The ‘Wild West’ of financing: are ICOs the end of venture capital fundraising?

Start-ups today have many options to raise capital, with many needing an infusion of funds to get off the ground. Traditionally, new companies would have looked to venture capital (VC) to raise capital and to help their growth plans. Now, however, companies have a new option: Initial Coin Offering (ICO). Fast-growing technology start-ups are increasingly turning to this model and can raise tens, if not hundreds, of millions of pounds through ICOs without sacrificing any equity, leaving VC funds helplessly on the sidelines with chequebooks in hand.

However, ICOs in their current form are not currently suited to the shareholder wealth-maximising business model. Although an innovative and disruptive method of fundraising, problems can arise which could mean ICOs still fall short of providing a paradigm shift away from traditional dilutive forms of venture capital.

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