Presales

What are presales?

Presales are a way for projects or protocols to raise money for their team by giving people tokens in exchange for their money or other valuable things. The money they get from presales is used to pay for things like making their product better, paying their team members, and advertising it. There are many types of presales.

Types of presales

• Pre-seed (This type of presale is conducted very early in the development process, and the investors who participate in it are taking on the highest amount of risk. However, if the project is successful, they also stand to gain the highest returns)

• Friends & Family (This type of presale is often limited to close friends and family members of the project team, and is usually conducted before any outside investment is sought. It is considered an "insider" round of funding.)

• Seed (Seed rounds are conducted after the pre-seed stage, and typically involve outside investors. The risk is still high at this stage, but the potential returns are also significant.)

• Private Presale (Private presales are similar to seed rounds, but they are conducted on a more exclusive basis, typically limited to a select group of larger investors or institutional investors. This round is often considered an "insider v2" round.)

• Public Presale (Public presales, also known as ICOs (Initial Coin Offerings), are open to the general public and are often heavily promoted to retail investors. They can be risky, but also have the potential for significant returns.)

• Series ABC (Once a project has gained some traction and has a proven track record, it may conduct multiple rounds of funding known as Series A, B, and C. These rounds are typically less risky than earlier rounds, but also offer lower potential returns.)

Since most of us peasents have acess only to Publc and ABC presales, we are going to dive into them.

Public presale

Public presales can also be divided into multiple types

Fixed Price No Limit token sale

A predetermined number of tokens is sold at a set price, with no cap on the amount that can be raised. However, many projects still choose to set a softcap, which is the minimum amount of funds that must be raised in order for the project to move forward. If the softcap is not met, the project may be cancelled, and investors will be refunded their contributions. This mechanism helps to ensure that the project has enough funding to at least get off the ground, but still allows for the potential to raise more if demand is high. Despite this, Fixed Price No Limit sales are often associated with low-quality projects looking to make a quick profit.

Fixed Price Soft+Hard Cap

This is a type of token sale where a minimum and maximum target of funds to be raised is set. If the minimum target is not met, the presale is cancelled, and investors are refunded. The presale is closed when either the minimum target is not reached, or the maximum target is filled. The tokens are sold at a fixed price, with a predetermined amount available for sale.

Overflow

Overflow, a type of token sale where there is no hardcap, but a fixed amount of funds to be raised. Tokens are allocated based on the percentage of the pool of raised funds that each investor contributes. The more money an investor commits, the more tokens they receive. Any funds that are not spent are returned to investors.

NFT Airdrops

An NFT Airdrops token sale, NFTs are sold, which may give investors a future reward. This type of sale is often used by NFT projects. NFTs with use cases are a good sign, and can also be staked to earn platform fees or royalties.

Platform IDOs

In a Platform IDOs token sale, a project raises funds on a platform that may require investors to hold the platform's token to receive an allocation. Some platforms take a percentage of the tokens or funds raised from the project team.

ITOs (Treasury Swaps)

ITOs (Treasury Swaps) are a method of raising funds where certain whitelisted tokens are swapped for a project's token. This approach allows for the use of a variety of tokens in the sale. The whitelisting process provides a level of vetting for the tokens used in the sale. There have been recent Initial Token Offerings (ITOs) that accept multiple cryptocurrencies for investment. For example, one ITO allowed the use of $USDC, $CRV, $BAL, $FXS, and $SDT, while another ITO called PepesGame allowed the use of $PLS and $USDC.

Duct Auctions

Dutch Auctions are a method for selling tokens where the price starts high and gradually decreases over time until all tokens are sold. Typically, the auction involves 99% of token A and 1% of USDC or ETH, and this ratio gradually reduces until all participants have made their investment. In simple terms, the idea is to create a sense of urgency among investors to purchase tokens by gradually reducing the token price. This strategy has gained popularity in recent times, as it is considered an efficient way to distribute tokens and create liquidity for new projects. Why would anyone buy early?

Dynamic pricing

is a method for determining the token price based on the level of demand during a presale. The idea is that as more people invest in the presale, the token price may increase due to the increased demand. However, in dynamic pricing, everyone who invests during the presale gets in at the same price. The only thing that changes is the Fully Diluted Valuation (FDV) or Market Capitalization (MC) and the final token price. This means that early investors will not get a better price than those who invest later, but the value of their investment may increase if the token price goes up due to increased demand.

Instructions

• Determine vesting schedules:

  • a. Ask about the vesting schedules for the coin.

  • b. Calculate how much the coin's value must increase after launch to break even on unvested bags.

• Compare valuations and vesting schedules:

  • a. Find out the valuations from other rounds, like private sales.

  • b. Ask about their vesting schedules.

• Assess liquid tokens on launch:

  • a. Identify who has liquid tokens during the launch.

  • b. Consider if they will sell and why they might (or might not) do so.

• Investigate OTC buyers for vested tokens:

  • a. Check if there are any Over-The-Counter (OTC) buyers for vested tokens.

  • b. If so, find out the rates they are considering.

• Evaluate the token and its valuation:

  • a. Determine if the token's valuation makes sense if the product is not live yet.

  • b. If the product is live, compare its metrics to other projects to assess if it is overvalued.

• Watch out for extra fundraising rounds:

  • a. Check if the team keeps opening extra rounds like Satin Exchange.

  • b. If so, be cautious and consider avoiding the investment.

Conclusion

In conclusion, presales play a crucial role in helping projects and protocols raise funds to develop and promote their products. These fundraising events involve the exchange of tokens for money or other valuable assets, and the funds raised are utilized for various purposes, such as product development, team compensation, and marketing.

There are several types of presales, including Pre-seed, Friends & Family, Seed, Private Presale, Public Presale, and Series ABC. However, the focus here has been on Public Presales and Series ABC, as they are more accessible to a broader range of investors.

Public Presales can be further categorized into various types, such as Fixed Price No Limit token sale, Fixed Price Soft+Hard Cap, Overflow, NFT Airdrops, Platform IDOs, ITOs (Treasury Swaps), Dutch Auctions, and Dynamic pricing. Each type has its unique structure, mechanics, advantages, and disadvantages. The risks and potential rewards associated with each type of presale vary, so it is essential for investors to analyze and understand them before making any investment decisions.

By evaluating each type of Public Presale based on one's risk tolerance and investment goals, investors can make informed decisions and choose the most suitable type(s) of presale for their investment strategy. As the cryptocurrency and blockchain space continues to evolve, it is crucial for investors to stay informed and adapt to the changing landscape to maximize their chances of success in this rapidly growing industry.