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Summary: Initial Exchange Offering is disrupting the crowdfunding landscape. By employing cryptocurrency exchanges to reach investors, entrepreneurs have found a reliable and scalable funding model. However, the marketing strategies used are elementary and there is a lot of room for improvement.
A few months ago, the companies, BitTorrent and Fetch.ai managed to achieve the impossible. The two crowdfunding projects raised their soft caps of $7.4 million and $6 million respectively in a matter of minutes. Not only was this a world record of sorts but it has also reestablished the supremacy of the blockchain-based financing.
Interestingly, BitTorrent and Fetch.ai did not use existing funding models such as ICOs or STOs, but instead a relatively new one known as Initial Exchange Offering (IEO).
An IEO harnesses the reach and popularity of cryptocurrency exchanges to raise capital. By promoting projects to the userbase of exchanges, entrepreneurs can collect funds without any hassle.
Meanwhile, the exchange conducts strict scrutinies of projects to ensure that they are compliant with regulations and protect the interests of investors. However, the standout factor of an IEO project is the marketing mechanism it employs.
In a nutshell, a successful marketing campaign in a traditional sense features four main components:
- Delivery and
First, an individual has to identify a need in the market and address it with a sustainable solution. Next, the idea has to be disseminated to the consumer base in a transparent and effective manner. Third, involves enabling the end-user to access the product easily. Finally, the business should also offer the customers with an avenue to enable a value-based swap of the purchased product.
Interestingly, Initial Exchange Offering accomplishes all of the above-mentioned tasks with flying colors, except the initial product ideation and creation part which is the entrepreneur’s responsibility. Initial Exchange Offering programs give an entrepreneur an unparalleled start by allowing them to access the large and existant user-base of the exchange.
Meanwhile, investors enjoy instant access to token sales as they are hosted on the exchange itself and not on other third-party platforms. Finally, investors do not have to worry about the salability of the tokens as they can be traded on the exchange platform itself.
Presently, many top cryptocurrency exchanges such as Binance, LA Token, IDAX, and others are offering exclusive IEO programs. They have opened exclusive outlets known as “launchpads” to market different projects in this funding category. Here, verified projects are listed on the launchpad platform and users can easily purchase tokens without any hassle. After the sale period is over, the tokens will be shifted to the primary exchange. This allows users to trade or exchange their holdings like any other cryptocurrency.
While there are several advantages to the IEO funding model, it suffers from the following shortcomings:
- No Guarantee of Clearing Scrutiny: When it comes to featuring your project on the launchpad, the exchange has the final say. Most exchanges do not give any guarantees with regards to listing your product. Hence, there is a chance that you may lose your initial deposit in case you fail to comply with any of the exchange’s whims and fancies.
- Promoted for a Limited Timeframe: Even after weathering the regulatory gymnastics organized by the exchange, there is very little assurance that your project will receive the attention it deserves. Most exchanges will promote IEOs for an average of 4-6 weeks. Thereafter, if the entrepreneur wants additional coverage, they are liable to shell out more of the big bucks.
- Very Rudimentary Marketing Services Offered: Moreover, exchanges offer very restricted marketing services that fail to realize the full potential of your product. Most exchanges take the easy way out and only promote your IEO on their platforms while denying projects a social media presence as well as other targetted marketing techniques.
- Possibility of Saturation: At the end of the day, the exchange should be understood as just another business as they do not prioritize their customer’s ambitions over their profits. Hence, there is a high chance that an IEO platform may promote your competitor with the same level of exposure given to your project. This leads to saturation and may prove detrimental to your funding aspirations.
While Initial Exchange Offering is a boon for both entrepreneurs and investors, it suffers from its own hamartia: poor marketing techniques. Fortunately, the shortcomings are easily remedied with the help of third-party service providers.
These providers comprise of companies who have established exclusive partnerships with cryptocurrency exchanges. This gives entrepreneurs access to better deals on IEO services offered by different exchanges. Moreover, these intermediaries also help startups to navigate the various regulations and compliances required by the exchange. This helps startups to list their projects faster.
These partner companies can also help you negotiate a better timeframe with the exchange to promote your product. Additionally, these intermediaries go the extra mile when it comes to marketing.
They ensure that your project is not only promoted on the exchange but on other platforms such as social media and others. They also make use of digital marketing tools like SEO, indexing, and more to give your project a better exposure.
Finally, they use specialized techniques like email networking and newsletters to reach potential investors who are not part of the exchange. Rest assured, your product gets the recognition it deserves.
Let us know what you think about ‘Initial Exchange Offering Marketing‘, in comment section below.
If you want to connect with me for IEO marketing, my details mentioned below in ‘Author Bio’
Patricia Dixon works as a Business Analyst at Blockchain App Factory. She has a masters degree in history but prefers to archive and examine all things digital or technical. During the weekends, you may find Patricia exploring the countryside or reading Japanese manga at the local coffeehouse.