In the economy of transformative technology, the innovators are constantly learning the ways to provide capital for new firms. InitialCoinOffering, or ICO is one of the newest capital-raising platforms which will raise the funds in the form of cryptocurrency. ICOs are considered as an alternative for startups and also for the existing companies to raise the frauds of a traditional venture capitalist at mark curry fintech. There are some similarities to crowdfunding and Initial Public Offerings. ICOs are unique as they deal with supporters than the investors. It is fact that most crowdfunding and contributors will expect a return on their investment.
ICOs are treated as disruptive innovate tools from the first token sale in the year 2013. However, the investors and supporters are suggested to be cautious of ICOs. The ICO’s are not regulated currently in the United States by the Securities and Exchange Commission (SEC). The financial authorities also have some potential for fraud. Due to this reason, ICO’s are banned in some countries, including South Korea and China.
The challenges have not slowed down ICOs, as they are highly popular. Ease of market, quick liquidity and regulatory freedom and quick liquidity are a few reasons for the rise in the trend. Startups can raise money quickly when they leverage this tool without the need to going through having to go through investment banks or venture capitalists. The freedom from the regulation will provide the innovation along with the ease and liquidity of the product. It means that investors can get a return on their investment very quickly.
Even though the ICOs are increasingly popular, there are also a few reasons why investors should be aware of the funding method. The scams and fraud will run rampant through the ICO campaigns. The absence of regulatory guidelines for ICO’s will provide an easy target at mark curry fintech for a scammer. Therefore it is more dangerous and risky for investors and secondly, there is no actual product. Hence, you are investing in a concept but not on a product. So the method of raising capital in a startup environment will pose a financial risk compared to the traditional methods.