Raising money for a venture can be challenging in the blockchain market. It is a good thing there are many ways to do it, such as bootstrapping and crowdfunding. The initial coin offering (ICO) is probably the most popular among startup companies. Get the lowdown on this capital-raising mechanism from crypto experts.
What Is an ICO?
An ICO is a popular fundraising activity in the crypto space. Startup companies launch one to raise capital to develop a new project, such as an app, service, or coin.
ICOs are the crypto version of initial public offerings (IPOs). However, unlike IPOs, they deal not only with investors but also supporters of the venture. Blockchain companies create ICOs, so they run on a decentralised platform. But that does not mean government agencies cannot intervene in cases of illegal activity.
How Does an ICO Work?
Interested parties receive a token when they buy into an ICO with digital currencies, such as Bitcoin. The token may represent a stake in the venture. Likewise, it may have some use for the company’s product or service. The potential return on investment motivates most ICO backers.
When a startup rolls out an ICO, it creates a whitepaper that contains the following details:
- What the venture is about
- The need the venture will meet
- How long the ICO campaign will run
- How much money the venture needs to succeed
- The type of money accepted
- The number of tokens the founders will keep
The company puts up the ICO in the blockchain market. If it fails to meet its target money in the set period, the company will return the money to the investors. As a result, investors have little to fear in putting funding the venture.
Types of ICOs
There are two types of ICOs: public and private. Blockchain technology companies recommend learning their difference before choosing one to create or participate in.
Public ICOs are open to the general public. Anyone can invest in them, which is both an advantage and disadvantage. The chances of them meeting their target figure is high, but the accessibility can result in regulatory concerns. Experts advise startups to secure crypto asset management when launching a public ICO to cover all their bases.
In private ICOs, the company can set a minimum investment figure. Also, only a limited number of investors can participate in a private ICO. This typically includes involved parties, such as accredited investors.
Is an ICO a Great Investment?
Yes, it is. Many of today’s most successful blockchain technologies started with ICOs, such as Ethereum, NEO, Alias, and Stratis.
ICOs are easy to launch, which is why there is many startup projects in the blockchain market today. This gives investors no shortage of ventures to choose from.
The key to successful ICO investments lies in having great crypto knowledge and staying on top of ICO news. Investors must know how to make the most of their cryptocurrencies. So securing bitcoin asset management is a great start for those who are interested in ICOs.
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