Cryptocurrency Conundrum: The Pros and Cons of ICO Funding for Startups and Entrepreneurs
Whether you are the inventor of a great new product or the founder of a great new company, you have a number of choices when it comes time to fund your enterprise. You can go the traditional route, working with the local bank to get the financing you need. You can take on partners and split the profits, or you can go public, issuing shares of stock in your new company and letting the shareholders in on the game.
These days, however, there is another path for entrepreneurs and the creators of new startups. More and more business owners are eschewing traditional sources of startup funding and choosing to fund their operations through the issuance of cryptocurrencies.
These funding strategies, known as initial coin offerings, or ICOs, are increasingly popular, but is an ICO really the best choice for you?As with any type of startup funding, there are pros and cons to using an ICO for your new enterprise.
Here are some of the potential advantages of ICO funding for the entrepreneur.
• There is a growing acceptance of cryptocurrencies. After lingering in obscurity for many years, cryptocurrencies are finally coming into their own. The growing comfort level among the general public makes ICO funding possible for more entrepreneurs.
• It is relatively easy to create a new token. You do not have to be a whiz kid to create a new token – in fact, the average token requires fewer than 100 lines of computer code.
• Issuing tokens is a great way to attract early adopters, especially tech-savvy ones. That makes ICO funding a natural choice for entrepreneurs in the tech field and those in related fields like biotechnology.
Of course nothing is perfect, and that is certainly true for entrepreneurial funding methods.
Every type of startup funding, from bank loans to crowdsourcing to the issuance of common stock, has its own set of drawbacks. The creation of an ICO also has its disadvantages, including:
• There is currently a lack of regulation in the cryptocurrency market. Many feel the cryptocurrency market, and the issuance of new tokens, is ripe for regulation, and that future regulation could complicate things for your new business.
• Some ICOs have proven fraudulent, and that could poison the well for new issuers. The relatively high incidence of fraud in the ICO market could be a headwind going forward, and an impediment in the search for qualified investors.
• The tokenization process can be complicated. The ICO process can be a complicated one, especially for non-tech savvy entrepreneurs. You may need expert advice to get your new ICO off the ground and attract quality investors, and those expenses could drive up the cost of your funding.
Whether you are a serial entrepreneur embarking on your latest endeavor or a savvy inventor ready to market your new product, an ICO could help you fund your new enterprise. But as with any type of startup funding, it is important to understand the pros and cons of the ICO before you make a final decision.