Cryptocurrencies are slowly becoming common across the world and investors are looking into such avenues that would help them make more. The offers in the initial coin offering events are increasing and though there are risks involved, there are unique features on offer that IPOs do not have.
- Venture Capital Restrictions
There are two ways to make money through Silicon Valley, which involve capital and connections. In most projects funding connections are a requirement which helps to get investors aboard. Many companies also need aid which is more than a simple contribution of capital such as hiring, marketing assistance, advice on products and so forth. Also, startup investors are also required to have a presence in Silicon Valley.
When there are large capital requirements, for convenience or regulatory reasons, venture capital usually remains restricted and accessible to investors who are accredited and have a certain income level or net worth. Many companies often do not have the bandwidth for dealing with thousands of investors on a small scale. It also requires due diligence, meetings, and much paperwork. It is easier to get invested in a larger scale from a small group which keeps the matter simple.
- Venture Capital Democratized
For such reasons, people have not had gains in technology startups that can be considered to be massive. ICOs bring in the possibility that investors can join in and make the most of such gains. It also helps to democratize the gains and spread them out, across the world and across countries. Even investing in crypto coins like Bitcoin, has become a popular consideration which can be done on different platforms and with different payment options such as Amazon gift card discount schemes that are offered on certain exchanges.
- How ICOs are Structured
ICOs are events for raising funds when cryptocurrency startup ventures are announced. Such ventures might have already created a platform or they wish to grow their business and scale up a project. ICOs are carried out by using cryptocurrency tokens that are offered in return for fiat currencies. The tokens are considered as equity shares of the company as an analogy. However, the tokens remain subject to how well a cryptocurrency platform form and are successful in raising the value of its token in the blockchain world. ICOs have been gaining popularity among traders and investors as expectations exist of market price increase of such tokens after an ICO. There are also high volatility aspects involved that trader does like to invest in.
- Trends in ICOs
ICOs are gaining in popularity and companies are offering similar experiences in fundraising. Some are even offering high valuations at the beginning, so that investors have to put up with a greater chance of losing their money. However, there are certain points to note. ICOs that are raising money in excess at the beginning include greater risks as the project as well as the product has not yet taken off. On the other hand, few investors have made money from a project by staying invested even when the market was bearish. This can be compared to how Bitcoin’s prices have moved, from being in the range of single digits to where it is now.
Projects that inflate their ICOs heavily in the beginning often lose out on opportunities in the longer term. Many forget that the cryptocurrencies get generated by the organic mining process which comprises of a community of supporters as well as short-term speculators. There are also other ways that investments are required in such projects. For instance, funding different stages of such projects come up from time to time for which pre-sale and pre-ICO events are held. The pre-ICO events are restricted events which help to raise money to start off a business. The pre-sale events are designed to woo larger investors who are offered to buy tokens of a platform at lower prices.
ICOs of cryptocurrency projects are not without risks. As every project is unique, it is necessary to conduct research and understand the viability of a project for the future as well as the expertise and base work that is going into it. The credentials of the team members and other background information need to be gained in order to ensure that the people involved are committed and have the expertise necessary to carry out the projects fully.
ICOs are opening up investing avenues that might be convoluted, but offer lucrative opportunities to gain as well.