When ICOs make financial sense.

Many have compared blockchain technology to the early days of the internet. Innovative, disruptive and world-changing, it is impacting every aspect of the economy and the world of business. Those who are able to think outside of the box as well as imagine a new business that is based on the use of blockchain technology are able to be a part of both innovation and the exciting world of tomorrow.

As an alternative to the traditional methods of raising funds, Initial Coin Offerings are becoming increasingly popular. According to various sources, funds raised through ICOs in 2017 exceeded $4billion up from just $96million in 2016.

Despite this, the term “ICO” remains rather unfamiliar to many and knowing how and when to buy cryptocurrency is an important and valuable skill. Much more than just a sound financial move, it is a solid investment in time which is required to understand emerging technologies. The act of investing in a startup company can leave investors, quite rightly, a little nervous, but in this sector particularly, many startups have already proved themselves.

A good example of this is the programmer Vitalik Buterin who is responsible for creating Ethereum, a cryptocurrency that experienced a whopping 9000% growth in 2017 alone, making it the second largest cryptocurrency in the world. These are the kind of success stories that people and investors want to see and hear about.

A shift from traditional fundraising

An ICO gives a company the ability to raise funds through selling its own cryptocurrency; these new coins or tokens allow the startup to grow. One of the main advantages of an ICO is that it significantly reduces the costs of development and marketing whilst enabling the creation of a global brand image, and encouraging the support of a network of enthusiastic investors.

It is a very different approach when compared to more traditional approaches and it allows everyone, even non-professional investors to participate in the concept. Because it is new and comes from a digital and tech-orientated origin, it automatically appeals to younger and more innovative investors. Millennials are generally more distrusting of the more traditional financial institutions and cryptocurrencies have the ability to encourage them to re-join the financial sector in a very different way.

ICOs can also alleviate geographic boundaries, unlike traditional businesses that usually have to prove their worth in their originating jurisdiction before being able to access other markets. An ICO has the power to reach potential investors all around the world by using a global currency. Cryptocurrencies have the ability to be universally accessible as well as being able to generate a genuine interest in the international community. Another advantage is that the nature of their ecosystem means that they are able to remove the usual notions of time and boundaries through the elimination of intermediaries.

An active community

But ICOs do more than just raising funds quickly. They are able to create a community all over the world from the moment of inception, therefore creating a truly global brand. During traditional fundraising rounds, brands have to solicit and reach out to existing communities where they could be completely unknown. An ICO however, allows the pitch to happen on home turf and your investors meet you where you are.

Whilst many ICOs offer a lot of great opportunities and potential, it is important to keep your wits about you and avoid getting caught up in the hype. Be sure that any project you want to invest in has been fully vetted and that you have a good understanding of the ecosystem as well as the vision of the company you want to support.

 

If you have any questions in relation to ICOs, please contact us on [email protected]