Choosing what token sales to participate in can be a bit hard. As a contributor or an investor, it is mandatory to know your investment and risk appetite so that you can be able to choose the best tier in an ICO sale to participate in.
Since evaluating all options can take time, I have created a summary of the different types of token sales; private sale, presale, and crowdsale.
A private sale, which is also known as an Institutional Round, is defined as a token sale that is usually made to a small group of invitee-only investors. Private sales are rarely announced to the public, but when published, the ICO in play typically have a strict requirement for participation as they only target a specific class or group of investors. (Most of the private sales are created primarily for institutional investors, employees, families or for project partners of the ICO project).
The strict process in private sales, which may include investor interviews, ensures that only investors with similar goals to the ICO are on-boarded.
So, if you are about to launch a private sale yourself, it is important to bear in mind that the distribution of tokens to private sale participants is subject to legal scrutiny in the future despite the event being private. It is necessary to consult with legal experts on various matters such as how much information should be provided about a private sale, how to organize a private token policy for the private sale, and so on.”
What Are The Benefits Of Participating in a Private Sale?
1. Higher possibility of a quick ROI (return on investment) if you choose to buy at the hugely discounted price and resell at a higher rate during a pre-sale or crowdsale.
2. Guaranteed availability of tokens compared to the limited pre-sale or if the ICO hits the hardcap during a crowdsale.
3. Enormous discounts and bonuses compared to a presale or a crowdsale.
The Hidden Risks Of Private Sales.
Private sales are considered to be riskier than a crowdsale as they are done without the scrutiny of the general public, so it is more difficult to gauge their actual value. However, the risks to the investment are often paid off as compensation tokens, or ‘bonus’ tokens.
Therefore, In the case of a private sale, investors must pay attention, scrutinize and evaluate the token distribution of the ICO in question. If you are expecting to participate in one of the private sales, it is always important to check through the ICO white paper as it will inform and help you decide on how much to invest.
The bonuses and discounts may end up being useless numbers in case of a cryptocurrency volatility which causes the fluctuation in prices
3. Strict Requirements
Not everyone is accepted in a private sale; therefore, a spot is never assured even if you get an accredited investor status and comply with the minimum purchase amount.
4. The possibility of a locking period for tokens or bonuses in private sale.
5. Private sales require a higher minimum contribution than a presale or a crowdsale.
An ICO presale is defined as a token sale that is done before a crowdsale. Presales are always announced and promoted social media platforms, websites and all sorts of advertising.
For investors, an ICO presale is an excellent middle ground as there are fewer risks compared to private sales, and a considerably more substantial discount or bonus compared to a crowdsale.
Also known as a Token Generation Event (TGE) or an Initial Token Offering (ITO), an ICO crowdsale is the main token sale of an Initial Coin Offering. It widely promoted and advertised than a presale.
Why choose a crowdsale over a private sale or a pre-sale?
1. With an already existing (MVP) minimum viable product, a crowd sale has a lower risk as the general public has enough information on what they are about to invest in.
2. The presale and private-sale profitability help as a forecast base of whether or not the tokens will be auspicious in future.
3. Less strict requirements as they don’t require you to be an accredited investor, therefore almost anyone can invest in the token sale
4. Usually, lower minimum purchase amount compared to a presale.
Whether you want to invest or just experiment, don’t spend money you can afford to lose on tokens. Always do your research, read through the ICO white paper page by page, word by word over and over again until you know what you are getting into. Don’t invest blindly. Happy investing!