When a company wants to expand and is in need of funds, it can raise money through various efforts such as crowdfunding methods or crowdsales. In recent years, blockchain technology has given rise to the Initial Coin Offering (ICO).
What Is an Initial Coin Offering?
In an ICO, instead of an investor receiving a company share as in an IPO, he or she receives a cryptocurrency token. It is the new age strategy for sourcing for funds, especially by startup blockchain-based companies that need more funds to execute their plans.
The ICO involves the company drawing up plans for a project, and the virtual populace determines whether it would be lucrative enough to invest in the project. In the ICO plan, there will be a rough calculation of how many tokens the company plans to take for itself.
The Appeal of an ICO
Just as the charm of an IPO partially resides in the rise in the value of the company’s shares, the charm of an ICO partially lies in the potential rise of the value of the tokens that investors buy with fiat money. If the startup cryptocurrency company is able to get as much popularity as it projects, an early investor can stand to gain a lot.
Steps to Launch an Initial Coin Offering
There are a few steps involved in launching an initial coin offering. You would need to come up with a company and an idea. Then, write the whitepaper, get legal opinions from experts on the terms and conditions, and build a team. Then, create the token; there are many platforms where you can do this; take Ethereum, for example. Additionally, create awareness for your upcoming ICO on media platforms. Finally, get your coin out on coin exchange platforms. Of course, for all of these steps, you will need initial funding.
What This Means for the World
You can rapidly create an Initial Coin Offering and raise capital. Given the rapid rate at which startup companies need to raise funds, the chances are that the Initial Coin Offerings will become more popular.