How do ICOs Raise Money?

ICOs raise money through the pre-sale and the crowdsale. To raise the targets set out they must generate interest from prospective investors. Therefore marketing the business and idea plays a vital role in raising money during an ICO.

Methods of raising money

Modern startups have various methods with which to raise capital. Venture capitalists might lend money to a promising new company. The issuance of stock through an Initial Public Offering can fund a company after some initial success. Even crowdsourcing methods (a la Kickstarter) have found their place in modern corporate fundraising. But no novel method is as potentially lucrative as the ICO.

ICOs are not a good fit for every company

The Initial Coin Offering allows a new company to directly approach investors and early adopters, without having to jump through the regulatory/social hoops of any of the previously mentioned fundraising channels. The ICO isn’t a good fit for every company, because it is always used to raise money for a blockchain technology. Not all companies use blockchain. For those that do, the ICO can yield incredible sums in short periods of time, with surprisingly few complications.

How to raise funds

To accomplish this goal of raising funds, a company must first create a framework for their ICO. This includes a team of leaders and developers who will create the technology; a useful concept with demonstrable utility for the world; and marketing efforts to make potential investors aware of the project.

A company can create their own blockchain through which to conduct their first ICO. More frequently, companies use existing blockchains that offer services for ICOs. Ethereum and NEO are two examples of established blockchains that offer ICO technology to new startups. NEO has performed several dozen ICOs, while Ethereum has performed hundreds.

In the period preceding the ICO, the company will communicate with its investors-to-be. They’ll exchange wallet addresses, so that the ICO can get paid, and the investor can receive their coins at the specified time. When the ICO begins, the company simply has to act according to plan. Because ICOs are so common, best practices and high quality ICO platforms make the process fairly seamless for most.

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