Crowdsales

What are Crowdsales?

Crowdsales are the new way to finance startups. Based on blockchain technology, startups offer crypto assets (coins or tokens) in the new company to investors. Crypto coins are custom-built whereas tokens are built on the code from existing platforms like Ethereum.

Once the startup successfully matures, investors go on to receive dividends from the company, like traditional shares. Alternately, hey could trade these coins on public exchanges for established cryptocurrencies like Bitcoin once the startup reaches the initial public offering stage, the ICO (initial coin offering).

Startups may offer tiered crowdsale options, such as early adopter rewards where angel investors receive more coins than later investors. They may also offer bounties to investors-turned-advocates or to those who agree to provide spec work.

Why Is It Important to Have Crowdsales?

As an application of blockchain technology, crowdsales are generally unregulated, allowing investments to reach startups faster and without fees. Additionally, although investors may hold onto their coins or tokens to receive dividends as if they enjoyed shares in the company, they do not have enjoy the same control over company management. Startups then enjoy a level of managerial freedom that companies previously did not have.

Finally, in addition to providing much-needed capital to startups, crowdsales provide crucial measures of the level of interest in a new project.

What Internal Data Should I Have for Good Crowdsales?

Firstly and most importantly, startups must have viable business plans. Only once the project and company direction have been developed properly should a crowdsale be developed.

If an experienced team runs the startup, they can develop a crypto currency by themselves, for a minimal price. Hiring a development team, on the other hand, can quickly become pricey, especially as more and more people become interested in the technology.

Naturally, startups should track feedback from investors throughout the pre-sale and sales tracks.

What External Data Is Essential for Good Crowdsales?

In addition to creditworthiness, both startups and investors must consider market data: Does the new project fill a real niche in the market? Does it have potential to be successful among its target demographic? What lessons can either side learn from other crowdsales? And so on.

Once startups complete this step, they can move on to the demographic or firmographic data necessary to find likely investors.

Finally, while it may go without saying, startups should also know some code, whether they are developing their own crypto coins or using another platform to offer company tokens.

What External Data May Prove Useful for Good Crowdsales?

Similar to other investment projects, startups may use demographic data, company data, investment platforms, or any other networking tools to find investors. They do not have to rely on blockchain-focused resources.

What Are the Main Challenges of This Use Case?

In the absence of real regulation, many investors feel reluctant to risk their funds on what may turn out to be a scam. To resolve this, they must take special care with the contracts and may even require that startups use escrow accounts.

Interesting Case Studies and Blogs to Look Into

Hashnode: The 2018 guide to writing (and testing) real world crowdsale contracts
Ethereum: ERC-20 TOKEN STANDARD

Tangible Examples of Impact

About $1.4-million of solar cells were sold through the crowdsale, which were purchased by more than 1 700 individuals across 98 countries.

By buying solar cells to power Nhimbe, Sun Exchange members will earn a monthly income stream for 20 years.

Engineering News: Sun Exchange completes $1.4m crowdsale for agricultural solar project