ICO(Initial Coin Offering) is the new age of crowdfunding, and believe it or not companies are denying the offers of Venture Capitalist for their sourcing their funds and going for this new concept of raising fund.
According to an article from Economic Times, “At least a half dozen Indian startups are skipping venture capital dollars to raise funds through ICOs despite the regulatory ambiguity, as investors take longer to scrutinize balance sheets and conduct due diligence before parting with their money”
The new form of raising funds is getting popular among a lot of startups because of a lot of reasons, earlier if a company had to go big, in order to raise funds they had to go through an IPO(Initial Public Offering) where a company issues its shares publically in order to raise funds through a public exchange.
But, What is the difference between IPO and ICO?
Well, there are a lot of fundamental differences between the two concepts, traditionally, an IPO has got a lot of compliances to do in order to raise funds and get itself listed in the public exchange. A company raises funds from the public by issuing its shares for a particular amount of issued capital. For an IPO a company has to register itself under a securities exchange for its shares to trade, and there are a lot of legal compliances regarding the registration of the business and its operational aspects. A prospectus has to be drafted by the issuer, which is the synopsis of the company’s past performance its finances, operations, the products they are dealing with and the risk factor of the business.
Then the company has to issue an Underwriter, an underwriter is an investment bank that employs IPO specialists, these bankers ensure that the IPO is successful, the underwriters’ contacts the large prospective buyers of the company’s stocks and these companies deal in Mutual Funds and Insurance companies. The underwriters take a hint of the prospective price that the shares can be sold for and recommend the price of the IPO that will be traded for, in case the shares doesn’t sell off, the underwriter will take the responsibility to buy off the shares in order to make the IPO successful.
It’s a long process and there are a lot of other technical aspects to cover but we have taken care of the basics of IPO.
- Create an idea of your project, not abstract but full and comprehensive one
- Develop an MVP(Minimum Viable Project)
- Decide your Crowdsale Pricing Strategy
- Build a team
- Choose advisors for your project, and choose carefully
- Choose a platform for your project (it is Ethereum in most cases)
- Establish a legal entity
If your project is good enough and the prospective target segment you are trying to hit likes your project, also if they seek value in your project you can easily raise funds, in a time period which would be a lot less than traditional IPO.
Now the question is how can an Indian company go for ICO?
While the Indian cryptocurrency market scenario would not be so favorable for any startup coming up with any cryptocurrency of its own, or a product dealing in Blockchain technology, there are still companies who are opting for ICO’s.
An article from Economic Times talked about the Indian Ventures going for ICO’s “Bengaluru-based blockchain startup WandX launched its ICO on October 27 and had already raised $430,000 as on December 4. Its target: $4 million. “This is an easier way to raise money. We raised about $400,000 in a month, which would’ve taken at least six months through a VC,” said Abhinav Ramesh, CEO of WandX, which allows users to create and trade in financial products on crypto-assets through its platform. “Moreover, we don’t give away any equity and people who participate are primarily cryptocurrency enthusiasts.”
Any business venture who want to opt for ICO’s can reach out to the countries where there are favorable conditions and the environment is conducive enough for the growth of the company, the best part of an ICO is there are no geographical boundaries limiting the scope of the ICO for generating its funds for its business. The business can be located anywhere in the world and more the country’s policy framework and regulation are lenient and favorable enough towards both cryptocurrency and Blockchain technology, the better are your chances of ICO getting success, the reason is simple enough, investors would ensure they have invested in the right place, a country where the regulations and policies are favourable for the business, will ensure the business runs for a longer period of time and there will no government interference, thus ensuring their investments are protected.
We have drafted an article selecting the crypto haven countries in 2018, handpicking the best countries to start a business in the field of cryptocurrency and Blockchain Technology, where the governments appreciate the cryptospace:
Hope the article gave you some insight on how an Indian company can opt for ICO.
Disclaimer: The opinions presented here are of the Authors. Readers should do their own due diligence before taking any actions related to the promoted company or any of its affiliates or services. CoinScenario.com is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in the press release.