Challenges faced by Startups during an Initial Coin Offering (ICOs)
Every year, hundreds of millions of US dollars are raised by various Startups globally in ICOs. For example, last year, over $1.5 Billion dollars were raised by more than 90 ICOs all over Europe, America, and Asia. But some might think that this whole process of raising funds for startup firms/projects is as easy as reading about their successes.
In this article, I will try to examine some of the challenges faced by these firms in the process.
Jurisdictional Laws for ICOs
This is a major challenge faced by most startup firms that are aiming to roll out ICOs. The intended location of their operations can raise very serious legal issues. For instance, if a firm is located in Croatia, and their target early investors reside in Germany, Britain, and France, their contracts must conform to the contract laws of all the countries involved.
So if you are thinking of starting an ICO, take some moment to do a little research on the contract laws of both your country, as well as of the countries of your expected early investors. The terms and conditions of your contract to them should be in compliance with the laws of their countries.
Regulatory Issues for ICOs
Due to their virtual nature, there is also some degree of uncertainty as to regulations guiding the distribution of tokens. Most investors think that it is first necessary to characterize the tokens in order to apply a set of predetermined rules.
The Security and Exchange Commission (SEC) has still not released its proposed guidance for ICO participants. That means that investors will take their time to learn all about a particular ICO before committing to them. This particular risk of an ICO is related to the issuance of scam coins. This creates a lot of doubts in the mind of many investors, even when the prospectus in the White Paper iscrystal clear.
Getting Experts on Board
One thing that can easily win the confidence of potential investors is the presence of a solid, well-respected team behind the ICO. No matter how good your White Paper is, no matter how exciting the plan is, you are still requiring potential investors to take a leap of faith. There are ICOs that do not prove successful after all the efforts put into it.The best way to encourage investment, and public support, is to first build a functioning service first.
But if there are experts on your team, experts that have worked on some successful ICOs, this will quickly win over the investors. Many Firms now face the enormous challenge of getting skilled individuals to join their team, and that can be very frustrating sometimes.
Publicity Challenges
How will potential investors support a plan they never know of? How will they know it with no one to tell them? No doubt getting the ‘word’ out is very important, but doing the spreading can be quite challenging because there is just so much to do. ICOs listing sites, forums, social media, newspaper, etc. have been explored over the years in spreading information about ICOs.
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