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OBSESSION WITH INITIAL COIN OFFERING – GET TO KNOW THE ICO3 min read

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Initial coin offering: since the inception of the human race, we are always obsessed of with how things have been done, others like to challenge the status quo and thus plunge into how the present ways can be improved or proposed a new way of achieving a particular end. In the financial world, the urge to pave ways for a startup to raise money has always given rise to different experiment by those in the know on how to aid new startup launch, stable and thrive in the business circle, none has been more prominent than the rise of digital currency new proposition named Initial Coin Offering or ICO.

 

In time past, the modus operandi around this or for a certain technology company to raise fund is a founder selling some of their stakes (ownership) in exchange for cash to aid the new startup to sustain in the market and these funds are majorly sourced from venture capitalist (investors) as they called, these set of people take risks believing their newly acquired stake will appreciate in the near future and double the initial amount they invested in the startup, initial coin offering takes this scope albeit a slightly different and transparent approach to Initial public offering.

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Initial Coin Offering, what is this thing exactly?

Simply, initial coin offering involves selling a digital currency at discount (a token) for a company to raise the fund with the hope that the invested cryptocurrency appreciates, if it appreciates, the investor has made a profit, this is not much different from speculations surrounding traditional stock market.

 

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Digital currency

 

However, unlike the traditional stock market the coins in an Initial Coin Offering does not confer ownership of a claim of a stake in the startup or entitlement of dividends or cashflow, investors in an ICO are major enthusiasts, cryptocurrency communities, and stable investor capitalists. Initial coin offering or any other cryptocurrency is extremely risky as it’s still unstable but this has been shadowed largely due to the upward rapid growth in the value of a bitcoin which presently sits at $4,000. This upsurge has convinced the cryptocurrency fanatics as well as professional investors to ICOs.

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What risks lurk around ICO?

There’s always a correction time and certainly, there are losers if and when initial coin offerings thrives.

Taking a long view of this new way of launching a startup and staying afloat, investors power are derived majorly from their superior judgment based on experience, venture capitalist funds a project that shows a promising future and worthwhile, otherwise they take their cash elsewhere if they see that the startup is not going to guarantee their ROI (return on investment), an owner is left with nothing than to look for crowdfunding or to source for cash from friend and self-funding (bootstrapping). This new way of launching a startup retains much power and control for the owners from handing over reigns of their cherished idea over to venture capitalists whose only objective is their ROI.

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Startups can now decide whether they want to go the old way of sourcing funds from venture capitalists or go to cryptocurrency enthusiast which guarantee stable cooperation without haggling for control or ownership and venture capitalist have to sit down re-strategized on what they are offering and how to remain viable, aside from the prestige, startups may find more able supporters within the cryptocurrency community willing to fund their initial coin offering to their startup if they are wary of handing over control to the venture capitalists.

Related Article: Understanding What an ICO(Initial Coin Offering) Is And Why Government Wants to Regulate It

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