New ICO format for raising funds
Projects that are offering their developments, based on blockchain technology, actively raising funds for the further development in a way of ICO. On the present day such a format is very popular among the developers and young teams.
ICO as a tool for raising funds appeared just a few years ago. Despite that it managed to develop into a multi-billion dollar industry with its own features and nuances. And so today we are witnessing the appearing of a new format — a platform for investment. Understanding this new way is important for those intending to enter Pre-ICO and ICO in the near future.
Starting with understanding of the tool
ICO is a special tool, created for the purpose of raising funds for implementation of some project. The condition for collecting money is emission and selling its own cryptocurrency, which investors buy for their own funds.
A number of projects managed to raise a major amount of money on the ICO stage. But through the time of this tool existing a lot of features have undergone certain changes. For example, Tezos Foundation raised $230 million, offered 42% of the total number of tokens to special hedge funds.
Of course, such a decision allowed to collect the required amount only partially, but it also allowed to modify the usual model of fees. This approach marked the beginning of the transition from the classical (standard) to the more innovative and efficient form of sales.
Existing ICO models
A lot of companies, that enters ICO, usually choose one of the two main methods (with some variations) of raising funds for a project:
- offering investors apptokens (utility token) — tokens, which have direct application in the network implemented by the project. Such a format was chosen by, e.g. GNOSIS and Golem Project;
- offering investors tokens, that are similar to securities. In this case people, that invested in a project, are given the right to vote, promised a certain profit, etc. This way was used by The DAO.
Despite the existence of two methods of collection, the Protocol Labs company, that is developing Filecoin, together with the AngelList investment platform announced the creation of the CoinList platform. This decision makes it possible to invest in projects even before their official launch.
It’s ICO the company carried out on the already developed platform, created by this a new reliable method for the primary location of tokens. Why was it necessary to create a new method with the two reliable already existing ones? To answer this question it’s essential to understand when it is necessary to choose a framework in the form of a SAFT agreement (stands for Simple Agreement for Future Tokens), as well as a CoinList platform, and when — another way.
SAFT was created on the basis of Y Combinator SAFE. They have the only one difference: SAFT promises investors to provide tokens, and SAFE — shares.
When and what to choose
If a company has created its own token and also has the abilities for its spreading during the ICO period, then it should be using the CoinList platform or SAFT.
But there are situations when a project is raising funds for the developing of its own app or platform along with the delayed release of tokens. Often such a format realizing by the pre-sale type.
In this case pre-sale will be a sale of the securities under the US law, and on the SEC company regulatory restrictions can be imposed. Because of this, projects often deter participation in the raising of funds of US citizens. Here it will be more rational to use one of the methods, that are listed above.
Why the platform was developed
The purpose of the creating the new ICO format (SAFT and the CoinList platform) was to simplify compliance with laws on securities, as well as the possibility of receiving funds from US citizens while holding a pre sale.
It’s necessary to understand that only accredited investors can take part in the pre-sales held at CoinList. Those who have an annual income of more than $ 200 thousand are considered accredited. If together with husband/wife the income should be more than $300 thousand per year. You can get accreditation in AngelList.
The CoinList platform is opened for organizations and investors. To conduct an ICO on it just fil the form and send the application to the development representatives. Investing is possible only after confirming the application and form submitted.
The SAFT agreement can be used outside the CoinList platform, since it’s freely available.
Analogues services to CoinList offers BnkToTheFuture. The investment here is carried out with the help of SAFT, which provides investors with guarantees regarding the forthcoming receipt of tokens. Users will be able to use this platform starting from September this year.
Solutions of this kind support investing with the help of professional investors or people with the necessary knowledge, as well as special mechanisms, that make it possible to register released tokens as securities. This simplifies their sale and increase the amount of funds received by the company at the stage of pre-ICO and ICO.
The usage of a new fund-raising format is relevant for companies that are planning to enter the fund-raising stage in the near future. For example, NeuroSeed will soon provide its solution in terms of development of Artificial Intelligence (AI) on the basis of a neuronet with the blockchain technology. The approach used by NeuroSeed will allow to create “pocket neuronets” for specific tasks, that will greatly expand the field of the usage of AI on each level, from the everyday life to the global one.