Why Would a Startup Go for ICO?
- In 2017 ICOs collected over $ 3.6 billion in digital tokens;
- During the ICO, investors buy tokens in exchange for crypto or fiat currencies. The token provides access to functionality and services of the project;
- Blockchain technology manages digital transactions and tracks them via smart contracts.
Participation in the ICO is open to the general public, so anyone from the crypto industry can invest. This means that the project raises funds in a decentralized manner. The more international investors enter the project, the less centralization is there. This is the essence of the cryptocurrency, after all.
ICO allows startups to bypass the timely and complex process of raising funds through VC. People investing money get access to those tech companies that are usually on the radar of big investors. Besides, cashing out of funds is usually faster compared to an IPO.
The ICO process is rather short and is open to global participants. The only limit to fundraising potential is the efficiency of marketing strategy. The ICO does not imply a waiver of equity, as is the case with traditional fundraising options. The most attractive feature of ICO, though, is that it stimulates the demand for products and services offered by the project. By purchasing tokens, participants become customers. Thus, the startup addresses two tasks: fundraising and reaching the critical mass of first users.