Raising Capital & Types of Fundraising Alternatives

Raising capital is a key objective for startups and the method chosen, whether it be through initial coin offerings (ICOs), security token offerings (STOs), or initial public offerings (IPOs), can greatly impact the success or failure of a project. Obtaining adequate investments is crucial for the growth and development of a business.

Security Token Offerings

Security tokens are digital assets that function like traditional securities, representing ownership of assets and economic rights. They offer the same benefits as traditional securities, such as profit participation, dividends, and the right to vote on important management decisions. In addition, security tokens can give holders ownership or equity in specific assets, such as real estate, trusts, LLCs, fine art, and more.

Initial Coin Offerings

An initial coin offering (ICO) is a fundraising method used by businesses, especially startups, to raise capital. It involves the sale of digital tokens, also known as coins or tokens, to investors in exchange for fiat currency (e.g. US dollars) or cryptocurrencies (e.g. Bitcoin, Ethereum).

Investors buy the coins or tokens with the hope that they will increase in value over time. ICOs are often used by companies in the cryptocurrency or blockchain industry and are not as heavily regulated as initial public offerings (IPOs). However, this lack of regulation has made ICOs a risky investment for many people and has led to scams and fraud in the past.

Initial Public Offerings

An initial public offering (IPO) is a process by which a privately-held company goes public and begins selling shares of its stock to the general public. It is a way for a company to raise capital by selling ownership stakes to investors. The company typically hires an investment bank to underwrite the IPO and handle the sale of the shares.

An IPO allows a company to access a large pool of capital that can be used to fund expansion, pay off debt, or for other purposes. It also gives the company a public market valuation and can increase its visibility and credibility. However, going public also requires the company to disclose financial and other information to the public and can subject it to increased regulatory scrutiny. IPOs are typically more regulated than other methods of fundraising, such as initial coin offerings (ICOs), and are only available to companies that meet certain requirements.