Initial Coin Offering: A Different Way to Raise Money for Your Business

BY: ON THURSDAY, MARCH 29, 2018

Today’s startups have various options to raise capital. This is a good thing - many businesses need funds to get off the ground and running. In addition to the options used in years past, businesses have a new option to consider: Initial Coin Offering (ICO).

More and more businesses are finding the ICO a valuable way to raise funding. Whether or not your business has adopted cryptocurrencies, the technology offers various benefits, and the token sale process can be good for startups and businesses that want to raise capital. Here’s why businesses are utilizing ICOs over traditional options.

It opens up a global market of potential investors

A staggering ninety percent of banks in North America and Europe are learning about blockchain. When your business fundraises through an ICO, it reaches a larger market to present your company’s tokens to. This boosts the chances of finding a bigger base of investors.


It involves lower costs to address a large market

Doesn’t every business hope to spend less money and extend the reach at the same time? Due to the way blockchains process transactions, ICOs are a much lower cost option that can address and manage a global market. Banks that use Ripple – a startup that uses blockchain technology to settle financial transactions - report a 33 percent reduction in operating costs.


It offers increased liquidity

If you want fast liquidity, ICO can deliver. A blockchain opens up the option of a secondary market where tokens can be traded after the ICO. Familiarize yourself with ICO Token News so you can reap the benefits and start raising money for your business.


How can I raise funds on blockchain
?

There are various ways to finance your small business in 2018. After you make the decision to raise funds through blockchain technology, there are some things to consider. The benefits listed offer excellent incentive to use blockchains, but it’s good to realize that there are challenges you need to navigate.


Choose a jurisdiction

You need to make sure you find the correct jurisdiction for the tokens to fall under. Delaware is the corporate home to most of the Fortune 500 companies and invoked a law that allows businesses to maintain shareholder lists on the blockchain. The Cayman Islands are also an attractive option – they have blockchain friendly service provider infrastructure and experience supporting ICOs. Switzerland and Estonia are also strong choices. Learn about your options so you choose the best jurisdiction for your needs.


Understand the laws

Many countries are examining blockchains, yet are still unsure about the compliance laws. In the United States, the IRS classifies cryptocurrencies as an asset and can impose capital gains taxes. The laws that surround cryptocurrencies will likely change frequently until they’re more mature. Take the time to learn more about the tax and compliance laws of your jurisdiction and watch for anticipated changes.


Know Your Customer (KYC) Requirements

KYC is a method for confirming the identity of your investors. Some cryptocurrencies offer a privacy coin that lets anonymous transactions take place, and many banks require issuers to meet Anti Money Laundering (AML) and KYC regulations.


Management considerations

After your ICO, there are still things to consider. You might need your investors to avoid selling tokens the first year. You may need to exclude U.S. investors from their ability to purchase tokens. Compliance with KYC and AML regulations are an ongoing effort.


It’s a good idea to fundraise through an ICO with caution, but know that the blockchain market is expanding quickly and offering all businesses, no matter the experience with cryptocurrencies, a great opportunity to extend their reach to a large audience of potential investors.



Image via Shutterstock

About the Author

Michael Jonas

Michael is a digital marketer and former Manager at SEO Marketing Media. As a marketing expert he is a proud contributor to many worldwide publications including ChamberofCommerce.com

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