At $6.3 billion, 2018 ICO funding has already overtaken 2017’s total funding in the first quarter. Many ICOs are fully funded prior to going public. It is clear that investor money is readily available, but how do companies access this money without even going public with their ICO?
A Private Sale is a way to connect companies with investors in a more intimate, less structured environment. It is not only a way to raise money privately for blockchain projects, but also to get powerful players on board with the ideas and concepts businesses are based upon, essentially creating champions for the concept in a sale.
Companies are ready for Private Sale, which typically happens prior to the Pre-ICO Sale and the ICO Sale, when their token infrastructure is built, White Paper is written, and other key components are in place. When all of this is squared away, the company is ready to present itself to specific initial investors.
Who Invests in a Private Sale ICO?
Which key investors do companies want to attract to their Private Sale round? Existing (relatively) long standing cryptocurrency investors, or those who have been around since the inception of Bitcoin less than a decade ago, are top candidates. Additionally, professionally managed funds and syndicate groups of privately wealthy individuals privately pooled together are good candidates. While they are typically smaller stakeholders, non-cryptocurrency investors wishing to diversify their portfolio are also frequent participants in Private Sale ICO offerings.
Advantages to the Private Sale ICO
Investors have a unique opportunity within the realm of a Private Sale ICO offering. With direct access to founders and management, they are able to ask tough questions to the people who conceptualized, designed and built the blockchain infrastructure. When they get the answers they are looking for from a project team, they are able to utilize their influence and extensive network within the community to help ensure project success.
This can be a mutually beneficial arrangement, as most companies offer ICO Private Funding investors significant financial incentives to invest during the Private Sale round. These are generally large discounts when purchasing, sometimes up to 50%, or bonuses in percentage later.
The robust incentives available to participants during the Private Sale round are always more appealing than Pre-Sale and the ICO itself. While there is still generally a financial benefit to participating in any round of the ICO, Private Sale offers the most advantage to investors, as the Private Sale round is typically promoted toward investors who can also offer benefits to the ICO/company.
How is Capital Raised Through Private Sale Used?
This depends on what is needed for the blockchain project in ICO. It may replace Pre-Sale or even Public ICO funding. If additional marketing is necessary prior to public ICO offering, the funds may be reinvested into sales and marketing prior to the Pre-Sale and ICO.
Sometimes it is necessary to invest a significant portion of Private Sale Funds toward a specific market. For example, Asia is currently a top investing market for blockchain technology, and with year-round road shows, conferences, and other networking avenues, with enough capital and an appealing concept/product, it is possible to generate tremendous interest within the Asain market, guaranteeing awareness and participation in a public ICO.
Private Sale ICO is a great way to obtain both funding and support for blockchain projects prior to ICO launch, in a win-win environment for both investing parties.