What is an ICO?
Did you just found out from an ICO marketing agency about a new start-up who is presently raising capital through crypto coins and you feel like participating? This can only be done through initial Coin Offerings (ICOs). For those newbie investors who are considering investment in Initial Coin Offerings (ICOs), this write-up will give you a basic guide to everything you need to know about ICOs – what it is, and how to get started as a beginner.
What are ICOs?
Before the emergence of ICOs, the available ways of raising funds for a firm are private equity, venture capital, bank loans, or Kickstarter. However, these methods have shortcomings like limiting investment opportunities to a small number of investors among others.
However, ICOs are available to everyone and anybody can participate in ICOs.
ICOs are actually a means of crowdfunding for firms that raise capital by accepting digital currencies instead of fiat currencies. The crowdfunding event is called token sales, where digital tokens (crypto coins) are given to investors in exchange for their investment. Just like shares, these digital tokens represent part ownership in the company and also stand as a promise of future profits or the firm’s product or services.
Depending on the nature of the ICO, after the ICO token sale is over, the tokens become available to trade on exchanges, while some are not listed on exchanges. Most of these tokens may rise in value, and subsequently, make millionaires overnight.
In ICO, digital currency is received from investors, while in IPOs, fiat currency is received from the investors. Today, ICO has risen to be a legitimate disruptive threat to venture capital.
How ICOs work?
All ICOs follow the same procedures to launch their token sales. These procedures are:
- A firm, business, or team proposes an economically viable blockchain project. But need to raise capitals through ICO to make the project a reality.
- The project produces a white paper describing the technical specifications, business model and a roadmap to achieve scale and generate revenues.
- The projects will have a working prototype as proof of concept. Though, there is no working prototype sometimes.
- The firm, business, or team carry out series of intense marketing campaigns through forums, google ads, social media, video bloggers, and reviews, etc. to get prospective investors aware and excited about the upcoming ICO
- The project then outlines its terms and conditions of its upcoming token sale to the general public
- the number of tokens available for distribution
- the price of each token
- the utility of the token
- how much the projects are targeting to raise
- ICO token sale launches and the coins are distributed to investors that take part in the sale, which is conducted on cryptocurrency blockchain.
- After the sale, the tokens may become available for trading on exchanges.
Main Issues with ICO
- ICO lacks regulatory oversight: there is no regulatory body to protects investors. Presently, the ICO market is not regulated and investors, who are at their own risk, are susceptible to fraudulent/scam ICOs.
- Unlike in shares and stocks, ICO token neither confers any ownership rights in the firm nor entitle the owner to any form of dividend-like cash flows.
- Most ICOs have no track record: in the real sense, most ICOs don’t have any working product. More so, it asks for an incredibly large amount of capitals.
However, you can overcome these issues by approaching a professional ico marketing agency in south africa like Else Mart. Please contact Else Mart on +27 (0) 61 578 0000 or email us at email@example.com, With Else Mart, you are in safe hands with your ICO investment.