Initial Exchange Offerings (IEO) are the new game in town. After Security Token Offerings started showing up, it was clear that the investment needed to raise crowdfunded capital far outweighs the costs compared to conventional fundraising for all projects that ARE NOT NATIVE to the blockchain.
This means that anything that is NOT a platform or an EXCHANGE, would not have the incentives to raise cash from the blockchain community unless it is outright money laundering. Now, this has slightly changed with the introduction of IEO.
IEOs are a way for companies to list before raising capital, in order to raise capital. Established exchanges such as Binance have enabled anyone to apply to list on their exchange even though they haven’t finished or in some cases, started their public fundraising.
What does this mean?
Exchanges where people already trade digital assets is where investors are, each day and each minute there are trades happening, and adding a token on these exchanges, whether it is a security or a utility token, means it sharply targets the digital assets investors’ market!
Many followed Binance’s example and established their own Launchpads, and hence, the birth of a new fundraising category, IEOs! However, don’t get hyped.
Here are the constraints and benefits from raising capital on established crypto exchanges/
1. Already targeting liquid markets with digital assets investors
2. Being among the few that gets the attention of investors
3. Having an established player guarantee the validity of your project as most exchanges do deep due diligence
4. Sharing part of the IR responsibility with another investors relation’s team
5. You can list part of your offering, let’s say 15% and not 100%, depending on your needs
1. It has limited funding potential. You cannot expect to raise $232 million or more only on one exchange. You have to plan an additional budget for successive funding rounds.
2. There is a limited amount of liquid exchanges in the first place and most slots for IEOs are already allocated. Getting a spot often requires deep pockets.
3. The negotiating power is on the side of the exchange if you don’t have a killer branding. This means that you may also need to give heavy referrals fees.
What are your options?
Regardless of your choice of STOs or ICOs, IEOs are platform-dependent and require more careful networking and lobbying at liquid exchanges. In short, everyone can set up ICO and an STO, but only exchanges can approve an IEOs.
To get an approval for an IEO, you first have to have an STO or ICO ongoing or good connections to an exchange’s owner/management. Most IEOs are STOs/ICOs that have captured the imagination and pockets of exchanges, and perhaps, didn’t even plan an IEO in the first place but it became opportunistically lucrative down the road.
How can TSM Global or other marketing agencies help?
1. Exchanges always want new investors on them. By escrowing an advertising budget we can confirm to exchanges, let’s say of 100000 EUR – 500000 EUR, you will increase your likelihood of obtaining agreement by an exchange. The simple reason we can show them our planned ad strategy that will bring our client investors while it will bring more recurring clients to the exchange as well.
2. We can help you develop a “pull” strategy rather than a push one. In negotiations brands matter and if you have a strong brand with a strong following, you will already capture the imagination of decision-makers at exchanges. This we can do with PR, branding advisory, event organizations, etc.
3. We can apply on your behalf on exchanges that have a peer-review system and are not prone to personal referrals we don’t believe in. We believe in equal opportunities. Additionally, we can help you craft a captivating story that can increase your odds of opening a conversation.
4. We already have a list of exchanges and email databases of potential investors. So, hiring an agency that can increase your power in the fundraising round, is a negotiating chip you can use to get to a launchpad.
With the right budgets, everything is easy. So TSM does not have the magic bullet in most cases. It is you, the potential client who needs to make sure that if you happen to start an ICO or STO, you have at least the initial necessary resources to do it. Bootstrapping without any constant monthly budget to invest, is something an agency is NOT ABLE to help you with.