Growing Trend of ICOs
The term ICO can be explained as an unregulated way of crowdfunding in which there is a use of cryptocurrency. Cryptocurrency is a main source of raising capital for start-up companies. It is sold by ICOs to their investors in exchange of legal tender or Bitcoin. It is quite similar to token sale, which means a technique of selling contribution in a start-up and providing access to the investors in a project which will be started in future.
ICO - Overview
ICO is an important process in which the blockchain project is sold via token to the big investors. An ICO takes place before completion of the venture. When a start-up firm which is engaged in crypto currency, wants to raise funds via ICO, it creates a white paper which explains about the future venture, its needs, required capital to be raised, virtual tokens that founders keep for themselves and the duration of the ICO campaign. During campaign the interested and convinced investors buy some crypto coins with virtual money or tokens. When the required funds are raised, the ICO becomes successful and token money is used to complete the venture.
How it works?
Initially the virtual tokens are offered via ICO is beneficial but at times can be very risky investment as well. In absence of good business venture model there is always a risk that the business would not get existence after some time. For a newly start-up company, it is very important to have a strong venture model irrespective of getting into fundraising or tokenised method.
An ICO is not a regulated method of funding as there is no clear disclosure of the investor’s protection plan. They are based on non-regulated self-governed rules and regulations. ICO is somewhat different than crowdfunding initiative. In crowdfunding, the investors are aware about all the possibilities of the venture where as in an ICO, it has a white paper and other important information, but it is difficult to value the end project. There is no guarantee of completion of project in ICO, it is more like early staged funding.
In the recent years, it has been seen that venture capital funding in blockchain entrepreneurship has grown at a fast pace. Although there is a risk of investment, the growth of ICO listing companies and fund raised by them have shown enormous growth in the market. This growth in the ICO explains that how industry push itself towards new challenges. On the completion of an ICO, token is listed and traded in crypto currency exchange and its price reflects the whole market views, project reviews and its features. It becomes an advantage for start-up, as they immediately need to withstand the analysis of public market.
The allure of investing in block chain projects is growing. The ICO and industry are in their initial stages and the investors are also keeping caution and showing interest at the same time, which clearly means that legal framework of ICO is developing and investors find them very interesting and challenging to invest in ICO ventures.