The difference between ICO and Start-Up fundraising
Before becoming ICO advisor I was consulting start-ups. Whenever a start-up was raising money I had only 1 question for myself: ”Has this company convinced me that in few years they will be making enough profit to pay my investment back?”
In 90% of the cases the answer was ”No”.
When it comes to ICOs, I don’t ask this question. Sure in 90% cases of the ICOs the answer would still be ”No”, but this doesn’t matter, because ICOs are totally different.
When you are investing in a start-up you are getting their shares and you own certain % of that company. The only 2 cases for you to make money is if the company will make profit or will be sold.
But when you are investing in ICO you are investing the whole ecosystem the company is building. There is no need for the company that had ICO sale to be profitable, as for as long as the ecosystem is working the token price will go up and you will be profitable. In most cases even the company itself does not aim to profitability in their business, because they too will make profit from price raise of their token.
I was very ”tight” advisor when it came to start-ups. Most of them did not get my approval as I had very little believe in their success. With ICOs I’m different. Same people who knew me back them would be surprised and even call me ”loose” advisor. But this is not because my view of business has changed, it’s because I see ICOs as fairly more profitable investment.
Worst thing about investing in start-ups are their outdated stiff seed rounds with all the unnecessary bureaucracy, KYC and AML policies. Sure some ICOs have that too nowadays, but you can always skip them and invest in ICOs that don’t have that.
The good thing about ICO tokens are their liquidity, you can trade them on different exchanges within minutes. But selling company shares is mostly difficult and time consuming with all the bureaucracy involved with it.
I favor ICOs over start-ups. Even though not all ICOs will be successful they are still more prosperous than old-school start-ups. And for wise investors they offer quick profit: you can multiply your money within days or weeks after the token sale has ended. Same thing will never happen with traditional start-ups.
I see ICOs as the next big invention in financial sector after Bitcoin. The same way as Bitcoin is the best practical example blockchain the ICOs are the best practical examples smart contracts. And it’s mostly ICOs achievement that cryptocurrencies finally went mainstream.