You’ve heard about ICOs that raised millions within a span of only a couple of days. You have a startup based on blockchain technology, and you are looking for funding. You feel a little bit insecure at what the best option is for your business, there is so many ways to fund and you are not sure if an ICO is the best way to go for you.
With the introduction of ICOs in 2013 by Mastercoin, the world of seeking funding for projects has been radically changed. For blockchain-based startups, it has become a lot easier and faster to get the necessary funding for dreams to come true. Ever since the very first ICO back then, the amount of new ICO projects has been seering high. Sure, it’s not always easy business, nearly half of the ICOs fail. Doing an ICO means that you have to make a lot of preparations, from white paper to legal issues to make sure that hackers won’t be able to attack. There’s a lot of technicalities that go into it, but you’re not in it alone as there are many agencies out there who can help you with tech, development, legal issues and marketing. So if you have a will to invest in marketing and grow your community then ICOs definitely can be a good choice and opportunity for you.
As a marketing agency for ICOs, we have not only guided our clients through their token sales, but we have first-hand experience with seeing how their business actually benefited from having an ICO. So if you are still doubting if an ICO for you is the best choice or not, we will lessen your worries and doubts and explain to you why and how an ICO can add value to your business.
The truth about IPOs and venture capitalists
The traditional ways of seeking for funding for your company can be awfully time consuming, asking grants from the government, doesn’t really guarantee you to get the grant, initial public offerings are a good way to raise capital for growth, but unfortunately, they are just not for you. You need to have some kind of revenue, so usually, IPOs are not open to startups. Venture capitalists sure seem like a good way to get money instead of IPOs. But all of these traditional methods require a lot of your time, are expensive and have so much paperwork, legal aspects, and regulations to them, that there must be better ways to raise money for your company.
One of the clearest downsides to both of these ways to raise money is that they are very exclusive, you need the happy rich few to be able to invest in your startup. What you’re basically doing, is selling shares of your company. This means that the people who receive those shares have power in decision-making. You will need to answer to a board of directors when you make decisions. That goes hand in hand with the fact that it’s for entrepreneurs often a humiliating procedure to raise money through venture capitalists because you basically have to beg for money. You’ll receive a lot of rejections before you eventually get one green light.
Moreover, you will have to share your profit with your investors. This is not always a worthwhile trade-off unless you benefit from the value they bring as financial backers and advice. The price you pay ultimately is that you lose control of your own company. Having to deal with sharing ownership could lead to tension, conflict in vision, management style and ways of running your own business.
Crowdfunding is the alternative that is the most comparable to what an ICO is, however, the market there is even more competitive because it’s not strictly for blockchain-based startups, anyone can do it. Most crowdfunding projects are also restricted to a certain region or a certain country that is native to the people behind the project. That also means that with crowdfunding, you will most likely not be able to raise as much money as you would raise with an ICO. That also translates, a crowdfunding campaign even when successful will never reach hundreds of millions like ICOs do.
The benefits of an ICO
So this is where ICOs definitely come in hand. ICOs are definitely a really fast way of seeking funding. And there are several extra benefits next to getting funded that you might want to take into consideration. For instance, we talked about the exclusivity of the traditional way of seeking funding, ICOs provide you a possible global pool of support. The cryptocurrency and blockchain community is mostly based online and because of that, every one of them is able to invest in your project. So ICOs are not as exclusive as traditional ways, even though community members need to be whitelisted to ensure that they are not bots or not scammers. Because of ICOs being a global phenomenon, you will be able to raise more than you possibly could with IPOs or VCs. Talking about the latter one, currently, VCs are also investing in ICOs, instead of receiving shares in your company, however, they get tokens. Which also means that they have no power in your startup.
If you issue a utility token, you won’t have to deal with equity, which basically means that you don’t have to deal with partial ownership and decision-making power in your company. That’s because utility tokens allow token holders to have access to the utility and usage of the blockchain powered platform you power.
If you are worried about your product and idea and often are in doubt whether you will be able to sell and pitch your idea, you will find that ICOs will also offer you some reassurance whether you really have a great project or not. You get immediate feedback from the marketplace as to whether your idea has support, this translates into people supporting your project, but also talking about it on different channels, mostly being Telegram, Reddit and Bitcointalk.
While as after looking for traditional funding you most likely will need to still build your brand and invest a lot of money in that. By doing an ICO, you already build your brand and people are already aware of you (if you invested in a proper marketing campaign). You will get a following that will also stick around after they have invested in your product, a user base.
So hopefully after reading this, you will understand a bit more about how an ICO can add possible value to your business and why choosing for an ICO as a way to seek funding is a new innovative and fast way to get the money you need for your project.
To summarize, ICOs are open to anyone, global, when issuing a utility token, you won’t have to deal with equity and partial ownership, you will have a community behind your product, you will gain a better understanding of whether your project is worth it or not and ultimately you will get a large pool of users. Through an ICO you will be able to raise more and fast, an example is Telegram’s ICO that managed to raise nearly 2 Billion US Dollars. In 2017 the average being raised by an ICO was no less than 17 Million US Dollars.
Hopefully, this article has helped you in making a definite decision if you should take the leap and conduct an ICO instead of seeking for traditional ways of funding. If you would like to get an understanding of what a marketing campaign looks like and how to conduct a cost-effective and successful ICO marketing campaign, read our guidebook, which will offer you some tips and tricks.
The article is written by Laureline Tilkin-Franssens from ReboundCrypto. Find what they do and follow them on Twitter.