An Excellent Alternative for Startups to Raise Funds: Ever Hear of an ICO?

The developmental trends witnessed across the various industries are happening very fast. The involvement of new technology has added to the rapid changes currently being witnessed in different industries.

To keep up with the trends, it has become imperative for startups and existing businesses to find alternative sources of capital. One of such opportunities is the use of ICOs. An ICO is an event organized by the administrators of cryptocurrency exchange platforms. It lasts for about four days during which the public can buy tokens in exchange for cryptocurrencies. With the tokens, the holders can access the services rendered by the ICO companies.  The entire process is run based on the blockchain technology through which digital transactions are managed via smart contracts.

Raising capital through ICOs

Entrepreneurs are always in need of money to grow their businesses. While searching for investors may be worthwhile, it is good to consider other alternatives.

ICOs currently represent a huge financial base, in 2017, ICOs were reported to have raised over $3.6 billion in the form of digital tokens, and this achievement is considerably higher than other venture capital funding sources.

However, before getting involved with ICOs in view of raising funds, it is essential that entrepreneurs consider the following approach.

Start with small values

First, it is good to know whether the proposed business can thrive based on cryptocurrencies and the blockchain technology. If it is discovered that the business cannot survive the highly volatile cryptocurrency market, then the entrepreneur will need to reconsider the idea of raising capital through ICOs.

Make adequate plans

It is a good idea to ensure that ICOs will provide the funding needed to develop an already outstanding product. The business should already offer viable products that are highly demanded in the market. Companies like ICOBuffer can help to explore and promote ICOs to ensure that the funding from ICOs will be an extra boost to grow the business.

Entrepreneurs who decide to take advantage of ICOs as a funding source may need to review their business plans to improve certain aspects that will conform to the cryptocurrency market.

Understand the risks

Cryptocurrency and ICOs are known to have certain risks such as the highly volatile markets, shifts in value and the tendency of government deregulation.

For business owners who have previously tried the venture capital funding system and now want to use ICOs, their business may experience changes which will reduce the value of the previous equity holders while adding value to the owners of tokens

The cryptocurrency industry is also facing risks from cyber-crime and hacking. The loss of cryptocurrency due to cyber-crime may be difficult to recover. The cryptocurrency market is also highly dependent on demand and supply. Thus a low demand may pose challenges to businesses.

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