What Are the Benefits of an ICO over Other Forms of Fundraising?

The cryptosphere is quickly becoming the counterculture of modern times, gaining a well-deserved reputation for being innovative and disruptive. So it makes sense to see crypto businesses turning away from long-established and often bureaucratic funding methods and embracing new approaches to raising capital.

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The cryptosphere is quickly becoming the counterculture of modern times, gaining a well-deserved reputation for being innovative and disruptive. So it makes sense to see crypto businesses turning away from long-established and often bureaucratic funding methods and embracing new approaches to raising capital.

Crypto entrepreneurs are turning the traditional dynamic on its head. They’re eschewing the conventional ‘Sand Hill Shuffle’ of incessant VC rounds and turning instead to Initial Coin Offerings (ICOs). This paradigm shift has created a new dominant fundraising mechanism for crypto projects. In fact, over $12 billion was raised by almost 600 ICOs in the first half of 2018 alone, with the top 2018 ICO EOS raising a staggering $4million.

It’s not just funding either. The innovative features of ICOs provide a host of benefits to startups that stretch far beyond just upfront cash. TLDR partner, Andrew Durgee, believes it’s time that ICOs are adopted outside of the cryptosphere:

“ICOs are absolutely not restricted to blockchain companies or certain sectors. In fact, the tokenization of traditional business models continues to grow. Everything from real estate development to small business loans are finding their way into ICO plays. By taking the investment power away from centralized institutions and giving it to individuals, ICOs have positioned themselves at the forefront of disruption in fundraising.”

A successful ICO gives the power of autonomy, community, and collaboration back to the startup. Three things that could benefit any sector.

What Are The Benefits Of An ICO?

-Community

A well-planned and executed ICO will generate a large user base. Unlike traditional investment routes, an ICO isn’t restricted to a geographical location. It’s open to the world. By removing the restriction, you allow your project a massive reach for fundraising. You are building a global community of users who are interested and engaged with your individual project.

Converting these interested users into token holders gains you a network invested in the growth and success of the project, far more than any financial institution would be. You’re creating an engaged and passionate community who can help you sustain the operation and security of the network and your project. This community is not only interested in participating in your ICO, but also shares a belief in the ecosystem of your project. They are prepared to help your token become a useable commodity within your ecosystem.

-Control

Anyone can start an ICO. By moving away from traditional funding methods, you gain greater control over how the ICO and later, the project, is managed. But, management still doesn’t mean bureaucracy. The cryptosphere is a disruptive sector that aims to innovate, often relying on self-governance and peer-to-peer transactions. The token model and other aspects are within the founder’s control.

ICOs, like all blockchain transactions, are a decentralized, transparent method of investment. Depending on the token model, it can allow for greater liquidity versus other funding mechanisms. Andrew believes that that the increased control of an ICO can be retained following successful fundraising. He explains:

“It completely depends on the token model selected by the business, as there are near unlimited options, as to whether this can continue. Assuming the fundraising has been done exclusively through an ICO and without dilution of the company’s equity, it’s safe to assume the company is able to maintain control of the organization. But it’s important to note that you still have a responsibility to the token holders as at the end of the day they will determine the value of your token ecosystem.”

It’s not just the project that benefits from this increase in control. The liquid nature of the ICO puts control back into the hands of investors too. Under traditional investment structures, founders are locked in for years, unable to monetize their stakes until approval is given by investors. With a token-based structure, founders are able to easily monetize their stake in the network without giving up their control. A token has a price immediately upon sale, and that price floats freely in a global 24/7 market.

-Collaboration

We’ve covered how important network is already, but that doesn’t just mean with potential investors. An ICO is a great opportunity to connect with other crypto organizations. Collaboration leads to a diverse portfolio, an expanded network and future potential for innovation. ICOs tend to attract people around a particular culture or behavior, so it’s also a great chance to test the viability of ideas outside of a board of directors.

The potential for collaboration is huge. Compared to local competition where you and other projects are competing for attention from the same small pool of VCs, founders can benefit from collaborating with similar or complementary projects. MEDIA Protocol, a TLDR portfolio project, has collaborated with several other projects on their CryptoCatnip news platform.

Collaborations like these show the truly global potential of blockchain projects. By seeing other businesses in the sector as potential collaborators rather than competitors you bring more diversity to your team. And, going back to community, you can combine forces when you market your respective projects. The collaboration is in your control.

The TLDR Recap

  1. The features of ICOs provide benefits to startups that stretch beyond upfront cash.
  2. A successful ICO gives autonomy, community, and collaboration back to the startup.
  3. ICOs aren’t restricted to a geographical location.
  4. Investors are not only investing in equity, but also in the ecosystem of your project.
  5. ICOs allow for high liquidity — but token models do differ.
  6. With the right ICO model, control of the organization can be retained.

If you’re interested in finding ways to collaborate and partner with TLDR, don’t hesitate to reach out here.

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This article is based on views and information held by TLDR on publication date and may be subject to change, although TLDR does not undertake to update them. Nothing contained herein constitutes investment, legal, tax or other advice, nor a recommendation or solicitation of an offer to buy or sell any securities or to adopt any investment strategy. No representation or warranty, express or implied, is made or given by or on behalf of TLDR as to the accuracy and completeness or fairness of the information contained in this article.