How to do an ICO for founders working with blockchain

Disclaimer: My opinion is not legal advice. I am not a lawyer. This in no way should be considered legal advice, and my views do not represent the views of my employer, investors, or partners. Moreover, nothing written here should be construed as investment advice either.

Over the last two weeks, I have had over 10 companies directly contact me to help them launch an ICO. Typically, I ask, “When do you want to launch?” The most ridiculous answer I’ve received was “next week.” I’m a pretty patient person, especially with young entrepreneurs, so I demurred slightly and asked what their technology was and if they had a whitepaper. This is typically where the founder gets a little lost.

I never really anticipated the time when startups themselves, and not incumbents, would have to go through a “digital transformation.” It was just a few years ago that a “tech” startup was good enough to be considered avant garde and pioneering. All of a sudden, everyone got crypto fever and learned about some of the unique properties of decentralized applications and blockchain technology, and it seems that everyone wants to do an ICO now.

I admit that three years ago, I was the guy pestering some of the luminaries of the field in the same way. They were all very helpful, patient, and encouraging, so I feel it necessary to do the same to founders and enterprises that are presently coming to their blockchain awakening.

I’m going to outline below a few things you must consider when approaching what is commonly known as an ICO and how to go about preparing yourself for long-term viability with a project.

I’ve listed some questions that you should prepare to answer, but I will not be able to help you answer all of them here. The list is a small portion (about 5 percent) of the questions that you will need to ask yourself, but this post will give you the foundation and help you assess your readiness for the process.

1. Is your technology really a platform?
2. What will your platform add to the crypto/blockchain community that isn’t being served yet?
3. Does your technology need its own token?
4. How will you offer your token?  Voucher, direct token distribution, or convertible note?
5. How will you issue and accept contributions: bitcoin, ethereum, or both?
6. How big is your network? Is it dense and engaged or sparse and quiet?

Stop calling it an ICO

It’s like someone said, “Hey, it’s like an IPO. So let’s change the public part to coin, and we’re good. It’s a coin, not a security offering.”

We should be in the clear now.

It’s like putting up a sign on your forehead that says, “Hey, please investigate me SEC.”

From a purely utilitarian perspective, what should power your application are more like chips in a casino or donations on Kickstarter.

A more appropriate nomenclature for this emerging process is “Token Generating Event” or “Token Donation.” Under certain jurisdictions, this is a specific and distinct definition aligned with the proper structures. It makes what you are doing exactly with your proposed endeavor clear to the authorities.

KYC and AML for pseudonymous tokens

What is the law in your jurisdiction?

Get a lawyer

What jurisdiction and why you should have a global perspective

Technical and business trust

Social trust and network effects