ICOs – An Innovative Way Of Fundraising

Through the years, many innovative ways of raising money emerged and the boom that cryptocurrencies made in the last decade meant that a novel way of crowdfunding for startups was created. Initial Coin Offerings (ICOs) are the latest trend for startups to raise money and that is the main topic of today’s article.

ICOs are sources of capital for startup companies, and are used mainly because this way startups can avoid costs of regulatory compliances and intermediaries. Essentially, with ICOs you have several investors buying your cryptocurrency, and in doing so they fund your startup in hopes of getting a return investment in the future.

As of February 2018, BTXchange states that the most used blockchain platform for ICOs with more than 80% of the market share is Ethereum. According to a research by Cointelegraph, a site generalized in cryptocurrency news, the Ethereum network ICOs have resulted in phishing, Ponzi schemes, and other scams, which accounts for around 10% of ICOs.

2017 saw ICOs raise 40 times as much capital as they had in 2016, which shows the astonishing growth that ICOs are experiencing. The capital they have raised is lower than the one raised by its main counterpart called IPOs, or initial public offerings.

The downside that ICOs have is the potential for making scams.

  • In February 2018, Crypto startup Giza raised $2.4 million (2,100 ether) in a fake ICO, which engaged more than 1,000 investors.
  • The US Securities and Exchange Commission has frozen PlexCoin’s $15 million gathered in the ICO in 2017 for advertising astronomically huge return of 1,354% which couldn’t be delivered.
  • In 2017, scammers behind Benebit blockchain token system with faked team photos collected money during ICO and walked away with $2.7M – $4M.

Take a look at the infographic created by BTXchange.io to find out more information about ICOs, and what is expected from them.

 

ICOs infographic image

How to Raise Money For Your Start-Up Today

How to Raise Money For Your Start-Up Today - coins and bank notes image

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One of the greatest challenges any entrepreneur faces in terms of starting their own business is ensuring that they have enough capital behind them to launch.  The word ‘capital’ relates to the amount of money a business has in its bank that is required to launch the business; taking it from the idea stage into something more tangible.

Funding your business is both an art and science.

There are many things to consider, and it can get very tiring to keep all the plates spinning; where one second you’re having HR meetings and the next you’re having finance meetings with your bank manager whilst also resolving a customer service issue.  It can be exhausting.

Raising capital is rarely an easy task, and for many entrepreneurs it can be a scary process – going before a panel of investors and being grilled about their business or securing a sizeable business loan on their house, can all be very stressful.

Entrepreneur’s can face immense emotional pressure and work very long hours; all the time knowing the odds are heavily stacked against them, but the one thing that allows them to turn their vision into reality is to have plenty of capital behind them, and this doesn’t have to be in the form of loans.  If you are looking for an invoice finance company you’ll be surprised by how helpful and flexible they can be; this is where a finance company offers you a loan based on invoices that are due in the future.

This article offers three suggestions for raising capital:

GET A BUSINESS LOAN

The most traditional route for setting up a small business is to get a business loan from a bank.  This is one of the most easy, reliable, and independent ways of financing your business as you retain complete control of your company, because you aren’t having to offer equity to external investors; and sometimes convincing one person can be a lot easier than multiple investors.  

The downside, however, is that this finance is usually secured on an asset such as your home.

FRIENDS AND FAMILY

In some ways, the best place to look for financing your start-up are to your own savings account, yet there’s a good chance your savings have already been invested to get you this far, meaning you might need to turn to friends and family for some support.

If you have people who are open to backing your business for a small incentive (such as interest on the loan or equity in the business) this is one of the cheapest ways to raise finance, that said, it can result in a stressful experience that can ruin friendships.

CROWDFUNDING

A recent trend in raising start-up capital is crowdfunding; this is where you pitch your idea on an online platform such as www.crowdfunding.com and strangers pledge cash to back your idea.

Crowdfunding is particularly effective if your project has an element of social value about it or a sense of “giving back” as people are keen to back projects with a compelling social story.