OK, the newest and one of the hottest new ways of raising money to fund startups is an ICO (Initial Coin Offering). Used mostly for fintech firms using the blockchain technology BECAUSE they know what an ICO is and how to use them. Lets get up to date and educated on this new form of funding (don't be the last one not knowing) because YOU may think an ICO is like an IPO or a crowdfund BUT its not. This is a very super read on a funding source that is really catching on.
(Bill Taylor, CEO)
"ICOs (Inititial Coin Offerings) are becoming more and more popular as means of funding new cryptocurrency projects. Start-ups mostly in the field of blockchain technology use them instead of traditional or heavier regulated ways of fundraising because even though they are often compared to other forms like IPOs or Crowdfunding, they differ significantly and so are the regulatory implications.
What are ICOs
An Initial Coin Offering (ICO) is a process, during which a company raises funds by issuing new cryptocurrency coins. Cryptocurrencies are digital or virtual currencies like Bitcoin or Ether. The startup creates a new currency to finance a project. For that purpose it issues a form of business plan in the form of a whitepaper that sets out the objective of the project, how much financing is needed and how it will be used, and the details of the ICO process.
These details include the duration of the ICO (usually a couple of weeks) and which forms of payment are accepted, in most cases only Bitcoin or other cryptocurrencies like Ether. In exchange the investors receive the newly created coins, which are referred to as tokens. In turn these tokens can, depending on the project, be traded on dedicated exchanges, give token holders rights as in, for instance, decentralized autonomous organizations (DAO – see related post) and so on depending on the structure and the objective of the issuing entity.
Similarities to other forms of financing
ICOs are sometimes also called Initial Public Coin Offering (IPCO), which highlights the similarity with more traditional forms of financing, in particular with Initial Public Offerings (IPOs), the issuing of shares in a company. In an IPO, stock in a formerly private company gets sold to the public, often through institutional investors though. The whole process is highly regulated with variations across different jurisdictions. The similarity stems from the selling a stake in a company and the motivation of investors of making a profit. The latter point, however, might be less prevalent depending on the kind of ICO. Take the ICO of
Humaniq, for example, which aims to support financial inclusion and thus clearly adding an element that is closer to those found in Crowdfunding, which is another popular way to raise funds from a group of people that believe in the (though not necessarily financial) success of an undertaking. Depending on the jurisdiction and the form of Crowdfunding, it is also a regulated activity, but only recently and in many countries less strict then issuing shares on a stock exchange via an IPO...."
Souce: PlanetCompliance