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The ICO market has emerged as one of the best places to raise money for all kinds of unique products, this new form of crowdfunding gives entrepreneurs much more leverage and freedom than the traditional equity market.
ICOs, or Initial Coin Offerings, are allowing entrepreneurs to have liquidity without relinquishing equity, which is impossible in the traditional funding process through venture capitalists. Take for instance, the Ethereum DAO that raised over $150 million. An ICO is a truly democratic way of raising funds backed by people who believe in the vision of the project and its founders.
The ICO market has seen a 5% increase in the aggregate collections in the first quarter of 2018 compared to the 4th quarter of 2017, according to a report by ICORating.
The highest funding according to the story had been $50 million. There had also been projects like the Mobius, Leadcoin, and Zeepin among others which were able to close their ICOs on the first day.
By industry type, the highest value was raised by the financial services industry and the blockchain infrastructure sectors.
Some bad news
While there are some successes in the market, there seems to be more bad news than good ones.
Only about 50% of the projects raised more than half a million dollars. This is a dire situation for the market, and in response to this, several projects postponed their plans for the next quarter.
Moreover, the report states that about 40% of the projects do not disclose information about their CEOs or their strategies to manage the funds and assets. This is particularly bad news in an ICO ecosystem where there is much news emerging of scams and unreliable projects. 25% of the projects are said not to have a legal entity. All these are expected to diminish the trust of users in ICOs in general.
However, the report also states that if these problems are efficiently corrected there is a scope of “perfect performance and huge profitability” in the ICO market.
The ICO market is still in its infancy, investors need to be cautious of the projects they fund, and authorities must finalize a set of regulations to oversee the process and protect interests of the investors. Initial Coin Offerings will continue to grow in sophistication as a form of crowdfunding for businesses. However, in their current state, accredited investor laws exclude United States citizens from participating. In every industry, bad actors exist however the truly democratic nature of
holds much appeal to project founders and investors alike.