Using ICOs to Raise Capital
Using an Initial Coin Offering as a mechanism to raise capital seems to be in vogue. But how does this financial mechanism actually work? And how it is better than just raising capital with traditional currency?
Creating a Cryptocurrency
Creating a new cryptocurrency it extremely simple. You only need to decide on the following points:
- Total supply (# of coins)
- Name of your new currency
- Set the number of decimal places for the coin
- Coin symbol (like a stock ticker symbol)
With that and a click of the mouse, you can create a new digital currency. But creating a coin and marketing/selling it in exchange for real money are two entirely different things.
Marketing Your Currency
The road show is fully electronic in the ICO world. Instead of holding multiple in-person meetings with money-people, as is done for a traditional IPO, most ICO issuers create a white paper that describes their project. The white paper is then distributed to potential investors.
Dodging the SEC
Isn’t an ICO really just a capital raise (or IPO) in disguise in an attempt to dodge SEC Regulations?