ICO stands for Initial Coin Offering. It’s a radically new way for a company to raise money without having to give away a part of its business. It’s popular among blockchain companies, but they aren’t as regulated as more traditional fundraising methods.
Startups traditionally raise money by finding investors to bank roll their ambitions in return for equity. This can be tough on startups, and investors too. In the world of cryptocurrency however, there's another way. Say hello to the ICO.
ICO stands for Initial Coin Offering. It's a radically new way for a company to raise money without having to give away a part of its business.
Let's take you through an example.
You have a great idea. You've created a payment system and platform to connect cookie makers with the cookie lovers of this world. Let's call it CookieCoin.
You could go to your nearest bank manager and ask them for a loan. Or could try investors. Instead you decide to do an ICO.
You're going to create 1,000 CookieCoins and invite cookie lovers to buy them. They can buy your CookieCoins in exchange for a cryptocurrency like Bitcoin or Ether or fiat currencies like pounds or dollars.
You write out the specifics of how your CookieCoins will work - most people call this a white paper - set the date for when you'd like the sale to begin and away you go!
Many companies build their currencies inside others, like Ethereum.
Creating your own from scratch would be tricky and time consuming. The best way to think of it is like building an app for an app store instead of building an app store to put your app in.
Read our guide Ethereum's currencies within currencies to learn more.
There are a few key differences.
Below is a list of companies that have used ICOs to raise cash.
See how much companies have been raising with our ICO tracker.
*🔥 High rate of failure - Nearly half of 2017’s ICOs failed within a few months.
*🗑️ No regulation - There have been several ICOs that have been little more than get rich quick schemes for the creators.
There have been several questions around how to regulate ICOs to prevent people using them as clever scams. Several countries are working on regulatory frameworks for this.
While that's happening, ICOs are helping a lot of new companies create new ideas quickly that can be scaled in record time.
It's also allowing everyone to get access to the future tech titans of tomorrow at an affordable price today. We're all tech investors now!