Indian Startups Adopt ICO for Fundraising

The startup industry has seen an increase in ICOs or Initial coin offerings, as a form of fundraising for their projects. In India, there is yet no regulation on ICO and many startups have been able to collect around $200 million in just a few normal ICO sessions. Startups from all over the world have collectively accumulated up to $3.7 billion in 2017 as reported by audit firm EY. Many of these contributors are India based, as a lot of Indian startups have caught on to the trend.



                                      
The concept of an ICO is not so different from that of an IPO or Initial Public Offering. Instead of giving away shares from the company, businesses will give their investors crypto-tokens. The investors, in exchange for the tokens, invest the cryptocurrency of their choice into the project. The investors’ tokens can be cashed in later or traded on multiple token trading platforms. The business or startup may set the terms and conditions for their ICO and once they achieve their target fundraising, they close the ICO.

One startup that was able to successfully fundraise via ICO was ‘Drivezy’, a P2P vehicle-sharing platform. They require a lot of funds in order to supply their users with cars. However, instead of seeking venture capitalists and sharing their equity, they found that ICOs worked better and they could meet their target. Another success story was ‘Belfrics’, a crypto coin exchange platform that was able to raise $2.2 million in funds by using ICO in 2017. The chairman of Belfrics, Praveenkumar Vijayakumar stated, “We raised funds to build a KYC-compliant blockchain and a token exchange platform”. He also claimed that most of the investors that contributed to their project were from Europe. This might be due to the vagueness and lack of regulation on cryptocurrency in India that drives startups to find funding elsewhere in other global markets. Most startups find investors in the US, Europe, and Singapore.

The company WandX was able to find investors in Singapore and raised around $1 million via ICO. With the money collected, they developed a platform that allows users to buy multiple tokens at once in a transaction. The founder Abhinav Ramesh, claims that many Indian startup businesses are adopting ICO for their schemes. However, not everyone can benefit and master the ICO. Belfrics chairman, Vijayakumar, recommends ICO for the companies that are able to market themselves well. He also warns that investors may come across multiple risks by accepting tokens due to the volatile nature of the market and the lack of regulation on ICOs.



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