Pre-IDO, also known as pre-initial DEX offering (IDO), is a concept in the world of decentralized finance (DeFi) that allows users to gain exposure to new crypto projects before the actual initial DEX offering (IDO) takes place. This fundraising model offers an opportunity for DeFi projects to enhance their fundraising capability regardless of market movements.

What is Understanding Pre-IDO?

Pre-IDO refers to the offering of coins or tokens before the official launch of the initial DEX offering (IDO). Unlike a pre-sale, which is limited to a selected group of investors, a pre-IDO allows anyone to invest in upcoming DeFi projects. It opens up investment opportunities to a wider audience, promoting inclusivity and democratization in the crypto space.

While IDOs are a way for projects to raise funds, the price of tokens during the IDO can be influenced by market conditions. However, with a pre-IDO, developers can raise funds regardless of market volatility. The tokens offered in pre-IDOs are future unlocked tokens, meaning they come with a predetermined lockup period before the launch of the pre-IDO. Each token is unlocked only when the lockup period expires, ensuring a fair distribution of tokens and preventing immediate dumping by early investors.

Compared to an IDO, a pre-IDO offers more democratized investment access and a relatively high price advantage. Additionally, there is a lockup period in place, which provides a level of confidence to investors that they won’t face immediate selling pressure from those who bought tokens at a lower price during the pre-IDO phase. Once the tokens are unlocked, investors can access liquidity immediately after listing, allowing them to trade or provide liquidity on decentralized exchanges (DEXs) or other platforms.

What are the benefits of Pre-IDOs?

Pre-IDOs provide general users with exposure to venture capital (VC)-style funding events. Typically, VC firms and institutional investors invest millions of dollars in these projects, giving them the first-mover advantage and often access to tokens at a lower price compared to the public IDO. Public rounds of IDOs usually have predetermined token prices that are higher than those of seed and private funding rounds, making it more favorable for early investors to participate in pre-IDOs.

Individual investors can participate in pre-IDOs and purchase project tokens at rates similar to private investors and VC firms. This gives them the advantage of being early investors and enjoying potential price benefits compared to buying tokens during the public IDO, where the prices are often higher due to increased demand and hype around the project.

The concept of pre-IDO also benefits developers. It allows projects to raise funds and increase their capacity to develop and deliver on their roadmap. Furthermore, a pre-IDO enables developers to secure sufficient funds for the project regardless of market fluctuations, allowing them to focus on product development rather than being overly dependent on the market sentiment during the IDO phase.

Who is the author?

Oscar Yeung is the co-founder of Convergence, the first decentralized interchangeable assets protocol. With over a decade of experience in blockchain, tokenization, and venture capital, Oscar is well-versed in the intricacies of the crypto industry. He is also a partner at venture investment firms EONXI, DAO Ventures, and Liquefy, a leading blockchain and crypto company.

If you’d like to connect with Oscar and learn more about blockchain and DeFi, you can find him on LinkedIn.

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