Startup Fund Raising Through An Initial Coin Offering (ICO)

What Is An Initial Coin Offering (ICO)?

Do you possess Bitcoin or another cryptocurrency? If so, you can easily invest in a growing number of startups raising funds through Initial Coin Offering (ICO) instead of Initial Public Offering (IPO). IPOs are subject to scrutiny by regulators and venture capitalists alike. ICO provides startups with a tool to seek funding by bypassing strict regulations and lengthy due diligence process by eventual investors.

How ICO works

Initial Coin Offering, or Initial Public Coin Offering (IPCO), is a means to raise money in accordance to a road map and business development plan. Hence, ICO resembles a traditional IPO minus all the hassles of issuing a prospectus and releasing numerous KPIs before the public. Nonetheless, an ICO would state what the funding is intended for, how much money the company want to raise, and what percentage of tokens the project founders will keep for themselves. If the minimum funding is not achieved, the invested funds are returned to investors. And IPOs work for a variety of industries and applications.

Initial Coin Offering

(Image Source: Coinschedule)

To put it simply: a company is distributing tokens, which act as company shares, in exchange for digital currency. If the IPO is successful, the company develops the project further and backers can make profit when the price of the tokens is rising above the initial exchange rate or valuation, the same way corporate stocks make gains upon release of profitable quarterly or annual financial results.

ROI on ICOs

The ICO of Ethereum, a smart contracts platform, saw return on investment (ROI) on their Ether coin tokens surging nearly 87,000 percent (yes, eighty-seven thousand percent) since July 2014. Other ICOs show similar ROI rates, which makes all other sources of permitted investment income look meager.

(Image Source: Icostats.com)

The initial exchange rate of the Ethers stood at $0.40 and gradually the rate reached as high as $391, boosting Ethereum’s market capitalization to more than $36 billion. Most experts agree that the overall success of an ICO depends mainly on the underlying technology while smaller ICOs usually have more room to gain value.

Replacing Investors with Backers

 

What makes an ICO attractive for starting up companies is the fact the startup does not need to pass through complicated screening procedures and comply with sometimes contradicting KPIs and metrics. What you need is a project development plan that looks convincing to potential backers. Of course, there is danger for would be investors to back a Ponzi scheme but risk is involved even when investing in a unicorn’s IPO on Nasdaq.

IPOs are like crowdfunding campaigns but instead of donating money in exchange for, say, early access to a product, backers hope for return on their investment when the price of the cryptocurrency tokens raises.

Replacing investors with backers gives a company unprecedented freedom to operate with the raised funds at its wish. This is risky, however, and the People’s Bank of China officially banned ICOs starting September 2017, saying ICOs may result in financial instability.

(Image Source: Statista)

Arguing pro or contra ICOs is tricky. Printing uncontrolled amount of paper money also results in financial instability but this well-known rule did not prevent post-World War I Germany from inflating their national currency by printing money to repay war contributions. So the ICO and cryptocurrencies in general need not be banned but regulated to a reasonable extent in order to avoid as many fraudulent coin offerings as possible. The problem is ICOs make unbelievable returns in relatively short periods which attracts greedy backers and once an overwhelming number of speculators decide to take their profits out any ICO can go bust. Which applies also to IPOs and that is why the stock market is regulated.

After all, mining for Bitcoin and using a digital wallet to purchase goods or trade other cryptocurrencies is one thing, while backing an ICO can leave you penniless and without much chance of recovering your funds under the current regulations.

By Kiril V. Kirilov

Gartner Predicts Public Cloud Services Market Will Reach $397.4B by 2022

Gartner Predicts Public Cloud Services Market Will Reach $397.4B by 2022

Public Cloud Services Market Will Reach $397.4B Worldwide end-user spending on public cloud services is forecast to grow 23.1% in 2021 to total $332.3 billion, up from $270 billion in 2020. Garter predicts worldwide end-user ...
Gary Bernstein

AWS General Release of Amplify Flutter

The AWS General Release of Amplify Flutter The Amazon Web Service has announced that the Amplify Flutter is now generally available in a way to help make flutter apps easier and more accessible. According to ...
Gary Bernstein

Infographic: The Data That Never Sleeps

Here’s What Happens Every Minute on the Internet in 2020 In 2020, the world changed fundamentally – and so did the data that makes the world go around. As COVID-19 swept the world, nearly every ...
Tesla Twitter

The Tesla Story The World Is Ignoring

The Tesla Story The World Is Ignoring Bugatti is one of the most recognized names among luxury supercars. After the founder Ettore Bugatti died, the company nearly disappeared in 1952. Until Italian businessman Romano Artioli ...
Darach Beirne

Raising the Bar for Business Communications with Deep Customization of WebRTC

Business Communications and WebRTC By Darach Beirne, Vice President of Customer Success at Flowroute, now part of Intrado, and Julien Chavanton, Voice Platform Architecture Lead at Flowroute, now part of Intrado With rising customer demand ...

PROXY SERVICES

The CloudTweaks technology lists will include updated resources to leading services from around the globe. Examples include leading IT Monitoring Services, Bootcamps, VPNs, CDNs, Reseller Programs and much more...

  • Smartproxy

    Smartproxy

    Smartproxy is a rising star in the constantly growing proxy market. Smartproxy offers awarded customer service, impressive performance, and is serious about your anonymity (yes, cybersecurity matters). The latest features developed by Smartproxy are 30 minute long sticky sessions and Google Proxies. Rumor has it, the latter guarantee 100% success rate

  • Bright Data

    Bright Data

    Bright Data’s network is one of the most robust of its kind globally. Here are its stark advantages: Extremely stable connection for long sessions (99.99% uptime guaranteed). Free to integrate with our Proxy Manager which allows you to define custom rules for optimized results. Send unlimited concurrent requests increasing speed, cost-effectiveness, and overall efficiency.

  • Rsocks

    Rsocks

    RSocks team offers a huge amount of residential plans which were developed for plenty of tasks and, most importantly, has been proved to be quite efficient. Such variety has been created on purpose to let everyone choose a plan for a reasonable price, online, rotation and other parameters.

  • Storm Proxies

    Storm Proxies

    Storm Proxies' network is optimized for high performance and fast multi-threaded tools. You get unlimited bandwidth. No hidden costs, no limits on bandwidth. Try Storm Proxies 100% Risk Free. If you are not happy with the service email us within 24 hours of purchase and we will refund you.