What is a Pre-IDO?
A pre-initial DEX offering (pre-IDO) is a funding round project that raises funds and creates hype around its products before the Initial DEX Offering (IDO) occurs.
In a pre-IDO, investors undergo a selection process, get whitelisted and invest a fixed sum to receive tokens.
During pre-IDOs, the company locks tokens for a long period to avoid price fluctuation. 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. Whitelisted investors can buy a certain amount of tokens at a fixed price. Some investors use multiple wallets to get whitelisted and secure a bigger chunk of the allocation.
Launchpads collect pre-IDO investments in various cryptocurrencies, but investors can usually enter with stablecoins like USDT or USDC. Ape Terminal, for example, only takes USDC.
