ICO as raise capital mechanism for traditional companies
ICO was born in a blockchain community, and it was quickly adapted as a capital raising mechanism for blockchain products. The community funded hundreds of different blockchain projects in exchange for new cryptocurrency.
That happened because of two factors. First, if you look at the market, you can see that owning almost any cryptocurrency in the early days is good for increasing the value. Second, the market was full of Ethereum and Bitcoin, which is not tradable because of different factors (source, need, fluctuations).
For the oldest cryptocurrency investors, it was a chance to multiply their wallets by its diversification. In 2017, the new ideology was born, thanks to Ethereum EVM with smart contracts. The ideology of utility tokens that are not built only to be tradable on the exchanges but also to be attached to a strong business economy. Now, the cryptocurrency can be treated as a payment instrument or share equivalent. This strategy makes a blockchain fundraising mechanism and currency control system a perfect solution for other business ideas than next blockchain network and cryptocurrency.
Companies can use this mechanism to fundraise money in the same mechanism possible on crowdfunding systems…in exchange for something. Traditional companies can build a token/crypto economy, which will put emitted cryptocurrency on the same level as traditional money.
What’s more, they are able to set the price of a currency compared to traditional cash. For example, a company can build a web application where people must buy points to use services inside the application. They can buy 100 points for 100 dollars or 1 Token they emitted. This can set a valuation of a token on the market and makes it a tradable asset in a wider perspective than just cryptocurrency trading.
This strategy must be carefully prepared and designed, but that’s why traditional companies can do it better than blockchain community companies. Those companies will do business in a real world, making the service available in traditional channels. Imagine someone building the next Airbnb or Uber based on the currency ICO system that will be offered in a way you see now, but with attached blockchain in the backend. Imagine someone building for
ICO money a restaurant chain that will be open for everyone but accept emitted in ICO tokens/currency. That’s one of the strategies that can be applied to a traditional business. Another strategy is an equivalent of equity crowdfunding mechanism. Based on blockchain transparency and possibilities, companies will build an ecosystem for shareholders. Every emitted asset will be treated as a share and allow for rights saved in a blockchain source-code, automated dividend systems or voting (Vitalik Buterin DAICO model is something worth adapting, maybe with some adjustments).
ICO will be the mechanism of capital fundraising for traditional companies. You will see more companies that want to build something outside the blockchain world, trying to interest potential ICO investors. Only a limited number of companies have a chance for a real IPO because of the regulations and costs of operation, so ICO opens new possibilities that are worth approaching.