What is an Initial Coin Offering?

An initial coin offering (ICO) is an unregulated way to raise funds for a cryptocurrency operation. Generally, trying to raise capital by more traditional means can involve a lot of paperwork and a lot of regulations.

When you use ICO as a fundraising method for your cryptocurrency operation, you’ll give a portion of the cryptocurrency that you sell to those who gave you money to buy cryptocurrency or to those who gave you actual cryptocurrency to help you get started. You likely noticed a similarity between an initial coin offering and traditional fundraising for a startup. You give something in order to get something. In venture capital funding, you generally give up some of the equity in the business. Since cryptocurrency is your business, you’re giving up a percentage of it to your backers. Same general idea, but obviously they are completed in different ways.

Before you start collecting money or cryptocurrency for your ICO, you really need to write up some kind of plan that explains:

  • What you’re doing. Make sure that you explain it in plain language. Don’t use industry jargon. If it can’t be avoided, make sure that you explain what the term means.
  • How much you need and how long your ICO campaign will last. This shouldn’t be a never-ending campaign.
  • What the overall objective is for your cryptocurrency project. People want to know what their funds are for.
  • How you will meet your objective. You need to have a plan. You don’t need to reveal what you might eventually consider a trade secret for your business, but people need to know the basics.
  • The percentage that backers will receive of the cryptocurrency. People want to know what it is in it for them.
  • The type of funding you’ll accept. Will you accept traditional money and cryptocurrency or just one of those options?

If you have specific questions about your ICO, consider LawTrades. We are a legal marketplace that makes it easy for tech startups and entrepreneurs to connect and work with entrepreneurial-focused lawyers. One area of the law that we’re focusing on is cryptocurrency and blockchain, and have some of the most informed attorneys in the space available on our marketplace. Visit us for a complimentary consult to start things off!

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