In cryptocurrency, an ICO is the equivalent of an IPO (Initial Public Offering) in fiat. A company seeking to raise money for an app can launch and ICO to raise funds. This can be known as “selling tokens.” A token is a digital representation of a particular asset or utility. It functions as a unit of exchange on distributed ledger technology like blockchain. An organization can sell tokens to investors. Tokenization is the process of converting something of value into a digital token that is usable on a blockchain application. Some examples are security tokens, utility tokens, value tokens, and governance tokens.
Pool of potential Investors, token purchasers is global, essentially anyone who has access to distributed ledger technology and is interested in supporting your technology.
Large investments circumvent institutional scrutiny of banking. Quicker fundraising may mean quicker traction and build cycles.
Large crowdfunded projects may receive global attention which is helpful marketing for delivering products and services after receiving funds.
No disclosure requirements. Potentially easier to raise for early stage companies.
Funds raised by ICO are inherently extremely volatile. Crypto is a largely unregulated space and there is considerable risk that the regulators such as the SEC, CFTC, FCIN, IRS, OCC, FCIC, and FTC may bring legal action against the company.
As web 3 offers access to a global investor community, challenges may arise.
Cryptocurrencies are highly speculative assets that draw investors who often seek high returns over a short timescales. ICO investor tend to be less patient than a traditional equity investors, and my not care about mission, impact, or sustainable growth and development. These pressures can be strong and may create emotional-charged negatives narratives about your brand, products, services, and company that spark F.U.D. (fear uncertainty and doubt.)