If you’re reading this article, you surely would’ve heard about ICOs (Initial Coin Offering). Prefer this guide if you are new to ICO.
Since 2017, ICOs have successfully delivered over 3.5 times more venture capital funding for blockchain-based startups than traditional venture capital rounds. ICOs are a quick way which the modern day blockchain powered entrepreneurs look forward to getting funds for their new business ideas.
In this article, we’ll be taking a gander at how Blockchain based ICOs soon are going the replace the VC Funding process.
However, before moving on to how Blockchain-powered ICO process is making this replacement, let’s first look into the Funding industry as a whole.
Such type of funding involves gathering small capital amount from people, usually taking the help of the internet.
In this type of funding, entrepreneurs connect with angel investors for funds in return for equity shares in the business. You can receive angel funding on the complete product as well as on your app prototype.
VC refers to as the investors investing their money in return for business equity. For investment, they receive the returns only when the business goes live, or some other company acquires it.
Usually, startups prefer taking bank loans. Entrepreneurs connect with banks and assess the interest before applying for a loan.
In this type of funding, small business take help of government boards that provide loans to new businesses and SMEs.
Out of these, VC funding tops the chart. There are a few reasons why the demand for VC funding is intact.
Some of them are here:
– With VC funding, budding entrepreneurs get the experience of Venture Capitalists. When a VC shows interest in your business idea, it’s because they very well know your industry. So, the guidance you receive here would be unparalleled.
– VC Fundings help expands one’s business network to such an extent that’s difficult to achieve on your own.
– Another factor and the culmination of the mentioned points is performance. The performance growth rate that VC funded companies achieve is a lot higher than the startups backed up by other modes. Also, they have higher sales rates, R&D investment, employee growth, and overall survival chances.
While these are the reasons why VC funding dominates the landscape, but now it has been experiencing a slight downfall. In the last years, 2017-18, the launch of various ICOs was the reason for this downfall.
Despite providing above $900 million of venture funding in 2017, and over $375 million in the first two months of 2018, traditional venture capitalists rounds like convertible notes seed, angel, Series A, Series B, and others have been outcasted by ICO campaigns created using ICO development services by an ICO development company.
If we throw some light on the Blockchain based startups’ fundings in the last 14-16 months, they have successfully collected around $1.3 billion through traditional venture capitalist rounds, but also have got funding of more than $4.5 billion through ICO campaigns.
When compared to traditional VC fundraise, which requires business enthusiasts to acquire a set of validating financial and market insights pointing towards the profits of their ideas, ICOs, and their low fundraising benchmarks prove to be quite beneficial as a fundraising process.
Unlike VC funding, ICOs don’t rely on any geographical location. For entrepreneurs, who live in the U.S. and raised and ICO there, can choose to invite investor from even UAE as well.
Most ICO campaigns get launched with a duration of 30 days. Almost every entrepreneur receives their expected funds in this timeframe.
Significantly, the timeframe is much higher than the VC funding.
While these reasons show that there are numerous benefits for budding business enthusiasts and entrepreneurs of launching an ICO campaign for raising funds, there are other reasons that have made ICO campaigns favorable for investors as well, equally.
Statistics and factors point towards an increase in adoption of ICO. It shows that ICO is racing ahead of VC Funding in terms of demand.