Private presales have become an increasingly popular way for cryptocurrency and blockchain startups to raise funds in the early stages of their development. As public cryptocurrency markets have become more volatile, private presales enable projects to secure financing from select groups of investors before conducting a wider public sale.
What are Private Presales?
A private presale refers to the private sale of tokens to a small group of investors, usually accredited or institutional investors, before the public crowdsale. It is a form of private placement that allows blockchain projects to raise capital in the early stages of development.
In a private presale, investors buy tokens directly from the project team at a discounted price before the tokens are made available to the public. The presale tokens are subject to vesting schedules to ensure long-term commitment from initial investors.
Benefits of Private Presales
There are several key benefits that make private presales an attractive fundraising model over traditional early stage financing:
Access to Funding
One of the biggest challenges for blockchain entrepreneurs is finding funding for early stage development. Private presales open up access to capital from cryptocurrency investors, funds, venture capitalists, and institutions seeking exposure to innovative blockchain projects before public listing.
The vetted, private nature of presale investors also enables projects to raise larger amounts of capital compared to crowdsales. For investors, presales provide the opportunity to get in early on promising blockchain ventures.
A private presale allows a project to establish a core community of long-term holders who believe in the project’s potential. These loyal supporters often become brand ambassadors that help drive awareness when public crowdsales commence.
The presale community provides important early feedback to help improve the product before launch. Their involvement creates momentum going into the public sale which helps boost overall interest.
Public crowdsales carry the risk of falling short of the desired raise due to volatility of public markets. Private presales enable projects to secure essential capital needed to get through development before public listing.
Setting a minimum presale fundraising goal with flexible caps also allows projects to scale their ambitions based on early investor interest and avoid the risk of failing to raise sufficient funds.
Many countries have imposed stricter regulations around public cryptocurrency crowdsales. Private presales enable projects to remain compliant by selling tokens to accredited investors before more public distribution.
KYC/AML processes can be conducted with smaller groups of investors during presale compared to larger public pools. This enables compliant and secure fundraising during the early stages of project development.
Private Presale Process
The private presale process involves careful planning and preparation:
The first step is curating a targeted list of potential investors aligned with the blockchain project’s vision, goals, and ethos. These investors are usually blockchain-focused venture capitalists, crypto hedge funds, incubators, family offices, and high net worth individuals.
The project team establishes a valuation model to determine fair token pricing and discounts for early presale investors. Discounts generally range from 20% to 60% of public sale prices.
Investors undergo KYC/AML verification to be added to token presale whitelists. This ensures all participants comply with anti-money laundering and terrorism financing regulations.
Marketing and Promotion
The presale round is marketed to whitelisted investors through private channels and promotional materials touting the project’s potential. The core messaging and benefits are crafted to resonate with targeted groups.
Once fully marketed, the presale commences across a defined timeframe, usually lasting days or weeks. Investor funds are collected during this period through secure payment channels.
Upon conclusion of fundraising, presale tokens are distributed to investors based on set schedules. Various lock-up periods are implemented to encourage long-term holds.
As an innovative form of early stage fundraising, private presales present a win-win opportunity for blockchain entrepreneurs and crypto investors alike. For projects, it provides access to essential capital and community needed to turn ambitious ideas into reality. For investors, it opens up rare early investment in the future potential unicorns of blockchain.
With strong strategic planning and execution, crypto private presales can enable the next generation of blockchain projects to get off the ground. The result is an ever-expanding ecosystem of decentralized innovation.