In this post, I would like to talk about ICOs, as they have gained popularity at a rapid pace, compared to other methods of funding. I’ll discuss the risks associated, as well as the benefits to both investors and founders.
There has been a large explosion of hosting ICOs (short for Initial Coin Offering, sometimes also referred to as a token generating event) as a means of funding startups. The investment in ICOs exceeds 4 billion currently and is projected to significantly increase in the following years.
That total volume is laughable in comparison to total venture funding which was around $40 billion last year. But it is much more similar to early-stage venture capital funding, which ICOs, essentially, are.
Many startup founders now wonder if they should “tokenize” their assets and projects and go for an ICO. Would you call that greed? Well, depends of what kind of project it is. But, it happens that more and more bad projects are “tokenizing” their fundraising.
In the traditional model of venture capital, investors get a stake in the business. That way, they get to have a say in the decision making processes of the company. But what do you get by investing in ICOs?
ICOs don’t follow these rules. Buying said tokens does not provide the investor (in most circumstances, it’s not the case with some ICOs, governance is gaining popularity recently, but is still in a minority to the standard protocol) with any rights in terms of governance whatsoever. A company can literally start an ICO on one day and disappear on the next. Well, that sounds bad and it has happened. So remember, do your research or avoid ICOs.
Founders much appreciate this model. Having the possibility to make your own decision, without investors having a say does seem great. All the while, the founders receive the much needed funds for their project. Governance is actually one of the reasons founders do hold ICOs. That could be great, but only if the management knows what they are doing.
Just like each part of project building, there is an opportunity for gains and losses depending on the quality of people you surround yourself with. Human resources are crucial to every project.
ICOs with proper governance models are, by far, the best option in terms of middle ground in my opinion. Investors deserve a say in the future of the company/startup. At InoCoin, for that matter, we place great value on our community. We wouldn’t be able to be the great crowdfunding platform we are without them.
The main problems with ICOs are regulation, or better yet, a lack of regulation. ICOs bear certain risks, which are, I would agree, proportionate to the potential profits. There is no guarantee on who is on the receiving end of an Initial Coin Offering.
Much of the laws around them are shady and unclear, this area of policy is not going to remain unregulated for long. Regulators are starting to pay attention to the crypto space and it’s only a matter of time before we start seeing some serious hammering down on some of the ICOs.
The main point I want to emphasize in this article is that ICOs can be both bad and good, depending on the team behind it. Regulation would greatly help clear out the good from the bad, but until then, I believe our InoCoin Platform is one of the safer ways of distributing funds. On the InoCoin Platform the community decides on the project that will receive the funding and because of that only the best will succeed in doing so.
Remember that listing projects on our platform is currently free, but it won’t be for long. So don’t miss your chance and start making your idea a reality today.