Initial Coin Offering (ICO)
ICO or Initial Coin Offering is the unregulated means by which a start-up raises funds to start, develop or complete its cryptocurrency or its blockchain-based software projects. Avoiding the difficulty and the rigorous and regulated processes to obtain funds through banks or venture capital investors. Explaining it in a simple way, the startups release tokens on a new cryptocurrency, that investors buy through existing digital currencies, usually Bitcoins or Ethers, or legal tender. So, the start-up can obtain financing for the development of the project. And investors expect those tokens to increase in value and get a high ROI.
Usually, in an Initial Coin Offering, the start-up issue a document (whitepaper) presenting the service , product or solution concept, characteristics, added value, the existing needs that will cover when finalized, the amount of money required, the amount of virtual currency that the investors will keep, the accepted digital or fiduciary currencies and the duration of the ICO. If the campaign does not raise the minimum funding established, it fails and money is returned to investors.
Unlike an IPO, where shares represent a stake in the company, in an Initial Coin Offering, the tokens are usually new digital currency units. These can be traded for other currencies or for the purchase and use of certain products developed by the start-up or licenses to run the software developed. In some cases, some ICOs issue their tokens on existing digital currencies, where the tokens represent voting powers in the invested project.
In 2013, Mastercoin launched the first Initial Coin Offering and raised more than $ 5 million in Bitcoins. Since then many campaigns have been launched. Of which some have been successful, like those of Ethereum and the most recent one (2016) Wave, that raised $18 million and $16 million respectively.
At Flag Theory, we help entrepreneurs to launch an Initial Coin Offering (ICO). We assemble teams to help with all of the legal, tax, compliance and banking issues you need to be aware of for both your company and its officers.
We are experts in cryptocurrencies and understand the legal workings that underpin an ICO. We will help you to set up your company for your ICO in the most favorable jurisdiction, designing the best corporate structure and selecting the places to setup it based on the unique complexities and number of options available to your specific situation.