ICOs stands for Initial Coin Offerings. Currently, it is an unregulated way by which funds are raised by new companies as well as existing ones for a new cryptocurrency venture. In ICOs, fundraising process involves using digital tokens. ICOs has become increasingly popular in the blockchain and crypto spheres. New tokens show up on trades every month and various new businesses are arranging their own particular ICO.
Companies around the world are adopting ICOs to bypass regulated capital-raising process required by venture capitalists or banks. In ICO, a percentage of the total cryptocurrency is sold to backers in exchange for other cryptocurrencies, such as Bitcoin or Ethereum. In June 2016 alone, over $600 million was raised by 36 organizations, surpassing for the first time venture funding.
You may wonder why do companies do Initial Coin Offering? ICOs in the blockchain space is widely acclaimed by the corporate world since it allow to raise funds in a faster and easier way than traditional IPOs. In addition to this, ICOs do not automatically grant token holders ownership of the company which early startups usually fear. In the last few years, despite the fact that the number of ICOs has raised exponentially, the trend has been very focused in the fintech and crypto-currency sectors.
As a rule, an ICO takes one to a month, amid which it is possible to purchase tokens in exchange for cryptocurrencies or fiat monetary forms. However, with this token, a buyer is also allowed to access future services of the ICO company and its community. And within the core of ICO, it’s blockchain technology which oversees and tracks advanced exchanges by means of smart contracts.
ICOs As A Fund-Raising Vehicle
According to industry experts, 2018 will be the year that blockchain, cryptocurrencies, and other companies will be evaluating an ICO as a fund-raising vehicle.
Though things have already been started, a review published by LendEDU, as much as 79 percent of Americans have found out about the best-known cryptographic money, Bitcoin. But of these, only 14 percent actually own bitcoins.
And that’s where entrepreneurs come in. Being an entrepreneur, at some point in business, you need to raise capital and search for financial specialists to inject cash into the endeavors. Traditionally, when your business developed, you kept on scanning for venture capitalists, angel investors and other types of funders.
VCs until recently, was the principal source of funding. But now we can add ICO and mix the method of funding for your startup. In 2017, ICOs brought over $3.6 billion in fiat money, reflecting a faster pace than that of some other beginning time venture capital funding source.
It’s a time that every entrepreneur keep themselves knowledgeable as much possible about cryptocurrencies and ICOs
Pros Vs. Cons
As now you know about ICO and it’s way to raise fund for the startup, you must be thinking “Should I Invest”. May you will not find a reason to say ICO a “Yes”. Let’s count the other side, there are conditions for which the answer is yes. In a business, the most important thing is to always keep in mind that when you don’t invest more money then you can afford to lose. Here we listed the most important pros and cons of ICO.
1. Capital Gain – A right ICO investment can make the investor millionaire with an investment of only $1000. Cases are there when the coin’s value increased 50000% since the ICO. Probably you wouldn’t hold that coin for so long and you would take the profit much earlier. However, if you are patient for a long time it can be very useful.
2. Liquidity – The cryptocurrencies are highly liquid assets. Whenever you want money in future, you can easily pull the plug and cash out the profits.
3. Experience – No matter how ICO goes, it gives you experience that helps you understand the ICO world and helps you with future investments.
1. Potential Scams – Like everything in life, the crypto world is also prone to scams. However, it will take months and years to prepare for successful scam ICO which if implemented properly can make scammers billionaire and leave investors run out of money. So if you are thinking about being an ICO investor, search thoroughly about ICO before investing.
2. Volatility – Just as Bitcoin, every other coin can be highly volatile in price. Hence you must keep eye on price surge and cut your losses in time if this happens.