Initial coin offerings (ICOs) have become a popular way for IT startups to raise funding for their projects. Yet, many experts are warning the public about the risks associated with ICOs, reminding investors to be careful as the practice is still unregulated.
ICOs, also known as token sales, are a good way for startups to raise money from interested parties, similar to crowdfunding, by allowing them to buy a stake. In return, investors receive a token or cryptocurrency. The tokens are not equivalent to shares in the company. This, of course, depends entirely on how the ICO and emission models are set up – if they do not provide dividends, voting rights on company policy or buy back initiatives, then they are not equal to securities or shares.
ICOs are very popular among cryptocurrency and blockchain startups, and many were launched in the past few months. After the so-called cryptocurrency bubble (when prices of all major coins went up a couple of thousands percent), many investors turned to ICOs in search for the prospective investment opportunities, so that could be the reason for the huge success of ICOs.
In 2017, there have been over 100 ICOs so far, which collectively raised US$1.25 billion. Many startups have raised a large amount of money, for example – Tezos, a company that has created a new blockchain, raised over US$230 million in a few days.
Below is a list of things to consider when investing in ICOs, which can come handy for all those interested in backing new tech projects.
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Marcel Va, FintechFans.com