During a blockchain project launches, we often come across terms like pre-ICO and ICO. The pre ICO system is involved with the selling of tokens before the actual crowdfunding campaign. ICO is also selling of tokens. Moreover, the question arises why there is a need to have a pre-sales prior to a sale.
Pre ICO and the need for it
In other to raise money for their blockchain project, companies make use of pre-ICO. This pre-sales of tokens in concerned with companies which will allow a selected group of certain people to buy before the official crowd sale begins. With this process, there aren’t a lot of funds but it gives the whales an opportunity to stockpile the tokens which they were trying to sell. It can be considered as a New ICO Exchange.
In order to get investors, companies apply this policy. These investors provide a good amount of operational cost for the company while being still completing their white papers. Also, the money that is collected from this pre-sale is usually used for building infrastructure.
Who can avail this pre-ICO?
Usually a month or two months before the beginning of Initial coin offering, this pre-ICOs take place but it can also happen just before prior to it as well. This opportunity is not given to all people. You have to be approved by KYC which is the abbreviated form of Know your customer. Also, a minimum and maximum amount are concerned with pre-ICOs.
What are the benefits of Pre ICO?
There are several benefits that are associated with pre-ICOs. Those who are involved with pre-ICOs are benefited with a higher bonus amount and also a cheaper coin amount for each coin. Also, they get additional bonus or merchandise. Sometimes they are gifted with free cards and many more similar things. The biggest benefit of these pre-ICOs is that investors are given the opportunity to buy tokens at a major discount which can even rise to 50%. The tokens are sold at a cheaper rate because then the fundraising target will be lower than for official crowd sale.
Also, there are many ICOs that are heavily oversubscribed. So to make sure that that you are allocated to the number of tokens that you want to purchase, they take part on PRE-ICOs. Also, projects can utilize this fund that is raised from the pre-sale in order to ramp up the interest of the investors for the purpose of the official ICO. A pre-sale will also make sure that the project has gained some traction already within the time of the official ICOs.
The pre-sales of ICO will help you to test the water before you are participating in the main event. This is smaller so it is more controllable and manageable. If something goes wrong it can be fixed and less number of people will be affected.
Another very recent trend that is seen in ICO pre sale is to get private VC investments at a larger discount for the project and even at an early stage.