As the procurement of start-up capital for young companies, so-called start-ups, is becoming increasingly difficult, banks are demanding more and more collateral and have long since stopped financing only great ideas, crowdfunding has now established itself.
Depending on the country, startups hardly have a chance to implement their innovative ideas. They simply lack the money. It also seems as if the banks are no longer interested in the future. To get a loan, you have to have a functioning product and a market. How can you do that if you first need capital?
Thanks to cryptocurrencies and tokens, such as Ethereum or Bitcoin, it is possible to raise startup capital transparently and securely. Simply put, you offer shares in the company, idea, vision, etc. in the form of a proprietary cryptocurrency, a token. Investors who buy these tokens are thus investing in the startup. If the potential is there and the market accepts the product, the value of these tokens will automatically increase as demand increases. These company tokens can therefore be compared to a share, whereby such a token offers even more possibilities than a conventional share. As a small example, dividends can be paid out every hour and not just once a year. The financial effort is also, for all parties involved, far below that of a conventional IPO.
The whole thing is called an STO (Security Token Offering) or ICO (Initial Coin Offering) and is a form of IPO or crowdfunding. An STO is regulated. An ICO is usually not regulated. Since it does not require banks and even micro-investors can participate, this form has become so popular that it has already outstripped conventional venture capital.
Of course, the whole thing also has a decisive disadvantage. Many ICOs raise money without anything behind them. Often, these supposed startups disappear from the scene again immediately after the ICO. It is therefore particularly important to take a close look and to inform yourself properly. In general, if you do not inform yourself in detail, you will lose your investment. The startup should at least have a prototype, a beta version of the software or similar. If you don't see the faces behind a startup or they never show themselves in public, it's not a good sign either. In addition, one should inform oneself about an ICO in the social media.
Basically, more than 80% of all startups do not make it. As an investor, you have to be aware of that!