1. What is an ILO?
An Initial License Offering (ILO) enables businesses to raise funds based on the revenue of current or near-future products and services. The ILO is a simple distribution rights license, which expires after an agreed time.
ILO contracts are formed between the company and ILO buyer. Depending on the terms of the contract, it may also be exchanged for cash under a buyback, or for equity.
An ILO buyer agrees to promote the business to their contact network in exchange for royalties. In some cases, buyers may agree instead to make direct sales for commission. Royalties consist of an agreed percentage of gross revenues, split evenly between ILO units.
Companies may issue their ILO in a single round, or over multiple rounds. After the first round, subsequent rounds can be priced based on the value of royalties paid out previously.
ILOs can also be bought and sold mid-term on the ILO Contract Exchange.
2. Getting Started On The ILO Contract Exchange
To buy an ILO, the first thing to do is create an ILO Contract Exchange account. Head to this page and enter the following information:
- Email Address
- Phone Number
Click the Register button and a confirmation message will be sent to your email. Follow the link in the message to activate your account.
To buy ILO contracts and withdraw royalties, you will need to add a bank account to your profile. Click Bank Accounts in the Account section of the sidebar. You will need to provide the relevant details on this screen:
- Full Name
- Bank Branch Name
- Bank Branch Address
- Bank Branch Country
- Account Number
- Sort Code
- Routing Number
- Phone Number
You will also be asked to upload a clear image of a government-approved ID document such as a passport. Click Save once you have entered the necessary details.
To withdraw money and receive royalties, your bank account also needs to be verified.
Click the Start Verification button at the top of the page, and a pop-up will provide the ILO CX bank details. Transfer $1.04 to this account, using your exact username as a reference for the transfer. This money will credited back to your account. Click Transfer Made once you have done this.
Your bank account is now verified and the final step is to add funds to your profile to start trading ILOs.
Click Deposit in the Manage section of the sidebar, and enter the amount you want to add in dollars. You will be asked to provide a billing address, and to select a payment method. Choose Bank Transfer to use the bank account you added earlier, or provide a card number, expiry date and CVC code to pay with a credit card.
3. Buying An ILO
Now your account is ready to buy on the ILO Contract Exchange.
- To find a specific ILO you want to buy, click ILO Exchange in the sidebar and enter the company name into the search bar.
- To browse the available licenses by industry, click By Sector in the Trading section of the sidebar, and select an industry from the list.
- To view all available licenses, click All Trading Licenses.
Select the ILO you want to buy, and click the Buy button. This will open a pop-up with two fields. Enter the number of license you want to buy, and the price per license you want to pay.
This trade will now appear in the Active Trades column, and will complete when a matching offer is found. When this happens, you will receive a notification and the license will appear in the Your Available Licenses column.
4. Qualifying An ILO
To qualify for royalty payments, you will need to promote the associated business. This typically involves sharing provided marketing materials with business contacts and social media, though exact requirements can differ from contract to contract.
ILO Contract Exchange will need to verify that you have done this.
To check how to qualify each of your licenses, click My Licenses in the Manage section of the sidebar. Select an unqualified license to open a pop-up with instructions on how to qualify and verify the license.
5. Selling An ILO
To sell an ILO license go to My Licenses in the sidebar, or browse to the ILO you want to sell in the License Board.
Select the ILO you want to sell, and click the Sell button. This will open a pop-up with two fields. Enter the number of licenses you want to sell, and the price per license you want to receive.
This trade will now appear in the Active Trades column, and will complete when a matching offer is found. When this happens, you will receive a notification and the licenses will be transferred.
You can check recent transactions by heading to Wallet in the Manage section of the sidebar, and you can withdraw funds to your bank account by clicking Withdraw.