ICO also called token sale stands for Initial coin offering is a way to crowdfund a startup project using cryptocurrency tokens. ICO bypasses most of the current legal structures and norms for raising money and have become popular in last 3-4 years along with the increasing popularity of Cryptocurrencies.
ICOs have in last one year become an attractive and easier way to attract funding by startups especially with projects based on blockchains or creating applications for blockchains. ICOs also provide startup/businesses to raise funds easily with lesser regulatory oversight and lesser compliance which reduces the cost of raising funds both in terms of effort.
Some of the ICOs issue tokens which are integrated with the product itself , so ICOs act not only as a vehicle to raise money but also to build early user community and early adopters for the product. The users help generate awarenes for the product and can act as a force multiplier as the product grows.
Some of the biggest crypto projects have launched with ICO or token sale and some of these have become multi billion projects. Here is a partial list popular products which launched with ICO
One of the constant criticism if ICO and token sales have been the fact that it introduces retail investors to never before risks with no regulatory protection.
ICOs have also been used by some teams to raise money with little or no oversight and recourse available to investors if they do not deliver on promise. Projects which miss timelines or do not deliver atall.
ICOs are one of the most riskiest investments this is something all retail and other investors should understand.
Analysing an ICO is a tough task but if you are a newbie here are some of the key factors you should look for