An initial coin offering (“ICO”) is a type of capital-raising method in the cryptocurrency and blockchain technology. ICO is an unregulated approach to crowdsourcing funds from retail investors. It requires a deep knowledge of technology, finance, and the law. ICOs opened up the crypto capital market to a more diverse investor base which was previously limited to sophisticated investors.
The most important tool for blockchain and cryptocurrency ICOs is the white paper, which is the most important marketing document, inviting people to invest in their crypto tokens.
White Paper
White paper is authoritative reports that inform investors in short to understand complex issues, clear doubts and make right decision, describe problems and solutions. It promotes and highlights the features of solutions, products or services. White paper is sales and marketing document used to entice or persuade potential investors to learn more about or purchase a particular product, service, technology or methodology. A white paper is meant to persuade and present factual and technical proof that the product is superior to solving a particular business problem. Therefore, drafting a white paper is a critical and one of the important steps in an ICO.
Following are the critical and arguably the decisive points in a white paper:
1. Idea & Introduction
A white paper should clearly depict the idea of the product as to its purpose, solution of problem and target audience. Introduction in a whitepaper provides general information about the product. It contains vision of the product. To make it more attractive, it is important to give a brief about ICO and crypto market in general and discuss about its benefit and the way this product is making ecosystem better.
2. Abstract
The abstract in a white paper gives a good summary of the product and draw attention of the audience by quickly covering the essentials of the product like platform, currency, plan and benefits of the product. It provides the brief that investors will find out by reading the white paper.
3. Problem statement, solutions and target audience
Problem statement and its solution is very important in a white paper. A white paper should explain the problem or multiple problems which the product is trying to solve. It is important that these problems must have been facing by the wide section of the society and most importantly by the target audience.
It would be attractive for the investors, if the problem is explained through reference materials and authentic resources.
With respect to solutions, a white paper should describe how the product is providing solutions to existing problems. The solutions should be clearly explained addressing each problem. Its focus must be on the unique quality of the product which gives the solutions.
The white paper should be clear about its target audience and explain the understanding of its customers. The problem and solutions should be relevant to the target audience.
4. Product Story and how it works
A good story of the product drives the attention of investors. A story should cover the source of idea. A white paper should explain the working of product for general audience as to whether it is an application, platform or blockchain technology based product, its key players and the key features, specifically those which are supposed to solve the problems or those which are better than available alternates.
It should explain the integration of token into product and relevant information with respect to accessibility, trade, earning, wallet and its advantages.
5. Market and competition
A good white paper always provides the general outlook of the industry as to how big the opportunity is, and growth and revenues of the product. It should discuss about current competition in the market including major competitors. It would drive more attention and give clear thought process to the investors, if white paper gives quantitative data with respect to market captured by the competitors and market size which the product is aimed to target.
It should also be covered as how this product is different form its competitors and leverage of competitive advantages, if any.
6. Product Development and marketing plan
A brief of product’s future plan helps the investors in understanding its growth and incline them towards investing more in the product.
The use of the product and place of its availability should be clearly mentioned. The white paper should provide the future vision as to its features with reference and relevant information, and plans with respect the future organic growth.
A marketing plan should contain methods and actions for engaging new customers, campaign, reference and affiliate programs. It should provide a proper road map for growth and discuss how are they adding values to the market.
7. Token Allocation and ICO
The investors always look for the criteria for token allocation. A white paper should provide the quantity/ percentage to be allotted to private/public sector, team, advisors etc.
It should give details about ICO including start and end date, and other information regarding the qualification, instructions, price and bonus allocation. It should clearly mention the vesting schedule and date for delivery.
8. Technical Overview and block chain adoption
A white paper should provide details about the technology as to how it solves the problem and leverage technology to serve users and customer, is there an API new method of proof of work, proof of stake, proof of authority, proof of elapsed time and how does technology solve the problem.
It helps investors to understand the working of blockchain technology, its future and where it will take the business.
9. Product road map and usage of ICO fund
The product road map should be given as to when it was conceived and whether it was funded. It should give investors a brief idea about the future and current plans with respect to token, product releases, platform upgrade and team additions, and role of funding it these plans.
Another major issue is to use the ICO fund. A white paper should clearly give the vision of the usage of ICO funds. The ICO fund can be used in common areas like product development, operations, marketing, business development, staff and technical development, legal, support, working capital, exchange and growth plan.
10. Team and Advisors
The details and background of team and advisor helps investors in understanding the strength of business and how they will help in the growth of the business.
11. Legal, Disclosures, Disclaimers
A white paper should specifically provide the included and excluded jurisdiction and governing laws of that jurisdiction. It should also give the information regarding any restriction and prohibition in respective countries. A disclaimer should be given which clarifies what product is and is not, risk involved and forward looking statements.
For any queries, please contact the author Rishabh Halwai at rishabh@alpha-partners.org
