Initial Coin Offerings (ICO) market is growing. First quarter of 2018 records new records. In just three months, companies raised more capital than last year. Telegram holds the record for the largest placement with a volume of 850 million Euro.
Companies like Telegram collect funds from investors via ICOs to implement growth plans. The counterpart to this in the financial world is the IPO or Initial Public Offering (IPO). There, volumes for placements of tech companies are significantly higher. Spotify have nearly $ 30 billion from investors this week. Swedish company avoided usual way in the placement of the large investment houses in the stock issue and listed securities directly on the stock market. A hitherto unusual step that, however, saves the extremely high fees. The behavior of Spotify shows that many young companies are looking for cheaper sources of capital. ICOs are well on the way to filling this gap in the market.
At the same time, development is progressing rapidly. In the first quarter of last year, there were virtually no major initial coin offerings. It was not until May 2017 when volume rose, to just over $ 1 billion in December 2017. Interest has been in line with Bitcoin’s strong upswing and de facto all other crypto currencies. But the development of ICOs is currently continuing unabated. Each month in 2018, financing volume was well over $ 1 billion. In March, 54 successfully listed ICOs even exceeded the US $ 2 billion mark for the first time.
Capital raising for start-ups
In addition to many successful ICOs, critics often refer to the failed attempts in which companies do not even reach the specified softcap. These experiments and experimentation testify to a rather young market. Participants test the limits and tastes of investors.
Many companies find it difficult to get a full picture as an investor. First platforms experiment here with ratings in which experts rate the project and the founding members. In addition, voluntary and rudimentary KYC procedures are available to enhance the integrity of the ICO. Procedure recalls the basic features of the ratings of stock exchange companies – with all the known advantages and disadvantages of ratings. In the future, there will be even more solutions to choose from. More and more start-ups are considering ICOs for raising capital. More than 1,300 young companies from various industries are currently trying on their own initial coin offering.
The success also attracts larger investors to the stage. Family Offices – Wealth managers of wealthy families – are looking for alternatives to the traditional capital market. They stand for the large sums of sums in the five-digit range and upwards. This is well above the average capital investment of private investors: Reliable figures are not available, but estimates are from about 200 to 500 Euro per person and ICO. The entry of Family Offices could be the next big step for ICOs.
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