A couple of years ago, when the era of the ICO was just beginning, the demand many times exceeded the supply. Companies collected the necessary amount within a few minutes, or even seconds – while the amounts could be tens of millions of dollars. Today, when ICOs are being conducted by hundreds of companies at the same time, fundraising is becoming a much more difficult task.
Why is interest in ICO not waning?
If we compare this method of financing with the classic venture capital investment, it is easy to note the advantages – both for startups and for investors. Startups do not need to share stocks or profits and, accordingly, lose control over the business. The benefits to the investor are also obvious. When he enters the capital of the company and receives its shares, it is impossible to get out of such an investment quickly. We can talk about the horizon of investment in 3-5 years. The token, in turn, provides the ability to quickly exit and quick turnover of funds.
Formula for success
How to interest the investor and sell him your token? To do this, a startup must meet a number of criteria. The first parameter is that the audience of tokens holders should intersect with the potential user base of the project. The ideal option is when 100% of token holders are projected users. Do not forget that ICO solves the problem of not only raising funds but also attracting users. ICO is an advertising campaign that is often the most prominent marketing event in a startup’s life. It is therefore very important in this short period to attract the maximum amount of the right audience.
The second factor is the ideological component of the project. A startup must use the blockchain, thereby developing the technology. The project needs to find new areas of use of the blockchain, demonstrate its solutions to the world and, as a result, stimulate the development of the industry as a whole. A token should not be invented just to raise money. Such a project will not be able to attract market apologists.
The third criterion, we would call investment security and consider this aspect from a legal point of view.
What is the future of ICO?
There are three areas in which the ICO market will develop. First, in the future, we will see how the release of security tokens will be regulated. There will be systems with the help of which it will be possible to trade security tokens without hindrance. Secondly, the ICO exit process will become increasingly difficult over time. In the future, I think, we will not see white papers, and investment memorandums will work instead. I suppose that, nevertheless, holding an ICO will never be as difficult as entering an IPO.
Another very important area is the development of the ICO market, in which tokens will be distributed free of charge. First of all, these ICOs will be aimed at attracting users. At the same time, the projects will receive profits after the public placement of tokens. In addition, during such ICO there will be no fact of sale and, as a result, there will be no risks – you just donate tokens.