How does an ICO differ from an IPO?
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ICO and IPO, though similar in sound and are in fact techniques to raise funds, are actually at opposite ends of the spectrum – the former occurring right at the beginning of a company’s lifespan, and the latter taking shape at a much later stage when a company, now mature enough and with a proven track record, is ready to take its shares to the public for the first time for purchase. The process of the traditional IPO is a long drawn one, and calls for the participation of a panel of advisors and activation of a comprehensive regulatory oversight. It has also been the domain of the ultra wealthy and elite who have acted in the capacity of venture capitalists and angel investors.
The returns expected by shareholders who have invested in an IPO are generally:
- An opportunity to create capital gain in the secondary market.
- Become a significant part of the company to be able to attend some of their meetings and have a vote on key decisions in their capacity as shareholders.
ICOs in their turn have found favor with company founders who use this format to rapidly raise money without having to part with any share of their establishment. The process of democratization of early-stage investment starts with the tokenization of service that immediately creates an incentivized populace who double as advertisers when the brand takes off. Simultaneously, power is taken away from bigger financial institutions like VCs who once enjoyed privileges such as being privy to ‘pre-IPO’ valuation of a company’s shares with an assurance of receiving lucrative returns when the shares were floated to the general public much later.
The buyers of native assets are also at an advantage – not only does the initial value of the coins indicate the early-stage nature of their issuer, it gives an immense scope of liquidity to the coin holders. These can be listed on exchanges for trade within just weeks from purchase.
Having raised over 6 billion dollars in the first two quarters, the potential of ICOs cannot be ignored. The quickest way to take ones business operations including the fund raising process to a blockchain network is to solicit the services of a software development company specializing in blockchain. Some of the names that have gained popularity in the start up circle are ICO Box, Hashcash ICO Stage, and Priority Token. These companies have proved their efficiency and developed an impressive client list in a relatively short time and deserve to be explored by enterprises with a plan to resort to ICO marketing.
