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Why ICO's Are Popular For Startups

Updated: Feb 20



ICOs, short for initial coin offerings, have become extremely popular over the last five years, a trend that culminated last year as startups managed to raise an average of $100 million on a monthly basis this way. With such impressive figures in play, it's hardly surprising that initial coin offerings managed to surpass traditional venture capital funding for early-stage startups in 2017.


In the infographic below, people from BTXchange analyzed what makes ICOs such a popular option for early-stage startups as well as what sets them apart from other fundraising methods. The most significant reason is the ability to gather large amounts of cash quickly and without the restrictions found in mainstream funding platforms.


Further, you maintain a good amount of control over your startup if you launch it as an ICO. Unlike traditional IPOs (initial public offerings), investors who participate in ICOs don’t get a share of the company, but instead get access to a unique product or service and an opportunity to sell the tokens once they go live and, ideally, when their value increases.

Despite some obvious benefits that ICOs bring to the table, launching a startup via a coin offering does not automatically guarantee success. If nothing else, the sheer number of failed ICOs is the best indicator of this. So who's fault is that? Is the ICO model broken? Or are founders making terrible mistakes during an ICO?


Neither.


The reason why more than half of ICOs fail is that such a fundraising model is not an ideal fit with every single startup. Founders need to be able to distinguish if their idea would be better off with a different funding mechanism, researching angel or venture capital before they hop onto the ICO boat and potentially do more harm than good to their up-and-coming company.


And the only way they're able to do that is to completely understand the ICO mechanism - something the following infographic was designed to teach.


It is a fantastic resource for anyone interested in initial coin offerings, as well as a perfect launching pad for anyone still unsure of whether an ICO is the right choice for a startup idea.

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