Last Updated on July 12, 2019
This is the era of making your dreams a reality and enchasing every opportunity that comes your way. Today, myriads of startups are striving to launch their projects and establish themselves in the market. And, providing funds to small and emerging firms expected to have huge growth potential is as old as the trading of goods and services in the society.
The newly established companies are too small to raise their capital in the public market and also not efficient enough to complete a “debt” offering or secure a “bank” loan with their limited operating history. These days, Venture Capital (VC), Crowdfunding and Initial Coin Offering (ICO) are some of the better known methods of funding. Though they appear similar in nature their form of financing differs a lot. They all have their own benefits, challenges and risks involved.
Crowdfunding is the online offering of securities of private companies to a group of people. It is the way for businesses to raise money from the public without the involvement of banks. With GoFundme, Kick Starter and IndieGoGo being the pioneers of the industry, these websites are mostly used by the film directors looking for companies to fund their movies. They are also enabling tech startups and clothing companies looking to pounce into the retail sector raise capital for their businesses.
Whereas, Initial Coin Offering (ICO) is the new step in the crowdfunding or new kid in the town for block financing. Instead of exchanging the equity with fund’s money, firms are issuing their own digital currencies. These currencies or token can be bought by anyone in the crowdsale and proceeds of these virtual shares help fund their businesses. There are many ICO development companies in the market which offer services to help businesses launch their own ICO
Crowdfunding and ICO are very similar to each other but there many a ways in which they differ from each other.
This is the major difference between both of them. Crowdfunding projects are restricted to a certain country or region but ICO has a wider scope. Coin offerings allow anyone from any part of the world to participate in an ICO.
Type of the Product
In crowdfunding, products may range from technology, software, hardware, textile and even food. ICO revolves around the blockchain technology and tend to be more towards the tech side. Few examples of ICOs include eSports gaming – Unikorn Gold, in banking it is Bancor, BABB and Centra, and many other sectors.
Return On Investment
Crowdfunding offers early access of a working platform or already launched product. One is also most likely to get discount vouchers for signing up and contributing. However, investors who will participate in an ICO and will have profit on their mind.
Both have risks involved into them. But the losses suffered by an ICO investor would be different from a crowdfunding participant as they are not expecting for any return of investment but just a privileged access to a technology or product.
Most of the Bitcoin experts are highly keen towards ICOs because the projects engaging in ICOs have technical & logical aspects attached to their systems. Also projects involved in ICO are on the verge of success like Ethereum and Decent.
Also there are technology companies are transforming as an ICO Consulting. These ICO development companies are helping businesses understand how to build an ICO and offering ICO Launch Services in the most optimistic way.