An ICO is the initial coin offering or initial cryptocurrency offering, a method of financing new startup projects. When a company is looking to start a new project, it seeks investors interested in buying its cryptocurrencies (usually in forms of tokens) in exchange for fiat money or other cryptocurrencies such as Bitcoin or Ethereum.
Once the startup becomes successful, investors can sell these tokens. In a sense, tokens could represent certain shares, similar to traditional IPO funding. So, is ICO a good financing option for your startup?
ICO vs. IPO
IPO, initial public offering, is a traditional way of raising funds for investing in new projects. When a company goes public they opt for IPO and sell their shares. They regulate IPOs, and the procedure to raise funding with this traditional way can take forever.
One big downside of ICO is that successful and promising startups sell their tokens very fast. That means that interested investors must act as quickly as possible.
ICO vs. VC
VC, or venture capital funding, can be an option to consider, but it takes a lot of time to find experienced investors willing to risk their money for your startup. In ICOs, however, the investors are usually enthusiasts without sufficient investing experience, which means it’s a lot easier to find such people.
Another great thing about ICO is that it’s available to everyone. If you’re fairly new and seek professional guidance, consulting, and networking then VC is a better option. With VC you get to work with businesses, with people who work in the industry, and have valuable experience and connections.
If you want to raise money fast and you know how to create a big buzz around your idea, go for ICO. Just make sure that your investors can sell tokens quickly for money or major cryptocurrencies, or they will leave your project and find another ICO to invest in.
Also, pay attention to unrealistic business models, scams, and those who are only there for the hype.