Crypto fundraising has revolutionised startup financing since 2017, when more than $4 billion was raised worldwide through ICOs. This phenomenon is not new, but its scale is impressive. For example, Ethereum's ICO in 2014, which raised more than $18 million, really propelled the concept.
Crypto ICOs now represent an innovative alternative to traditional funding methods for crypto companies. Indeed, some projects have achieved staggering records, such as Brave, which raised $35 million in just thirty seconds, or EOS, which holds the record with around $4 billion raised. One of the reasons for this popularity is the advantages of raising funds in crypto-currencies: large amounts raised in a short space of time and at low cost.
In this article, we'll explore the different forms of crypto financing (ICO, IDO, IEO, STO), understand why at least one ICO is created every week in the world, and discover the essential steps for successfully raising your first crypto fund. Whether you're a startup looking to finance your innovation or a curious investor, this information will be invaluable to you.
Understanding the basics of crypto fundraising
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To get started in the world of crypto fundraising, it's essential to master the different methods and their specific features. Unlike traditional financing, this field offers unique opportunities for innovative startups.
ICO, IDO, IEO, STO: definitions and differences
Cryptocurrency financing methods have diversified over the years. Initial Coin Offering (ICO)represents the original form, where a company issues tokens that are sold directly to investors. This method, popularised by Ethereum in 2014, allows great freedom but carries significant risks.
Initial DEX Offering (IDO) has emerged as a more democratic alternative. This method uses decentralised exchanges to distribute tokens, offering greater immediate liquidity and fewer barriers to entry for small investors.
Initial Exchange Offering (IEO) is distinguished by its launch on an established exchange platform that verifies projects. This provides an extra layer of security, although fees are generally higher.
And finally.., Security Token Offering (STO) represents the most regulated method, where tokens are considered as financial securities subject to securities laws, offering better legal protection.
Why start-ups are choosing crypto to finance themselves
Crypto companies favour these methods for several decisive reasons. Firstly, they allow access to capital without diluting the control of the founders as traditional investors would require.
In addition, crypto financing offers instant global accessibility. A French start-up can therefore attract investors from all over the world without costly intermediaries.
Speed is also a major advantage - some crypto fundraisers have raised millions in just a few minutes, as Brave proved with its 35 million in just thirty seconds.
Tokens vs shares: what you need to know
Crypto tokens differ fundamentally from traditional shares. While a share represents an ownership stake in the company, a token can have a variety of functions:
- Utility tokens give access to a service or function
- Governance tokens Project development: to vote on the development of the project
- Security tokens represent an underlying asset and are more similar to equities
Unlike shareholders, token holders generally have no legal rights over the company's assets or entitlement to dividends, except in the specific case of STOs. Nevertheless, they often benefit from superior liquidity and ease of international exchange.
Preparing your first cryptocurrency fundraising round
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Preparing to raise crypto funds requires methodological rigour to maximise your chances of success. Here are the basic steps to follow before you get started.
Creating a convincing white paper
The white paper is the cornerstone of your crypto project. This summary document explains your vision, the technology used and the purpose of your tokens. A good white paper generally contains:
- An analysis of the problems you are trying to solve
- A detailed technical description of your solution
- Presenting your team to inspire confidence
- Your roadmap with clearly defined objectives
- Tokenology explaining the distribution and use of tokens
Even without an AMF visa, I strongly recommend that you publish a complete and transparent white paper that clearly explains your project.
Choosing the right blockchain (Ethereum, BNB, Solana, etc.)
Ethereum's ERC-20 protocol remains the most widely used standard to create tokens, which has contributed to the expansion of this network. [1]. However, other blockchains such as BNB and Solana offer interesting alternatives in terms of cost and speed. Your choice should depend on the nature of your project and your technical requirements.
Define the type of token to be issued
This crucial stage determines the very nature of your offer. Your tokens can:
- Provide access to a service (utility tokens)
- Enabling participation in decision-making (governance tokens)
- Represent a real asset (security tokens)
Setting up a secure smart contract
Smart contracts automatically execute your ICO but require impeccable security. We recommend that you Separating smart contracts (one for KYC, another for fundraising) [2] and use multi-signature portfolios. In addition, have your code audited by independent experts to avoid any loopholes that could be exploited.
Building a community around the project
An engaged community is a major asset to the success of your fundraising. Once the fundraising is over, maintain an open dialogue with your investors through regular updates. [3].
If you are interested in our fundraising, please visit the token page. https://token.deravel.com.
Benefits, risks and common mistakes
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In the world of cryptocurrencies, every opportunity comes with its own specific challenges that you need to know how to tackle.
Benefits for crypto start-ups
Start-ups that opt for an ICO benefit from considerable advantages: they can raise funds much more quickly than with traditional financing. Some even manage to raise impressive sums in record time, such as Brave, which raised $35 million in just 30 seconds. [4]. In 2017, the crypto funds raised reached $3 billion [4]demonstrating the effectiveness of this mechanism. Furthermore, ICOs avoid diluting capital, leaving the founders' decision-making power intact. [5].
The risks of volatility and scams
However, these opportunities come with major risks. The extreme volatility of cryptocurrencies can lead to losses of 20% in a matter of days [4]. What's more, almost half of all ICOs end in failure. [5]and some of them are real scams. The most striking example is Modern Tech, which disappeared after raising 660 million dollars. [5].
Mistakes to avoid during an ICO or IDO
To be successful, avoid rushing through your white paper, as 16% of ICOs are issued without any documentation. [4]. In addition, a token structure that excessively favours the development team may be suspect. [6]. And don't forget to have a clear roadmap to reassure investors. [6].
How to assess the viability of a crypto project
To analyse a project, assess its market capitalisation and trading volume. A similar project with a market capitalisation of less than $50 million will have a better margin for growth. [7]. Also check who holds the majority of the chips and why [7]. The team is just as important: beware of projects where the developers remain anonymous. [6].
Regulations and best practices for securing your ICO
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Legal certainty is a major issue for any crypto fundraising. In France and abroad, regulatory frameworks have emerged to protect investors while supporting innovation.
AMF visa: is it necessary?
The approval of the Autorité des Marchés Financiers (AMF), introduced by the PACTE Act, is still required. optional for ICOs in France. However, it confers several considerable advantages. This visa certifies that the token offering has been approved after a thorough review of the white paper [8]. Only fund-raisers that have received this approval can legally canvass the public. [9].
To obtain it, the issuer must:
- Be a legal entity established in France
- Provide a complete and comprehensible information document
- Set up a system for monitoring and safeguarding funds
- Complying with anti-money laundering obligations
However, this approval does not constitute an assessment of the advisability of investing or a verification of the technical elements. [9].
KYC and AML compliance
Compliance with KYC (Know Your Customer) and AML (Anti-Money Laundering) standards has become essential. These procedures make it possible to rigorously identify investors and prevent illicit activities. [10].
To meet these requirements, you need to:
- Check the identity of subscribers
- Actively monitor suspicious transactions
- Maintain continuous control even after the initial check
- Report suspicious activities to the appropriate authorities [11]
Case studies: successful ICOs vs. fraudulent ICOs
The history of ICOs includes some resounding successes, but also some resounding failures. The Tezos affair is a perfect illustration of the risks involved: after collecting 232 millionthe company never put the tokens into circulation, causing their value to fall by 40% [12].
The DAO project also represents a textbook case, where flaws in the smart contract enabled massive hacking. [12]. More recently, AriseBank has been accused of breaching regulations and making false statements. [12].
Tips for inspiring investor confidence
To maximise the credibility of your ICO:
- Opt for total transparency in the distribution of tokens [13]
- Secure tokens issued but not distributed
- Manage their marketing carefully to avoid sudden price movements [13]
- Clearly define the minimum (soft cap) and maximum (hard cap) thresholds for your exercise [13]
- Have your code audited by independent experts
- Build an identifiable team with verifiable skills [14]
Conclusion
Ultimately, cryptocurrency fundraising offers extraordinary opportunities for innovative startups. Although this field is relatively recent, its impact on the entrepreneurial ecosystem remains undeniable. The various methods (ICO, IDO, IEO, STO) now allow promising projects to access global funding without the traditional constraints. However, this freedom comes with significant responsibilities.
Careful preparation is undoubtedly the key to success. A convincing white paper, a well thought-out tokenomie and a credible team are the solid foundations of any successful fundraising. What's more, the right choice of blockchain and token will greatly determine your ability to attract the right investors.
Yet some projects fail despite these precautions. The volatility inherent in the cryptocurrency market and the risk of scams present considerable challenges. However, total transparency and compliance with regulations, particularly KYC and AML standards, considerably enhance the credibility of your project.
If you are interested in our fundraising, please visit the token page. https://token.deravel.com or contact us so that we can help you raise funds in crypto tokens.
The statistics clearly show that crypto fundraising can generate spectacular results, as illustrated by the examples of Brave and EOS mentioned above. However, these successes are rarely the result of chance, but rather of a meticulously devised strategy. So before you launch, make an objective assessment of the viability of your project, build a committed community and prepare for regulatory challenges.
Cryptocurrency financing will undoubtedly continue to evolve in the years to come. Entrepreneurs who know how to navigate between innovation, compliance and community engagement will find this a promising avenue for turning their ideas into concrete, sustainable realities.
FAQs
Q1. What is an ICO and how does it differ from other crypto fundraising methods? An ICO (Initial Coin Offering) is a financing method where a company issues tokens that are sold directly to investors. Unlike an IDO or IEO, it offers greater freedom but also involves greater risk. STOs, on the other hand, are more regulated and considered as financial securities.
Q2. What are the main benefits of raising funds in cryptocurrency for a startup? Crypto fundraising provides rapid access to large amounts of capital, without diluting the control of the founders. They offer instant global accessibility and can attract investors from all over the world without costly intermediaries.
Q3. How can I effectively prepare a white paper for an ICO? A good white paper should include an analysis of the problems to be solved, a detailed technical description of the solution, a presentation of the team, a clear roadmap and the tokenism. Transparency and completeness are essential to inspire confidence in potential investors.
Q4. What are the major risks associated with cryptocurrency fundraising? The main risks include the extreme volatility of cryptocurrencies, which can lead to significant losses, and the risk of scams. In addition, almost one in two ICOs ends in failure. It is crucial to carefully assess the viability of a project before investing.
Q5. Is an AMF visa required to launch an ICO in France? No, approval from the Autorité des Marchés Financiers is not compulsory for ICOs in France. However, it does confer considerable advantages, including the possibility of legal canvassing. It certifies that the offering of tokens has been approved after a thorough examination of the white paper.
References
[1] – https://www.lafinancepourtous.com/decryptages/finance-et-societe/nouvelles-economies/crypto-actifs/initial-coin-offerings-icos/financement-par-initial-coin-offering/
[2] – https://www.journaldunet.com/fintech/1206949-comment-assurer-la-securite-des-ico/
[3] – https://rue.ee/fr/blog/fund-raise-for-crypto-token/
[4] – https://www.cegos.fr/ressources/mag/fonction-financiere/finance/comprendre-les-levees-de-fonds-par-ico
[5] – https://www.lafinancepourtous.com/decryptages/finance-et-societe/nouvelles-economies/crypto-actifs/initial-coin-offerings-icos/avantages-et-risques-des-initial-coin-offerings/
[6] – https://www.zdnet.fr/pratique/comment-eviter-les-escroquerie-a-l-ico-39861300.htm
[7] – https://feel-mining.com/blog/cahier-charges-projet-crypto-viable/
[8] – https://cryptoast.fr/ico-initial-coin-offering-cryptomonnaie/
[9] – https://www.amf-france.org/fr/actualites-publications/communiques/communiques-de-lamf/lamf-delivre-son-premier-visa-sur-une-offre-au-public-de-jetons-ico
[10] – https://www.complycube.com/fr/conformite-crypto-aml-securisation-du-secteur/
[11] – https://kriptomat.io/fr/finances-et-investissements/conformite-aux-regles-kyc-et-aml-lors-de-lachat-de-crypto-monnaies-ce-quil-faut-savoir/
[12] – https://finyear.com/ico-gare-a-la-fraude_a39455.html
[13] – https://www.amf-france.org/sites/institutionnel/files/contenu_simple/lettre_ou_cahier/risques_tendances/ICO francaises un nouveau mode de financement.pdf
[14] – https://www.amf-france.org/fr/actualites-publications/communiques/communiques-de-lamf/lamf-publie-la-synthese-des-reponses-apportees-sa-consultation-publique-sur-les-initial-coin
