ICOs: New way to raise funds for wannapreneurs

We can't ignore the importance of capital for an emerging startup and Venture capitals often come to the rescue when it comes to the financial backing. VCs were designed to pour a hefty sum of money into a small number of companies that could be sold for over a billion dollars. It wasn’t designed to distribute capital across many companies that have the potential to succeed, hence the chances of funding are significantly lower that inhibits the number of ideas that get funded and the number of companies that are created.

To inspire innovation and empower more people we need a more flexible system that doesn't crunch entrepreneurs and investors for access to capital. We need a balance in the start-up ecosystem just like the marine ecosystem where the big, as well as small fishes can thrive together. We need to democratize access to capital and that’s where blockchain comes in with its concept called cryptocurrency.

As an early start-up, you can’t go for an IPO in a stock exchange since the company needs to deliver profits in at least 3 of the last 5 years so an ICO(Initial Coin Offering) is the best way to raise money from everyday people provided they trust the start-up and its fundamentals. ICOs are a way for young companies to raise money by issuing a digital currency tied to the value and services that the company provides for reference. 

Ethereum's ICO in 2014 was an early pioneer, raising $18 million over a period of 42 days. The currency acts similar to shares in a company, like on the public stock market, increasing in value as it's traded online. ICOs expanded the investor pool, from a limited number of VC firms to millions of common folks who were excited to invest. This led to the influx of more people increasing the chances to get funded. After taking out the middleman fees of venture capital investors had a chance to get better returns, which they eventually did as tokens purchased in ICOs returned an average of 12.8x on the initial investment in dollar terms. 

And these people took their money out and reinvest it despite knowing it to be largely unregulated and are rife with fraud and scam, in search of even better returns like the 'Bitcoin boom' which made many millionaires overnight and this creates a virtuous cycle of capital that allows many more entrepreneurs to get funded in realising their dreams and it's illustrious that access to capital is access to opportunity.

ICOs despite having caught on in the west is still in the nascent stage in India and with the recent lifting of the ban on cryptocurrency by SC, the likelihood of cryptocurrencies being recognized as an excellent choice for investment is fairly high. KC (signing off....)