An ICO Presale is an unregulated investment fund-raiser for a business. It describes a time of fundraising before an Initial Coin Offering, which would at some point include a token generation event. (Check out Sun Fund’s offer.)
What to Expect from an ICO Presale
Investors should expect more for their money out of an ICO Presale. Perhaps the current climate of offering more-of-the-same as an incentive (ie, 75% more of the same token) is going to be viewed as less-interesting over time, however.
For example: at our offer, we feature tokens via SAFT plus an equal face value of preferred equity shares for the investment – a true 2 for 1 – but even compared to a generous token pre-sale bonus, that bonus is not capable of truly hedging the investment because all tokens, no matter how many, will be subject to the same forces. Getting equal amounts of equity plus tokens in an SEC-registered offer on a FINRA regulated platform was both an historic first (as far as we know) and a game-changer for investors. (Blockchain upside exposure AND a normal security! Bring it!)
Some say these events function very much like venture capital for businesses, entering at an early stage and giving investors more upside exposure in exchange for accepting the greater personal risk because the business isnt as fully formed as it would be at a later stage, such as at an Initial Coin Offering.
A few common misperceptions occur around an ICO Presale (these may be true in whole or part of any ICO Presale – so do your homework):
- They arent valid
- They are only for accredited investors (theyre not)
- They need to make astonishing claims in order to attract investors
- One needs to possess cryptocurrency in order to participate in one
Any investor must scope their own risk they are willing to accept before investing. There are many great tools offered by FINRA, the SEC, and more. So first understand yourself, and your position and use professionals and tools to logically determine how much money you can reasonably lose by participating in an ICO Presale. (All investments are risky and should be transparent about risks at-hand. Some reports say as many as 50% of ICOs offered in 2017 arent around any more so, we have to wonder what looked so great at one point that led to disaster at another.)
An ICO Presale can be valid because they simply represent the stage of business growth that leads up to an ICO. ICOs are bigger and the move from the idea to the product is more clear. They usally say they’re going to use the funds towards development of a token, or a coin, in large part, and in smaller part towards administrative expenses and things like that. Look for statements that delineate how the PreICO funds are used as opposed to the ICO funds.
If you feel the company is worth risking your money on, you can give it to them at that point, and possibly be exposed to the greater upside than simply joining their ICO. Businesses need money at the PreICO stage to get many important components to an ICO in-place.
ICO Presales, or PreICOs, also are not just open to Accredited Investors (ones who meet certain investment & income criteria – basically they have a certain amount of money and a track record of investments that shows they are capable of understanding and assuming the risks of certain-sized investments.)
Good Questions to Ask About an ICO Presale
A few things to ask about an ICO Presale:
- do they have a good use-case for blockchain, or could they accomplish what they need to without a distributed ledger? Does their application seem to negate the inherent decentralized attributes that makes the best use of blockchain technology?
- is the team in place for the PreICO the same team that was in place in a normal meat-space business?
- was this team able to profitably or even just reasonably run a meat-space business before blockchain was interesting to them?
- does the team have any experience in the industry they are saying theyre going to enter?
These are just some of the questions you can ask yourself about ICO Presales. There are more great questions at the SEC website.