When ICOs exploded in 2017, many companies used them to raise more than $3.5billion. Since then, ICOs have become a new mechanism for entrepreneurial finance and crowdfunding. Given the speed at which ICOs are becoming popular, we also have to ask ourselves an important question – “Are ICOs the right solution to raise money? If yes, how reliable are they?”
If you really want to understand ICOs and find out how appropriate are they for your business, here is an article where we will discuss the good, the bad, and the ugly side of an ICO with the help of an experienced ICO marketing firm. Stick with us!
The Good Side of an ICO
When it comes to raising funds, ICOs are an excellent solution. Unlike any other debt, the cost of capital for the company is very low here. Since stocks and venture capitals are easy on pockets, companies using cryptocurrency as investment tokens become able to offer easy access to investors from all economic levels. This is great in every way as far as start-up businesses are concerned.
What makes ICOs so much popular than other traditional assets, such as IPOs, is the fact that they rely on blockchain to keep a record of various transactions, allowing the constant update of data in mere seconds. Additionally, the transactions of an ICO are done online. Thus, everything can be investigated and traced, eliminating the hassle of hefty paperwork.
Since there are no shares given away, the future value of the business stays with the founders and investors. That’s probably the reason why there are many successful ICO projects emerging. Some of the most successful ICOs are Ethereum raising $18 million in 42 days, MobileGo raising $53million in May 2017, and NEO raising $4 billion in 2018.
The Bad Side of an ICO
Since the cost of launching an ICO is astonishingly high, the upfront risk is also high. A failed ICO can represent a significant sunk amount that can further take the company down with it. Also, ICOs have a worldwide investor community, which is not easy-to-manage. As investors might be highly speculative about cryptocurrencies, they may tend to be less patient than traditional investors. Thus, there is a considerable risk that they will start chasing you. After all, you’ve just raised a couple of million dollars from them. So, it’s obvious for them to worry.
Because ICOs are not regulated, they don’t have investor verification. They are mostly supported by investors within the community or ecosystem. That’s the reason why many projects have limited guidelines and policies to prevent fraudulent activities. ICO projects become worse when the entrepreneurs are clueless and don’t bother to educate themselves.
The Ugly Side of an ICO
A poorly propagated idea with absolutely no capital, planning, and know-how of a White Paper makes no sense. Sadly, they do exist in the real world. Some concerns with ICOs are so deep that in 2018 Google banned all adverts for cryptocurrency and ICOs, following the footsteps of Facebook. In a similar vein, some banks prohibited people to use their credit cards to invest in cryptocurrencies and ICOs.
Although the time has changed and ICOs have improved a lot, there’s a long way to go when it comes to replacing venture capital. ICOs are still relevant to blockchain-oriented businesses and appeal to a very specific crowd. This is a shame because using ICOs in different sectors can leverage their potential to reap great benefits for both companies as well as investors.
Over the last 2 years or so, there have been some notable movements within countries, governments, and institutions to find solutions to successfully regulate and legalize ICOs and cryptocurrencies. That’s a good sign for ICO development services that are flourishing amid the ups and downs of the industry. Although there is no clear-cut answer on whether ICOs are worthinvesting in or not, there have been some successful ICO projects too. So, if you’re interested in an ICO, practice proper precautions before you make any investment.
Start creating innovative ICO development solutions with a knowledgeable ICO development company today!