View on GitHub


Fresco Capital's ICO Playbook for Entrepreneurs

image alt text

ICO Playbook for Entrepreneurs

Initially compiled by:
Team Fresco

An open source guide to ICOs.

Background and Purpose of this Document

When the first known ICO was launched in July 2013 (Mastercoin, according to Wikipedia), few were aware that this form of fundraising even existed and few of those who were aware that it existed would have predicted that ICOs would become one of the dominant forms of fundraising for technology companies in 2017.

Indeed, ICOs have quickly progressed from a unique form of fundraising to a mainstream phenomenon. On one hand, they have become a viable option for entrepreneurs seeking to raise capital for innovative concepts, on their own terms, without the oversight of regulators and VCs. On the other hand, ICOs have also supported fundraising by companies without a viable business plan or experienced management. This means government regulators are struggling to keep up, and these unregulated offerings have also attracted a dark contingent of disingenuous (if not outright dishonest) players keen to make a quick return on an alluring cocktail of profit speculation and token euphoria.

At the same time, ICOs have become a viable option for startups looking to raise capital. Governmental organizations in every country are struggling to contemporaneously regulate all aspects of ICOs, which means that this form of fundraising - in some shape or form - is not going away anytime soon.

Fresco Capital is a global early stage venture fund, and our mission is building global ecosystems that enable entrepreneurs to leverage technology to solve the world’s most critical challenges. As such, we are inherently supportive of innovation in capital markets as well as any globally viable mechanism through which entrepreneurs can fund transformative solutions. We believe in the power of aligned incentives, and have an agnostic view on ICOs as a fundraising mechanism - the same as we do about bonds, commercial loans, crowdfunding, factoring, and equity. Each company, including each of our portfolio companies, has a unique need and commercial objectives that need to be considered when determining which (or what combination of) available sources of funds is most appropriate for their business to achieve their growth and operational targets. ICOs may, or may not, be a feasible and appropriate part of that mix.

We believe it is critical to understand tokens and ICOs, like we understand all of asset classes and funding mechanisms. As the cryptocurrency and ICO markets are evolving faster than any one person can keep up, we have created this document as an open source reference to be used to understand and keep updated with respect to this topic. We encourage you to ask questions, update information that has changed, and share globally relevant suggestions on how to navigate this exciting and complex new ecosystem.


Team Fresco.


  1. What is Cryptocurrency?

  2. What is Blockchain?

  3. What are the Major Cryptocurrencies?

  4. What is an ICO?

  5. Candidates for an ICO

  6. List of Basic Information to consider before running an ICO

  7. Benefits of an ICO for the Organization

  8. Risks of Conducting an ICO


Background Reading / Deeper Dive Information

Cost Estimator

Issuance Timeline

Appendix and Additional Resources


Discussions of an ICO are incomplete without a discussion of cryptocurrency and blockchain technology (i.e., distributed ledger technology). These topics, along, could fill volumes,so we aim to highlight only the relevant points below:




The major cryptocurrencies currently being used for real world payments and ICOs are Bitcoin and Ethereum. For a current list of each cryptocurrency and their market cap, see here:

Name Description
Bitcoin Token used for ‘real world’ payments
Ethereum Token used on a Smart Contract Platform between two direct parties, which removes intermediation.


An ICO is an acronym for Initial Coin Offering. The acronym, whether intentional or not, looks and sounds similar to the more well-known “IPO” and, indeed, reflects that companies are offering to third parties, for the first time, coins (which are referred to as Tokens).

Buyers (subscribers) pay money in exchange for tokens. Usually, buyers pay for new tokens cryptocurrency (Bitcoin and Etherium are the most popular, but others are accepted also on a case-by-case basis). There are multiple structures and requirements, for contributions. In most cases, companies considering an ICO will hire a team similar to an investment banking team in traditional Wall Street finance. This team implements an end-to-end contribution process, either by engaging several different vendors who are each responsible for a part, or by providing a turnkey solution that can provide the entire solution.

Token Creation:

Tokens must first be created in order for them to be issued to investors. As of now, there are two primary ways of creating new tokens:

Token Issuance:

The two major issues from the creation and issuance of Tokens are, first, the actual issuance of the Token, and, second, the purpose of the Token.

When described above, the exchange of a new Token for an investment seems simple enough. Our entire society exists on the seamless exchange of something (money, tickets, etc.) for something (pizza, movies, etc.); but the ICO market expanded so rapidly that, in some cases, the infrastructure needed to support a proper ICO lagged behind. For example, some ICOs accepted money but did not deliver Tokens (or delivered Tokens late).

Generally, the company issuing the Tokens dictates the timing of the process. In most cases, investors do not (in some / many cases) receive Token instantaneously (i.e., in real time). Instead, there are milestones set to determine when Tokens will be issued to various groups of buyers who may have contributed amounts at different times. This creates a risk that Token issuance will be delayed or not issued at all, in which case, it will be extremely difficult (if not impossible) to secure the return of invested funds. In some cases, the delay of issuance is because the company is understaffed, underprepared, or experienced some unexpected issues. In some cases, companies simply don’t care, after realizing that they have no enforceable obligation to deliver on their promises.

Token Classification: Are they securities?

The second issue, which is among the hottest topics in all financial markets, is whether Tokens are securities. This is determined by their purpose.

If their purpose is “utility”, then tokens are not securities. For example, let’s use the analogy of a cinema. When you go to the cinema and buy a ticket, you can only use that ticket to get into the show you paid for. You cannot get dividends from the cinema, you do not share their profits, and you do not have any voting rights. The ticket has the “utility” of letting you watch a film. For this reason, cinemas do not need special licenses to issue tickets.

If their purpose is to represent ownership, then tokens are securities. When a company issues stock (which is a security) in exchange for money, the stock certificate allows the owner to vote and receive dividends as a share of the company’s profits. The company needs approval from their financial services regulator, and must go through a long and expensive process, to have approval to issue the stock.

So, if a Token is considered to be a “Utility Token”, the ICO can go on with minimum oversight and regulation (like a cinema issuing tickets of any color size and for any price regardless of whether or not the film is good). But, if the Token is considered to be a “Security Token”, then things get more complicated, with the company issuing the Token potentially in violation of securities laws (and potentially violating different laws in different countries).

Initially, (i.e., up until mid-2017ish), ICOs gained in popularity because many people bought into the idea of “This is great, I can raise money without a lot of regulations because I am just giving people a Token, not a stock.” whereas the pendulum is beginning to swing the other way with many regulators taking increasingly aggressive positions against Tokens that look like and smell like securities.

The potential outcome is two-fold: (i) classifying Tokens as securities would dramatically shrink the market as fewer companies would be willing to spend the time, money, and effort to undertake the securities process; and (ii) companies that have already issued Tokens may be subject to liability under securities laws.

There are countless articles and resources about how to evaluate whether a Token is a security or not. We have linked to some good ones below:

In general, to be classified as a Utility Token, the token has to serve a functional purpose. Examples: Tokens are used to gain access to a system (i.e., gain access to data, the ability to play an online game, etc.) or used as digital currency in a system (i.e., can be exchanged for features, functions, etc.).

If the utility case is absent, the token may be regarded as security, which makes it heavily regulated. In the U.S., the courts have developed something called the Howey Test to evaluate whether a token is a security. The test has 4 parts - previously, aggressive companies justified their Token being a Utility Token on the basis that 1 of the 4 parts was not met. For example, they considered the 4 parts to be the 4 legs of a table and believe that if 1 leg was missing the table would fall. Now, more conservative thinking is that even if 1 leg is missing from a table, you can still tell that it is a table (it does not suddenly look like a chair or a lamp).


If you are an entrepreneur looking to raise capital, you may be asking yourself, “Should I issue an ICO?” Below are several examples of when an ICO may make sense for you:

If you fit these criteria, it doesn’t matter how much money you are looking to raise. While some ICOs set minimum commitment requirements, there is no average ticket size for fundraising - ZrCoin raised US$7M from 3,955 investors (NOTE:, while BAT raised US$36M from 190 investors (NOTE:

Common Misconceptions about ICOs

In order to navigate this complex landscape, you need to know more than just “what is an ICO.” It is equally important to understand what an ICO is not.

Misconception Explanation
ICO = IPO An ICO is not the same as an IPO. There are many major differences between an ICO (that issues coins/tokens that may or may not be considered securities. An IPO issues stock/shares that are traded on an exchange and are legally considered to be securities. Apart from the possible legal distinctions between coins/tokens and stock/shares, ICOs and IPOs are undertaken at different lifecycle stages of a company.Companies that issue an ICO typically do not qualify for a "traditional" IPO because they do not have an operating history, do not have audited financial statements, and usually do not have the needed level of corporate governance or internal controls.
A coin/token is not a security One of the most important issues surrounding ICOs is whether or not they constitute a security. Each country/jurisdiction has complex and detailed securities laws administered by a regulator that evaluate and determine what constitutes a security. These criteria differ, sometimes subtly and sometimes dramatically,from country-to-country, and are described in more detail later in this document. For a securities “expert”, some coins/tokens are relatively easy to categorize as either a security or as not a security. In other cases, depending on the jurisdiction, the company’s business model, the development stage of the company’s product, and to whom the coins/tokens are (or will be) issued, the categorization can be extremely uncertain and experts / courts could reasonably disagree.
Issuing and ICO is a fast, inexpensive, and easy way to raise money. A successful (and legal) ICO requires at least 8-12 weeks (usually more) of preparation, a budget of hundreds of thousands of US dollars, engagement of several experts, and a lot of hard work to distribute and explain the vision and benefits that your company is trying to get others to invest in.
All ICOs are scams (or are amazing) ICOs have come in all shapes and sizes of success. One of the largest ICOs in recent history was Tezos, which is still plagued by ongoing litigation between investors and the issuer (and other parties) in the United States and in Switzerland. Others, such as, (which raised ~ $16m USD) have used the ICO process to raise money that has resulted in extremely successful, reliable, and useful products.


Items Explanations
ICO Roadmap Without any major legal, technical, or regulatory delays, it is possible to complete the entire process in 4-5 months. Basic steps are listed below, later in the document we provide more detail on the timeline. Purpose Build a Team & Conduct Research Write a White Paper Conduct Initial Marketing Seek legal counsel Offer a Pre-sale of Tokens at a Discount (Optional) Mass Marketing Official Offering Build and Launch
Platform/ Blockchain for your Token Token sale on third party Blockchains/Protocols Token sale on proprietary Blockchains/Protocols Proprietary v.s. Third Party Blockchains/Protocols: Writing your own blockchain/protocol makes a strong case for utility of your token because a blockchain is needed to solve a real world problem, and your token is needed for anyone to operate on the blockchain (utility). On the flipside, doing token sale on other people’s blockchain is easier but the utility case is not as strong, which can lead to regulatory issues in the US
Contribution Value Cap (Ceilings) Soft Cap: Once reached, a time limit that shortens the window is triggered on the period of sales Hard Cap: Limit on the total contribution[9] value that will be accepted Hidden Cap: Undisclosed Soft and/or Hard Cap to public No Cap: No limits to contribution amount e.g. Tezos
Token Distribution Token distribution can vary case by case, for example: 1) Augur - 80% distribution to ICO subscribers 2) Civic - 33% distribution to ICO subscribers 3) Ripple - 10-20% distribution to ICO subscribers
Token Utilities[10] Most tokens have one or more of these utilities below: Usage Token— redeemed to access and use a product or service provided by the organization Work Token— contribute work to an organization and earn revenue in exchange for their work Community Token—used within the community for certain kinds of activities on the platform e.g. tipping a writer who wrote a good post on the community forum Asset Token— Backed by real life assets, e.g. 1 Token = US$1 held in issuer’s reserve
Validation Refers to the process where transactions are cryptographically validated and securely added to the blockchain- ‘miners’ get rewarded with getting new cryptocurrency or paid the transaction fee paid for by the sender of the validated transactions Nodes[11] on the network can do ‘proof of work’ by solving some mathematical problems and competing to find the solution to the block first, earning the right to publish the new block of transaction into the chain and earning the reward
Bounty Campaigns Community members will often help with marketing on popular Bitcoin Forums, translations of any offering documents, code writing—it is not uncommon to see 2-3% of ICO tokens reserved for Bounty Campaigns.
Pre-sales Pre-sales are optional—but as ICO is potentially an expensive exercise to run, some organizations sell a predetermined number of tokens (<10% overall volume of tokens released in ICO) to fund the ICO. While optional, practically pre-sales are mission-critical. This is the period that you offer Tokens privately, for a discount (20-25% maybe, depending on the amount invested) to a group of influencers. When the ICO proper begins you already have a good story, some prominent names attached, and good momentum. The flip side to this is that if you Pre-Sales flop, it is tough to dig out from that


Risks of Conducting an ICO

ICO Decision Checklist

Items Consideration
Token Utility Does your Token have a real use case? If not it may be considered a security in some jurisdictions. Note: Security Tokens are gaining some momentum (see SPiCE, also Overstock: company that is issuing asset-backed ICO Tokens).
Technology Creating your own Blockchain or building it on existing ones (Ethereum/Waves)?
Team Capabilities Do you have the network in the Cryptocurrency space to amass interest? Do you have the in-house capabilities to write the code?
Cost ICO is not a cheap exercise to conduct—ICO costs can easily surpass US$250K. Refer to the ‘How much does it cost to raise an ICO section’.
Time To conduct a successful ICO, the team may need to go onto roadshows and events to raise interest which detracts it from the day-to-day business operation
Audience Who would use the service and do they need cryptocurrencies to do that? If there is not a use case of the Blockchain technology in your business model, there may not be sufficient interest from the crypto space in your ICO.
Risk Appetite Are you comfortable with taking the risks listed in the previous section?

Best practices around ICOs[19]

Countries Description
Team Management 1) Clearly identify key team members on the website and white paper, and link to their credentials or LinkedIn profiles. 2) To incentivize founders and employees to maximize the project’s long-term success, create an equity and token vesting schedule. For example, equity and tokens could vest monthly over four years and have a one year cliff.
Transparency with White Paper 1) Detailed white paper with a comprehensive description of the business case, technology, team, network helps with building positive perception around the project 2) Disclosures of risks around the ICO and business 3) Distribute monthly or quarterly reports on the progress of the business and technology
Communication Channels to engage the Crypto community 1) Slack, Telegram and Twitter are most popular 2) Good source to get feedback on early versions of the token designs, white paper etc.
Technology Open-sourcing[20] the technology to be audited by the community
Treasury Management To prevent mass token sell-offs after an ICO, consider creating a lock-up period for ICO tokens. ICO structure, total token supply, proposed usage of funds, and development roadmap.
Legal and Regulatory 1) Hire a legal counsel. 2) Create a ICO Terms and Conditions agreement with all token buyers. 3) Create an open dialogue with regulators in case of regulatory uncertainty.


Cost Breakdown
Legal Advice US$200k This amount can vary dramatically depending on, among other things: the jurisdiction when the token-issuing vehicle is located; the type of ICO (utility token vs. security token), the tokenization strategy, etc.
Establishing the legal vehicle to issue the Tokens US$15k Again, this amount can vary dramatically depending on the jurisdiction (with EU countries such as Switzerland being more expensive and offshore jurisdictions such as the Cayman Islands being less expensive).
ICO listing(s) US$50k Each individual exchange (such as Coinbase, Bitfinex, Kraken, etc.), have their own fees for a newly-created Token to be issued so that it can be traded. Often, these fees are quoted in cryptocurrency (i.e., Bitcoin, Etherium, etc.), and are NOT adjusted for ongoing market price changes.
Code Writing (external) and Audit Report US$25k Mining and issuing the Tokens, and establishing the tokenization protocols (such as whether certain Tokens will be destroyed, restrictions on transfer, etc.) can either be done in-house, or by a specialist third party. Again, costs vary by the complexity and quality of work as well as whether or not the issuer will prepare an "Audit Report" to be shown to investors validating the Tokens and blockchain utilized.
Marketing Budget US$100k Marketing budgets depend on the amount sought to be raised and any advertising restrictions based on the type of ICO (for example, tokens limited to Accredited Investors; restrictions on marketing to US or Chinese citizens, etc.). Previously ICO issuers established a “bounty campaign” (whereby independent third parties would promote an ICO and be rewarded with Tokens for doing so), but this practice is declining due to the prevalence of spam and artificial “likes”.
PR Firm US$50k
Issuer/Placement Agent US$50k Legal steps including AML checks, company registration (setting up SPV for collection and distribution of funds).
Road Show Expenses US$10k-20k Depending on travel, number of people going, style that you entertain people, etc.
Technical Advisors US$25k (oversee the coding, help structure the Token, advise on partners) - $25k

How long does it take to raise an ICO?








Howey Test

1) It is an investment of money

2) There is an expectation of profits from the investment

3) The investment of money is in a common enterprise

4) Any profit comes from the efforts of a promoter or third party


Open Sourcing


Smart Contract

White Paper

Appendix 1- Coindesk’s Ultimate Resources List to ICOs

For a more up to date list, see here:

Other ICO Resources
ICO Service Providers

Rather than list the service providers that we came across during our research below, we have posted three sites for you that keep the service providers up to date. This is not a recommended list, but is meant to serve as a starting pointto look into if you are interested in using a third party service provider to run your ICO.

Exchanges for Token Trading

ICO Platforms

Coindesk’s Ultimate Guide to ICOs (specifically the service providers)