Navigating the crypto market: When an ICO makes financial sense
Like the internet, there is no doubt that blockchain technology will have a big impact on the economy and create hundreds of billions of dollars in economic value. Those who know how to think outside the box and imagine a new business based on the blockchain technology ensure an important role in the innovation, and possibility, of tomorrow.
As a fundraising alternative, Initial Coin Offerings have never been more popular. According to fin-tech analytics provider Autonomous NEXT, funds raised via ICO in 2017 amounted to nearly $4 billion, up from $96 million in 2016.
For many, though, the term “ICO” remains inherently unfamiliar. Knowing how and when to buy cryptocurrency is a valuable skill for the foreseeable future. More than a sound financial move, it is an investment in time which is needed to understand new technologies. Investing in a young company can sometimes, rightly, can leave the investor more than a bit uncomfortable. However, many start-ups have already proven themselves.
Take, for example, the success story of the programmer Vitalik Buterin, at the origin of Ethereum. This cryptocurrency experienced more than 9,000% growth in 2017 and is now the second largest cryptocurrency in terms of capitalization. Those are the kinds of numbers investors like to hear about.
A change of paradigm from traditional fundraising
An ICO allows a company to raise funds through the sale of its own cryptocurrency; these newly created “coins” or tokens will allow the start-up to grow. The advantage of an ICO? It significantly reduces marketing and development costs, while allowing for the creation of a global brand image and, most importantly, the immediate support of a network of enthusiastic buyers who will not hesitate to spread the word.
It’s a very different approach that allows everyone to participate in the concept. And because it’s new and springs from purely digital and tech-oriented origins, it automatically holds appeal to younger and more entrepreneurial investors. Millennials, in general, are more distrustful of traditional financial institutions—cryptocurrencies can beckon them back into the money game like few other financial innovations can.
It can also cut across geographic boundaries. Unlike “traditional” companies that must prove their worth in their home country before hoping to access other markets, ICOs can reach investors all around the world through a global currency. Crypto-currencies have the particularity of being universally accessible and generate a genuine interest in the international community. Another advantage is that their ecosystem blows up any notions of time and boundaries by eliminating intermediaries, thus facilitating international expansion.
An active community from day one
An ICO does more than just raising funds very fast. It creates its own community all over the world from incept, and thus creates a global brand. During traditional fundraising, brands have to solicit and reach out to existing communities in which they may not be known entities. Contrast that with an ICO, which allows the pitch to happen on home turf — your investors meet you where you are.
While the jumble of ICOs contains a lot of good opportunities, it’s important to avoid getting caught up in the hype and instead look out for projects that have been fully vetted. Participating in an ICO can pay off, but a good understanding of the ecosystem as a whole and the overall vision of the company is critical before investing in a project.
Frédéric Montagnon is a French entrepreneur and Business Angel (ranked 7th by Challenges magazine) who’s specialized in big data and new generation advertising. Graduated from ENSEEIHT - an engineering school in Toulouse, France - he worked for Phillips for two years before joining Cirpack, a startup specializing in telecommunications. But very quickly, the young engineer wants to fly on his own. This is the beginning of the success story: he created Codanova in 2003, Nomao in 2017 and Teads TV in 2010. His greatest success is Overblog, which he co-created with Julien Romanetto in 2004, and which quickly became the first platform of European blogs.
After having sold his four companies for more than $400M he now makes his startup Secret Media (which offers a solution against the blocking of online advertising) thrive and is working on the development of Legolas Exchange. This new project stands out as the first fully secure and transparent virtual currency exchange platform, based on blockchain technology. The startup has raised more than $30M in record time and tends to create a favourable environment for institutional investors.
With over 20 years of experience, Frédéric Montagnon regularly speaks on BFM TV and is often asked by many media to give his expert opinion on cryptocurrencies and new technologies.