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Raising funds through crowdsales has been a popular option for small and medium-sized enterprises (SMEs). Due to the lack of financing opportunities from banks, SMEs often resort to such crowdfunding methods to finance their operations.
However, traditional crowdfunding methods have several limitations: high transaction costs, limited access to investors, and lack of transparency. What if there was a solution helping SMEs bypass these limitations?
Crowdsales solve exactly that. By leveraging blockchain technology and tokenization, SMEs can create and manage a crowdfunding campaign via so-called token sales (aka ICOs, IDOs, and/or STOs).
This method is more secure, transparent, and cost-effective as it utilizes blockchain smart contracts that execute actions based on predetermined rules. Smart contracts are tamper proof and made immutable thanks to the underlying technology it operates on (aka blockchain). This article will show the benefits of crowdsale smart contracts, as well as how SMEs can use them to raise funds.
Case Study: AMi Exploration
To better understand these benefits, we will use the example of ARCA Space, an Aviation & Aerospace company that leveraged Bitbond Token Tool to streamline the fundraising for their AMi Exploration Program (AMiE). This was achieved by conducting a token based crowdsale.
ARCA Space was looking to raise funds to kick off their space mining project called AMi Exploration. It consists of sending an asteroid mining mission to space with the aim of extracting resources to be used on Earth.
They hence decided to run a crowdsale. Through their crowdsale smart contract, ARCA Space was able to automate the entire process, from token issuance to investor payout.
This significantly reduces transaction costs. It also ensures that investors receive their tokens and payouts in a timely and transparent manner. ARCA Space was also able to reach a wider pool of investors, including those who were interested in investing smaller amounts.
As smart contracts enable fractional ownership of tokens, it makes it possible for investors to invest as much or as little as they want. Therefore, the barrier to entry for investors is significantly reduced.
All these benefits would typically not be available when conducting a traditional fundraising campaign. Issuers would maintain less ownership over the funds, while giving up a hefty portion of the amount raised in commission to the crowdsale platform being used.
Why did ARCA Space use Bitbond’s tokenization platform?
ARCA Space used a tokenization platform to create and launch their crowdsale for several reasons:
- Developing their own platform and smart contract would have been a time-consuming and expensive process. They would need to hire developers, security experts, and auditors to ensure that the platform and smart contracts are secure and functioning properly.
- Using a tokenization platform such as Token Tool reduces the risk of errors in the code, as it has been thoroughly tested and audited by experts. This saved ARCA Space a significant amount of time and money in the long run.
- Additionally, using a tokenization platform provided them with access to a wider pool of potential investors due to lowered barriers to entry.
- Finally, Token Tool helped ARCA Space comply with regulatory requirements. Thanks to its built-in compliance features that enable the possibility to configure the token issuance and crowdsale in a legally compliant manner.
How did ARCA Space use Token Tool for its crowdsale?
To launch their crowdsale, ARCA Space had to first create a token. Below you find the token parameters that they issued on the Avalanche Network.
Once the token was created, they went ahead to create the token sale to kick off their crowdsale campaign. The company raised close to $26.5k in USDT stablecoin for their AMiE program. This is the white-labeled investor frontend that is created automatically via Token Tool. The page can be embedded into any website via an iframe.
If you’re looking to launch your own crowdsale smart contract just like in the example of ARCA Space’s AMiE program, then you’ve reached the right destination.
Let’s walk you through the same process of leveraging Bitbond’s tokenization platform for crowdfunding your projects.
Before starting let’s make sure that you have:
- A Web3 Wallet
- Enough funds in your wallet to cover for Token Tool fees
- The terms for your token and token sale parameters (i.e. blockchain on which tokens will be issued, total supply, token name & symbol, token standard such as ERC20/ERC1400, token sale duration, amount to be raised etc.)
- It is now time to configure your token smart contract, as well as you crowdsale smart contract
Go to create a token on the Token Tool interface, connect your wallet, and start configuring your token based on your needs. The process is straightforward and self explanatory, you can also find more details in our documentation or in the guide linked above.
Once your token has been created, it is now to create a token sale based on the terms of your crowdsale. With Token Tool, configuring the crowdsale smart contract can be done in a few clicks. It is as easy as filling a form. More details in our documentation or in the guide above.
After successfully creating your token sale, you can start redirecting investors to the Token Sale Display link that you receive. You can embed this unbranded investor user interface directly on your website therefore maintaining your brand identity.
Marketing your token sale
Promoting your crowdsale is a determining factor to the success of your sale. Therefore, it is important to concentrate the resources that you save from being spared the need of dealing with technical complexities while using Token Tool, on implementing the necessary marketing activities to drive as much exposure to your sale.
Some of the most popular marketing activities used to market token sales are:
- Video Marketing
- PR and Content Marketing
- Email Marketing
- Token Sales Calendars
- Social Media
- Post-Token Sale Marketing
You can find more details about how to find the right marketing strategies for your token based crowdsale in this guide.
Benefits of Crowdsale Smart Contracts
Crowdsale smart contracts are cost-effective
Crowdsale smart contracts reduce or sometimes eliminate the need for intermediaries, such as banks or crowdfunding platforms, which significantly reduces transaction costs. However, developing them can come at a hefty cost and proves to be time consuming due to its technical complexities. That’s why Token Tool is the ideal solution to launch your crowdsale smart contract.
Transparency is significantly enhanced
Smart contracts are transparent and auditable, providing investors with a clear view of how their funds are being used. The blockchain technology provides an immutable record of transactions, therefore ensuring safety and security.
Access to a wider pool of investors
Smart contracts allow for fractional ownership of tokens, making it possible for investors to buy as much or as little as they want. This is enabled through instant exchange of assets, where transactions are carried out directly on the ledger. See our guide on security tokens to learn more.
Crowdsale smart contracts are secured by blockchain technology, which ensures that transactions are tamper-proof and resistant to fraud. Once a transaction is carried out on DLT, it cannot be reversed, same goes for smart contracts that are deployed to the DLT network, once the rules have been predetermined and put into action, they cannot be changed.
Crowdsale smart contracts are a game-changer for SMEs looking to raise funds through crowdfunding. The benefits of crowdsale smart contracts are clear, and as blockchain technology continues to evolve, we can expect to see more SMEs turn to this innovative financing option.
Thanks to blockchain technology and tokenization, SMEs can benefit from a transparent, secure, and cost-effective crowdfunding campaign, as well as offer their investment opportunity to a wider pool of investors.
The only challenge such SMEs and other issuers face are the technical hurdles related to developing intuitive, secure, and efficient products on blockchain. This process is very costly and time-consuming.
That’s why Bitbond is the ideal partner for you, we spent years perfecting tokenization technology so we could make it available to you in minutes and hassle-free.
Don’t miss out on this opportunity and start your crowdsale now. If you have any questions, feel free to contact us and our team is available to assist you throughout your crowdfunding process.