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Funding Innovation with an ICO



 

Initial Coin Offerings (ICO) are becoming popular for startup funding – rather than the company taking a VC investment. Further, an ICO can improve the probability of venture success by creating more awareness and opportunities with stakeholders (Customers, company personnel, etc.).

This also applies to enterprise new ventures as a strategy to –

A. fund innovation initiatives in a separate company / operation
B. enable people to focus on scaling and evolving their new product or service – like a startup
C. reduce the risks and costs associated with change and innovation
D. expand the options for the company to monetize the value and benefits from successful innovation

Further insights on increasing the rewards from innovation with an ICO are provided from those who have done it –

1. BLACKMOON – CEO OLEG SEYDAK

“One of our main value propositions is to bring together the ‘best of both worlds’ for both crypto and traditional asset managers. Set a benchmark in the industry. Thus, we see that crowdfunding via an ICO (or token sale) would attract more crypto investors who have a clearer understanding of the advantages blockchain technology can bring to the industry. Traditional funding is a complicated form of achieving results, not to mention that it would limit the number of crypto investors who would be able to participate.”

2. VANYWHERE – COO AND FOUNDER ITAY SHECHTER

“ There’s no denying that issuing a token is a great way for companies to raise funds to achieve their goals. But that alone wasn’t our reason for doing it. The more important reasons were – having our own token allows us to use smart contracts that benefit our users in a variety of ways, from our rewards program, to our reputation system, dispute process and more. Further, we’re building an ecosystem, economy and brand, and having our own token allows us more control over our brand and its value and values than if we were tied to an existing currency. Issuing our own token also gives other people who believe in our vision and platform the opportunity to take part in it and help build the next big thing.”

3. CARFIX – CO-FOUNDER VLADIMIR LUPENKO

“ICOs currently present a unique opportunity to raise non-dilutive capital to build technological infrastructure such as blockchain platforms to create significant value for various stakeholders of the core business: customers, partners, shareholders. Token purchasers, when making decisions about token acquisition, need to assess the fundamental value drivers that underpin the token appreciation potential. Value created for stakeholders is typically an indication of token price growth potential.”

4. NARRATIVE – FOUNDER TED O’NEILL

“If we had gone with traditional VC funding, the company may have had strong capitalization, but the users would not have participated in or had the same level of impact on that value. By utilizing a Token Sale, we allow our future users to drive the value and participate in the success of the network. Since our network is all about user autonomy and rewarding active participants, a Token Sale perfectly aligns with the objectives of the project.”

5. COLU – CEO AND CO-FOUNDER AMOS MEIRI

“ While we could have raised VC funding, we decided to issue a token for two reasons : Firstly, when building a location or community-based business that is essentially a marketplace you have a chicken and egg problem. What should you tackle first – supply or demand ? Secondly, if you built a community in one location, how do you scale that ? How do you scale to 20 communities in parallel ? We knew we needed to raise a big round, or find a business model that will help us create a network effect. The CLN model provides both.”

6. WINDING TREE – CEO AND FOUNDER MAKSIM IZMAYLOV

“Decentralized projects by definition must have their ownership as widely distributed as possible so there is no centralized control. That is why ICO / crowdfunding is the way to fund decentralized protocols, separate project, or autonomous operations.”

7. CROWDWIZ – CO-FOUNDER SLAVENA SAVCHEVA

“Up until now, it wasn’t possible for many people to participate in the traditional funding round; this unique option was mainly available to VCs and other established investors . Also, the VCs are entitled to shares in the company, whereas crowdfunding allows the control to remain in the hands of the founders. In the case of CrowdWiz, due to VC structure, companies are relying on a sole decision maker and are completely missing the crowd knowledge factor. It has been scientifically proven that this is the most accurate method in lots of areas. Lastly, with crowdfunding, there is proof of the demand for the product / technology.”

8. ZEN – CEO AND CO-FOUNDER ADAM PERLOW

“The coins act to subsidize Associates and serve as a focal point in the system. Allowing people to buy the coins and fund development subsidizes development and aligns the interests of everyone in the system. We can’t use an existing token due to the lack of the deterministic nature required for inflating the supply curve.”

9. BANCOR – CO-FOUNDER GUY BENARTZI

“An ICO was the best path given our mission. It is especially useful when you seek to build an ecosystem that can support many players, such as the Internet or Ethereum. As Bancor is seeking to create a new standard for cryptocurrency protocols, this mechanism was best able to provide us with both the capital to build out the technology and bring in as many participants as possible to be a part of seeding the ecosystem.”

Summary

ICOs are a new business model and expand the options to monetize innovation. And with all things new, there is the potential for huge rewards – if you execute and manage the risks. Regardless, an interesting future lies ahead for ICOs.

Nov 5, 2017 – by JP Buntinx

– CAIL Monetizing Innovation commentary

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