Pre-IDO refers to token offerings before the actual initial DEX offering (IDO) takes place.
Pre-IDO refers to token offerings before the actual initial DEX offering (IDO) takes place. It is an innovative concept that allows DeFi users to get exposure to new and upcoming crypto projects. On the other hand, a pre-IDO allows DeFi projects to increase their fundraising capability regardless of the market movements.
What Is a Pre-IDO?
Pre-IDO refers to projects offering coins or tokens before the initial DEX (decentralized exchange) offering, more commonly called an IDO. Unlike a pre-sale, where tokens are only offered to a selected group of investors, a pre-IDO allows everyone an opportunity to invest in upcoming DeFi projects.
Although IDOs are one way to raise funds for a project, the market condition plays a significant role in influencing the price of the tokens. However, with a pre-IDO, developers can raise funds regardless of the market volatility. The tokens offered in pre-IDOs are future unlocked tokens, meaning all tokens come with a lockup period predetermined before the launch of the pre-IDO. Each token is unlocked only when the lockup period expires.
Compared to an IDO, a pre-IDO offers more democratized investment access and relatively high price advantage. Moreover, there’s a lockup period, and investors get instant access to liquidity after listing.
Advantages of Pre-IDOs
Pre-IDO offers general users exposure to VC-style funding events. Generally, VC firms and institutional investors, with millions of dollars, invest in these projects. They get the first-mover advantage and enjoy a much lower price than the IDO. For instance, the token price for public rounds of IDOs is usually predetermined and higher than that of seed and private funding rounds.
Individual investors can invest and buy the project tokens at private investor and VC-level rates through a pre-IDO. This gives them the first-mover advantage and price advantages compared to purchasing tokens during the public IDO.
The concept of pre-IDO works in favor of the developers as well. Projects can raise funds and increase their capacity by hosting a pre-IDO. Furthermore, a pre-IDO allows developers to receive adequate funds for the project irrespective of the market ups and downs, allowing them to focus wholly on product development.
Oscar Yeung, co-founder of Convergence, the first decentralized interchangeable assets protocol, has more than a decade of experience in blockchain, tokenization and venture capital.
Oscar is a partner at venture investment firms EONXI, DAO Ventures, an investment firm, and Liquefy, a leading blockchain and crypto company.
Connect with Oscar on LinkedIn.