What is a Pre-IDO?
A pre-IDO is a funding round project used to raise funds and create hype around its products before the Initial DEX Offering (IDO) occurs.
Such fundraising events are hard to participate in. Investors who get to invest in a pre-initial DEX offering undergo a selection process, and only those who get whitelisted are allowed to invest a fixed sum and get the tokens.
Tokens sold during pre-IDOs are locked for a long period of time to avoid price dumping. Investors receive their tokens according to a pre-determined vesting period, usually over 12-48 months.
An example of a pre-IDO was Elixir Games, which went through a pre-IDO for its token, $ELIX. The tokens were distributed on a 3-month linear vesting schedule, with an initial 5% release at TGE and a week cliff period. This helped the project maintain a stable price for its token without any whales dumping the price.
Pre-IDO Key Points
Pre-IDOs can be summarized in three concise points. Here they are:
- Participants in a pre-IDO get tokens at a lower price than the IDO participants.
- Developers use pre-IDOs to attract big investors and raise more capital to develop the product.
- Pre-IDOs are offered to a select group of investors and participants first.
How Does a Pre-IDO Work?
Decentralized finance protocols usually allocate a certain percentage of tokens (usually between 10% and 25%) for early investors in their tokenomics. These tokens are distributed for purposes such as pre-IDOs, ICOs, and IDOs.
Projects are often listed on launchpads to complete a pre-IDO crypto sale. These launchpads market the token on their side and attract more potential investors, creating hype and FOMO for the token.
Then, potential investors undergo a screening process. The ones who get whitelisted can buy a certain amount of tokens at a fixed price. Some are using multiple wallets and accounts to get a bigger chunk of the allocation.
Different launchpads take payments in various cryptocurrencies, but investors can usually enter most pre-IDOs with stablecoins like USDT or USDC. Ape Terminal, for example, only takes USDC.