Why ICOs are the real deal
As bitcoin and the overall cryptocurrency market exploded in 2017, the appetite for ICOs (Initial Coin Offering) has also risen but without the same mainstream attention.
At its most basic level, an ICO is a public crowd fundraising alternative to the traditional IPO (Initial Public Offering). ICOs have quickly become the choice of global visionary companies that have an audacious plan and need capital to quickly execute it. While the general consensus is that participating in ICOs should be taken with great care, which I agree with, there are many success stories in Australia and around the world that buck this notion.
ICOs differ from IPOs in a number of ways, but one of the most important to note is that instead of offering shares in the organisation, the company doing the ICO will offer tokens. These tokens are tied to the value of the company and may even act as currency for the ICO’s platform, but do not convey any ownership in the business to the investor.
The attraction lies in the fact that businesses can raise funds without sacrificing equities, allowing founders to maintain complete directional control over the organisation. This also means that the company isn’t chasing quarterly shareholder returns which will mean the ability to deliver on a long-term vision.
The crypto tokens investors receive will increase or decrease as the platform succeeds or fails, and exist mainly as an asset. The appeal for investors is the very fast growth rate if you pick a successful ICO. A recent report from VC Mangrove Capital revealed that the average performance of ICOs delivered a +13.2x (1,300%) return.
Traditionally, IPOs can operate within a rigid framework that involves ongoing reporting, several middlemen and added service fees, whereas ICOs completely bypass this lengthy process and allow unsurpassed flexibility.
An ICO drastically reduces the time and effort required to source the required capital.
Holding roadshow meetings at several major cities for 20-40 brokers and investors,doing the same presentation, and fielding similar questions every round of finance can take the toll out of even the most experienced people.
As an ICO is only seeking money from those who believe in the company’s goal, you have an incentivised investor base that will help provide feedback on the platform as well as helping promote it online and to their friends and family. The more people that use the platform, the higher the token price becomes, and hence, your initial investment increases in value.
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Source: Why ICOs are the real deal – The Australian
