than any others out there. There is no shame in enhancing an existing idea, just make sure you relay what your improvement means in your white paper. Remember, a ‘me-too’ brand has room in a crowded marketplace if you offer the same product at a better value than your competitor. Emphasise it in writing.
In this section, you should also give an overview of the competitive landscape in your field. Include their strengths, weaknesses and pricing structure along with any relevant information worth mentioning. Are they using antiquated technology? Is their CEO ready to retire? Have they been penalised for compliance or regulatory issues? Showing your extensive knowledge of the industry shows you have done your research.
Is there a product roadmap?
If you fail to plan, plan to fail. Without a detailed and structured blueprint of what the next 12-18 months looks like, the likelihood of a successful ICO is slim. Not including a solid roadmap will make investors nervous. Put them at ease with a well-structured timeline of how you will roll out your product or service. And if you don’t have a specific beta launch date included, don’t even bother wasting your time. It’s the first thing a serious ICO investor will look for. Use graphs, charts and images…visuals are a great way to share your story.
Another important piece of planning will come in the form of your marketing strategy. It is naive to think that word-of-mouth will be sufficient to get your business off the ground. A solid base for all marketing should include digital advertising, which is cost effective, target-based and can be measured with the use of tracking links. Social media, paid search and search engine optimisation should be part of every marketing plan. Display media (banners), print, television and radio can be layered in for additional brand recognition. If you don’t know how to market your new business, find a good marketing business that can get you started.
What is blockchain?
The following is a simple breakdown of blockchain technology, and it should be the cornerstone of any compelling ICO whitepaper.
Despite being less than a decade old, blockchain technology has completely disrupted various industries. Finance, crowdfunding, data management, distributed computation are just a few of the areas being revolutionised by this technology.
Blockchain can increase efficiency, transparency and user empowerment. One example of the flexibility of its application is ‘tokenization’ – the representation of assets by Blockchain-based tokens. Probably the most famous of all blockchain-based cryptocurrency is Bitcoin. However, blockchain can be used on any asset, including cars, houses, commodities and even artwork. Any of these can be represented by digital tokens on a Blockchain.
Tokenization of an asset offers several advantages:
- Blockchain is immutable, meaning that if something has been recorded on it, the record will stay there forever, barring some extraordinary circumstances. That, in turn, means that if a user has bought a token of an asset, they will own it for an indefinite amount of time (until they decide to sell it), and they will always have proof of ownership in the form of a record on the Blockchain.
- Blockchain is decentralised, so it doesn’t have a single point of authority, nor any single point of failure. Tokenization results in increased security for owners’ assets. Investment records cannot be lost or damaged via a targeted attack. Additionally, the lack of third-party intermediaries leads to decreased transaction costs, enabling cheaper asset trading.
- Blockchain is permissionless, which means that a user can trade their tokens with any other user without asking for anyone’s permission. Assets cannot be frozen, arrested or involuntarily manipulated in any other way. Blockchain ensures that the owner of a token has complete, exclusive control over it, and, by extension, over its underlying asset.
How will the tokens work with the product and how are they implemented?
This is where the rubber meets the road. Investors will need to understand what the value of their coins are expected to be, and how the exchange will happen. Remember, ICO and cryptocurrencies are still a new technology concept to most people, so they need reassurance that you know what you are doing.
How will the funds be used?
Even though ICO’s are fairly new, there are a few common schemes that are used in ICO-land that raise giant red flags for investors. Organisations that pledge large portions of their raise to create an industry forum, a non-profit arm, or an event series to benefit the industry are dubious ventures for a start-up. This may seem like a way for the team to spend (/waste) the raised funds (or possibly line someone else’s pockets).
When will the token be listed on an exchange?
Any timeframe that exceeds 30-60 days is simply unacceptable, and it represents a risk that the team could be planning to manipulate the price of the token in advance of the chance to purchase more/sell/generally trade.
Finally, any whitepaper worth its salt will include an appendices section where you cover any disclaimers, legal considerations, compliance or regulatory guidelines, acknowledgements and supporting material. Depending on your industry, this final section may be far lengthier than the rest of the content. However, it is best to cover all bases and include whatever is needed to cover yourself legally.
Need help? ActiveWin Media has a department dedicated to composing ICO whitepapers that tick all of these boxes. Since this document is the most important factor in a successful ICO funding, don’t leave it to chance. Get in touch with our SEO and content teams to ensure you have a strong whitepaper and landing page to direct your potential funders too.