Pros and Cons of ICO Presale
What is an ICO presale period?
As implied by the name, pre-ICO sales give the investors a chance to buy the tokens before the onset of the official sales. A pre-ICO sale is based on a smart contract to keep the funds separate from the official sale to avoid confusion. Generally, few funds are gathered at the presale stage because, during this period, the ICO tokens are sold at a lower price on top of certain bonuses to the investors. Different organizations initiate the presale for different reasons. Just to give you a glimpse, these are some of the common reasons why companies initiate presales prior to the official opening of the crowdfunding.
It is used as a promotional tool by most of the companies. An ICO is always an easy way of distributing capital and ensuring that the investors will stand for the upcoming project. An ICO presale is more of “buy one, get one for free” kind of approach. The presale thus ends up raising awareness about the ICO. This is always the best period to invest in an ICO because the tokens are sold at a lower price because the companies give offers that will attract the attention of the investors. After the implementation of the project, the companies increase their profits after getting enough long-term investors.
Some of the companies may opt to initiate a presale as a way of testing the potential that the ICO has. Simply, they aim to understand whether people are interested in their ICO and whether they are willing to invest in it.
This undertaking is also a tool that attracts and keeps long-term investors’ whole belief in the idea, products, or services offered by the company.
Pros of an ICO presale
Liquidity. As an investor, one can trade tokens in secondary markets instead of fixing up a given value in equity of a certain company.
Ensures there is a good distribution of capital. When an ICO presale is well organized, it opens a great door that facilitates allocation of capital in a rational manner. With ICOs, there is no any demographic or geographic barrier and anyone can be involved in this investment, regardless of their nationality.
A crowd-funded ICO startup has many supporters. In ICOs, many people are involved and incentivized to be participants of the project and the company ends up getting many supporters who are committed and engaged with the happenings of the company.