What Types of Projects Benefit from ICOs and Tokenization?

ICOs provide a new economic model for fundraising and launching innovative projects. Founders looking to raise capital to fund their vision for a new decentralized ecosystem that provides an innovative solution to an existing problem, or improves their current industry model, see tokenization as the key to getting their project off the ground.

big img

ICOs provide a new economic model for fundraising and launching innovative projects. Founders looking to raise capital to fund their vision for a new decentralized ecosystem that provides an innovative solution to an existing problem, or improves their current industry model, see tokenization as the key to getting their project off the ground.

There’s a simple reason for this. Tokenization doesn’t (typically) involve any loss of equity for the business, and at the same time it creates a level playing field for anyone looking to participate in a token sale — people who may have very little money are still able to make small, micro, contributions.

What tokenization does is create a currency within a project’s ecosystem. Coins become utility assets that allow network participants to engage and interact within that project’s economy. You’re effectively buying a ticket to use. The coin, or token, acquired does not grant the user ownership of any part of the project, instead, it derives its value from the token’s perceived utility. The greater the adoption of the coin and, by extension, the project, the greater its value will be. And this is the premise of ICO fundraising — presenting user networks with interesting projects, that have solid business models and strong enough disruptive potential to inspire significant adoption, and in turn increase the value of the token being offered.

Are There Any Sectors That Would Particularly Benefit from an ICO?

When considering the benefits of an ICO it’s important to separate tokenization as a funding model from the blockchain technology that underwrites it all. As the technology is developed and improved, more use cases arise for blockchain that transcend all sectors and industries. Blockchain is being used in supply chain monitoring and tracking, to secure healthcare records and ID, as a method of storing real estate and financial transactions, and even for voting. It is all-encompassing in its use cases and applications.

ICOs do span a whole host of industries and sectors too, but to a lesser degree, because of the economy that drives them. Tokenization is more pertinent to projects that are looking to innovate and create a new ecosystem within a certain sector that solves a particular problem or satisfies a particular need through the issuance of coins.

When discussing what he looks for in a project as an investment opportunity, TLDR’s Managing Partner, Tom Graham, puts it quite simply:

“We look at industries, maybe very stodgy old-school industries, with old-school business models, where there is an opportunity to find an interesting tokenization project that maybe challenges that business model or potentially provides a new disintermediated layer of economics inside that, for example, MEDIA Protocol within the advertising world. Projects that engage with the status quo economies that exist in an industry and find ways to try to make them better.”

Sectors should not be a barrier to tokenization. Potentially, elements from all industries could benefit from an ICO. That is, if there is a clear and solid application and use for a token economy within that industry; one that will replace an outdated model that is no longer fit for purpose.

One of TLDR’s founding partners, Graham Friedman, offers his insight into the types of industry that stand to benefit the most from an ICO:

“The goal of an ICO is to distribute the foundational currency of a decentralized ecosystem. Therefore, companies that benefit from network effect are more reasonable candidates for an ICO. This will also manifest itself in the response that you receive for your project. The cypherpunk roots of DLT are wild for truly decentralized businesses. Therefore, the greater the centralization, the more resistance you will get during your ICO.”

What Kinds of People Are Attracted to Investing in ICOs?

The very public nature of an ICO means that literally, anyone can participate in one. It’s the ultimate democratization of investment. All participants require is the base currency of the blockchain the ICO is built on (either Bitcoin or Ether) and they can convert this into tokens, [_‘empowering the masses to participate in investments that can potentially earn them multiples over their capital [giving] “power back to the people” instead of a close-knit club of elites.’_](https://masterthecrypto.com/crypto-ico-vs-stock-ipo/)

Graham charts the evolution of the ICO investor, from his experience:

“When I got into the space in 2010, the investor base was mostly disruptive libertarians who wanted to overthrow the system. 2016 brought on the bored bystander who realized that there was some opportunity trading Bitcoin daily. 2017 brought the curious full-time banker dipping their toes in after work, as well as everyone and their mother in late 2017. 2018 has shaken a lot of the ‘weak hands’ and we’re now back to professional investors and millennial day traders.”

Ultimately, with the sheer quantity of ICOs launching monthly, there’ll be a project to interest and attract anyone (with a bit of research and due diligence, of course).

Can ICOs and Traditional Fundraising Live Together Side by Side?

We’ve previously explored the benefits of ICO fundraising over more traditional forms of funding. TLDR partner, Andrew Durgee, sees a bright future for ICOs outside of the crypto space:

“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.”

ICOs are increasingly finding their way into more and more sectors and disrupting long-established methods of fundraising. Taking the power away from centralized institutions and handing it back to individuals is effectively the crowdfunding model, but with potential monetary returns on investment.

But it’s the fact that ICOs are mainly concerned with utility tokens that enables them to live side by side with more traditional equity investments. Andrew explains further:

“Not only can they coexist, but they can often help support each other. As the ICO markets continue to mature we will begin to see hybrid fundraising models which will pair both equity and token investing together as a package. This can help ensure that a company has enough runway to indeed make it to their token generation event (TGE).”

Are ICOs and Tokenization Only for Brand New Startups?

Although ICOs still provide a greater attraction to protocol layers, scalability, and privacy, they don’t remain the confines of new tech startups. By their very nature, ICOs lend themselves to projects that are decentralized, but you don’t have to be a new startup to explore the potential application of blockchain and tokenization as an improvement to existing economic models within your industry.

Andrew’s greatly encouraged by the movements he’s seen made by established businesses towards the ICO model:

“More and more we are seeing established and traditional businesses either executing or considering ICO models. Most recently Telegram raised over a billion USD in their ICO play paving the way for other businesses to contemplate similar strategies. Some examples of other companies evaluating ICO options include Overstock, Kodak, Atari, and even Sears.”

Does an ICO provide an innovative funding mechanism for projects seeking to challenge and improve existing business models? Yes. Is tokenization a process that every business should consider? Only if their answer to the previous question is yes. It’s easy to get swept up in a bullish market, and even try to reverse-engineer or throw together an ICO for your business because it’s what all the cool kids are doing. But ultimately, there’s something organic about tokenization. It’s the means to an end, not the end itself.

The TLDR Recap

  1. ICOs have leveled the playing field for anyone looking for an investment opportunity.
  2. Tokenization creates a currency within a project’s ecosystem.
  3. Tokenization projects should challenge established business models.
  4. Anyone can participate in an ICO.
  5. ICOs and traditional funding methods can coexist, and often help support each other.
  6. You don’t have to be a new startup to explore tokenization as an improvement to existing economic models within your industry.

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

Find out more about TLDR. Check out our social channels below:

Website: tldr.global

Twitter: @TLDR_Global

LinkedIn: linkedin.com/company/tldr-global

Medium: @TLDR_Global

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.