Initial coin offering is a new way of fundraising, popularly used in the cryptocurrency market by startups and projects to raise money for their business.
Initial coin offering (ICO) is similar to the Initial public offering (IPO) both of which have a common goal of raising capital for a company. But unlike IPO which take equity, investors invest in the potential of the token.
Initial coin offering provides startups with the opportunity to raise funds while bypassing all the regulations that come with IPOs
The advent ICO has seen many startups in Asian and European countries raised more capital compared to Africa where the numbers are insignificant. Startups in developed countries like China, Japan, USA, and Singapore are already leveraging on this new form of crowdfunding. Reports in 2017shows almost half of ICOs are based in Europe.
This guide attempt to explain the concept of initial coin offering (ICO) and how it’s different from initial public offering (IPO)
What is Initial Coin Offering?
Initial coin offering is simply a means of crowdfunding a startup or project using cryptocurrencies. The startups create a digital currency or token and sell it to the public in exchange of funds needed for their business. Investors, on the other hand, buy these digital tokens, hoping to sell them for profits when they get listed on an exchange or in the long-term future.
Structural Difference ICO and IPO
Initial Coin Offerings (ICO)
Decentralize (not control by single authority)
Lack Regulations and government influence is minimal
Coins or token is available to the general public.
Value is utility based.
ICO funds serve as seed money
Initial Public Offering (IPO)
Centralized and controlled by an authority like SEC
Institutional investors are given more preference
Demands proof of concept
Successful ICOs Held in Africa
Many ICOs have been held in Africa however only a few of them have been successful so far. Zimbabwe’s Golix Exchange raised $23 million in June 2018 the biggest ICO fundraise in Africa. Kora Network a Nigerian blockchain startup for low-cost money transfer raised $12 million in May 2018.
SureRemit another Nigerian non-cash remittance platform also raised $7 million in 2017. Other African focused blockchain startup that held successful ICOs include South Africa’s Wala, DreamBlock (ProsperiProp) netted $200,000 and Mazzuma a Ghana blockchain platform for mobile money settlement raised $45, 000