ICO (Initial Coin Offering) vs VC (venture capital) - What suits you better?
Nov 10, 2018
ICOs (Initial Coin Offerings) have proven to be a valuable new funding method especially for early stage tech projects. But what advantages does this new method have over the already familiar VC (venture capita) option?

ICOs allow startups to fund themselves without any equity commitment where VCs risk their money in exchange for company equity. If it’s possible to raise money without a share in the company, why should one do it? However, each funding technique is ideal in its own way depending on the situation and it is important to note their advantages and downsides.  

ICOs are still a fairly new concept involving the sale of a cryptocurrency to investors as a means of generating revenue. This investment model has been trending in the cryptocurrency market.

One of the key features of ICOs is the fact that they offer a simple approach to the concept of funding startups. The process is straightforward and anyone can invest in an ICO-project from anywhere in the world.
Most ICO projects present affordable investments. This strategy is aimed at making them accessible to more potential investors. Governments and regulators have criticized ICOs due to transparency issues and security of investments. ICOs have also been associated with scams making it difficult for the good ones to gain trust from investors.  

VC is an equity-based investment in companies with growth potential. These projects are a bit safer as investment options because they go through quality evaluation. VC investors are much more dependable as they are prepared to support your project for a long time and are not looking for a quick return on their investment. Most venture capitalists often contribute to the development of a business and not just capital funding. On the other hand, VC projects usually have high input thresholds and high costs of transactions are involved. The investment process can take a long time due to the strict legal procedures involved. Another disadvantage is that company founders are usually left as minority stakeholders as they give away a big portion of the company to investors since the money is coming from them.  

Traditional VC is a great way to raise money, as it is a proven method that works well and brings innovative ideas to markets. The new ICO has the potential to change how startups raise money. By allowing access to investors around the world, the ICO process opens opportunities for investors of all types. It seems that ICOs offer more versatile options regardless of the obstacles involved. Nevertheless, both methods need improving. For example, ICOs need more regulation and improved transparency while VCs may benefit from simpler processes and lower costs. The best option depends on the investor’s patience and preference, as well as the amount of money to be invested.