ICO vs. Venture Capital – What’s best for your company
If you are currently reading this, there is a fair chance that you have your company at an early stage and are thinking about boosting money to grow. But are you aware of the best option for your company? Venture capital is one traditional approach of raising capital where you can raise money from a group of venture capitalists who will, in turn, risk their money in exchange for raising additional capital from the company.
Another option that is feasible, is that of the Initial coin offering or ICO. It is a method that will allow you to raise money from across the world from anyone who has an internet connection and enough funds to buy a token. An ICO is an invention that will allow startups to finance themselves without the need to offer any commitments to provide equity.
Learn more here: What is an ICO?
We can assume that ICOs have the power to alter things. So why should one share a percentage of the company if it is possible to raise money today without having to? But do not be so fast as Venture capital still has a few benefits hidden under its sleeve.
Venture Capital vs ICO: Objectives
There are several valuable things that you can get from Venture Capital in addition to financing, consulting scalability options, business rules, and guidelines along with certain influencers of the industry. If this is what you’re looking out for, you need to move ahead with Venture Capital.
If you need a speedy way to raise money with as many people involved as possible and you believe that a strong community is more valuable than influential individuals, you can go ahead with an initial coin offering.
Venture capital vs ICO: Target Audience
The easiest way to explain the difference in terms of the target audience is to compare ICO to business-to-consumer sales and Venture Capital to business-to-business sales methodology.
Venture Capital: The investors are entrepreneurs with years of experience, who have a lot to offer and a lot to appeal to. If you have a great idea, but don’t have a presentation to exhibit, with no reports or a detailed project roadmap, then venture capital is not the right choice for you.
You need to prepare yourself more than in the case of an initial coin offering. On the other hand, Venture Capital investors are much more dedicated and reliable, they are willing to support your project for an extended time and they do not seek a quick return on their investment.
This could help you: How to launch an ICO, a detailed guide?
Being an ICO investor does not require much and anyone can try to be one. You can get a lot of money from people who belong to another continent. You don’t need to have a product that works and it is not necessary to have a good track record. If your idea has enough momentum, you will receive your well-deserved funds.
A video that explains your product, a YouTube channel, a PPC advertisement, a webcast; whatever you choose to get attention and spread the word will work wonders.
Ensure that you know the very nature of an Initial coin offering is that they are a quick buy-sell process. Therefore, most investors will try to sell the tokens for a quick profit and expect to make a profit very fast too.
Venture Capital vs ICO: Requirements
Venture Capital: You need both strong personnel and material, work product, vision, well-prepared playing field, documentation, and much more. Also, once you acquire an agreement, you will need to share a part of your company (usually at least 20 percent)
ICO: In ICO there are no formal requirements for holding a token. You decide which investor you will go ahead with and how investors will receive their tokens.
Want to understand more about this topic: What is an ICO token and how does it work?
Venture Capital vs ICO: Legal Regulation
If you need money from investors, you need to pay close attention to the rules and regulations. In the case of Venture Capital, the rules that regulate its collection processes have already been determined for a long time and this provides some legal certainty for both the investor and you.
The ICOs are somewhat different. Being a novelty, the applicable regulatory framework is still very poorly developed. In the beginning, the absence of rules was one of the “advantages” that many saw in ICOs since this implied a simpler collection process. However, with the passage of time, this situation has become different. Many governments have begun to regulate the operation of ICOs in a very restrictive way and have even applied new rules to ICOs made in the past.
Learn here about legal aspects: Is Bitcoin legal?
ICO vs. Venture Capital: Accessibility
Venture Capital: Venture Capital investors are solid, knowledgeable, and conservative. They generally prefer companies and firms from the same country. They want you to attend numerous meetings and sign multiple documents. While this may not be a problem for citizens of the US ., For businesses in the developing world can be a serious limitation.
ICO: There are no limits to raising an ICO. One of the most striking benefits is that it can be accessible and raised from any country in the world.
ICO vs. Venture Capital: Press and public recognition
Venture Capital: Venture Capital has a great benefit in public perception. Raising and collecting money through Venture Capital gives you a strong credit of conviction and public relations since the people who participate in this type of investment are much more experienced and check the project thoroughly before they decide to invest. Added goodwill is sure to be a benefit in the eyes of the public and those who choose to invest.
ICO: In the case of ICOs, you will need to make it public. It is quite easy for people to believe in scams and frauds, so you will need to display credibility and be genuine to keep up.
Which Option is suitable?
We cannot make this decision for you, we can only show you the characteristics of each of the options and the advantages they can bring so that you can decide which one is more closely related to your business idea.
Benefits of Venture Capital
- Investor commitment
- Business guidelines and knowledge help
- Building valuable connections and networking
- Credit for public relations
Benefits of ICO
- No work product required
- Absence of geographic limitations
- No bureaucracy
