Funding a startup is challenging and historically, that involved pitching VCs, going through accelerators and pursuing angel investors. However, with the advancements in the Web3 ecosystem, there is a new paradigm: Initial DEX Offering (IDO), a decentralised method of raising funds through crypto launchpads and reaching a global community.
What is an Initial DEX Offering?
An IDO (Initial DEX Offering) refers to a new fundraising model on a decentralised exchange where any startup can offer tokens for sale to raise capital. Investors on decentralised exchanges can purchase the tokens directly on a blockchain through launchpads like Binance Launchpad, CoinTerminal, Polkastarter or DAO Maker and other DEX’s.
Different Types Of Launchpads Explained
There are different types of launchpads that startups can create communities and entice investors to trickle funding into their projects:
- ICO (Initial Coin Offering): Raised funds directly from investors, often without much regulation
- IEO (Initial Exchange Offering): Conducted on a centralised exchange like Binance
- IDO (Initial DEX Offering): Runs on a decentralised exchange using smart contracts, offering more transparency and accessibility
What is the Appeal? IDOs can democratise fundraising-giving early-stage startups global reach and instant liquidity.
What is the Challenge? It can go wrong very quickly without the right preparation.
How Early is Too Early To Launch On An IDO?
If you don’t have a working product, a clear roadmap and an engaged community, it is too early.
Unlike traditional fundraising, where investors might back an idea, IDO participants expect to see some traction, even a prototype, a few users or strong token utility. This matters because launching too soon can destroy credibility. The crypto community is quick to spot ’empty’ projects and once trust is lost, it is almost impossible to regain.
So:
- Build an MVP first.
- Validate your tokenomics.
- Grow an organic community before raising funds.
Do Investors Really Care About Tokenomics?
Tokenomics are usually one of the first things investors look at. Properly designed tokenomics promote trust and confidence; poorly designed tokenomics attracts short-term market speculators. Your token is not just a fundraising tool; it is the economic engine of your ecosystem.
Common Mistakes
- Minting too many tokens with no long-term value.
- Not setting vesting schedules for team or investors.
- Failing to define what the token actually does.
What To Consider
- Why do I have to have a token for my startup?
- Am I creating real functional value other than speculative value?
- How do I plan to control value and market activity after the launch?
Overlooking Legal and Regulatory Requirements
Because IDOs occur on blockchain networks, some founders believe they are not subject to regulation. In actuality, regulators around the world are closely monitoring these activities. Tokens, even in a decentralised system, are subject to regulation. Non-compliance may result in fines, legal action or delisting – so it’s important to ensure sufficient research is done to ensure compliance.
What to Consider When Launching
Before you launch, it’s important to get a legal opinion from a reputable law firm specialising in crypto in your jurisdiction, provide terms for the participants, set realistic expectations and avoid promises that seem to guarantee participants a return. While blockchain may be borderless, the laws are not.
Community and Marketing Neglect
In the early days of ICOs, projects could be sold out on hype alone. However, nowadays, trust, transparency and your community are the most crucial aspects. To have a successful IDO, your community must have trust in the vision and the team. Your startup should keep in mind that investors are buying into you, not just the token and a community that is actively involved will enhance liquidity and provide continual support.
What Should be Prioritised
Although a launchpad may provide initial visibility, it is the community that will provide lasting support.
- Regular communication through Discord, Telegram and X (Twitter)
- Communicating clearly about objectives, achievements and any obstacles along the way
- Recognition of early supporters-projects that put the community first have improved outcomes
