What are the most popular options in crypto fundraising?

Crypto fundraising has become very popular because it has more benefits than traditional fundraising alternatives. In the traditional option, businesses and investors need to put in a lot of time, effort, and money, which is why a more efficient alternative was needed. Blockchain finally introduced a new possibility in funding, leading the way for crypto fundraising. 

Cryptocurrency fundraising, also known as token sales or token fundraising, is a new way for businesses to raise money by selling digital tokens. This alternative has changed some things in fundraising forever and represents a more democratic access to capital, as all projects can gather a diverse base of investors. 

An Initial Coin Offering (ICO) is a very popular option in crypto fundraising, and over the years, it has been used to launch various crypto projects. An ICO involves raising funds when a company wants to build a new coin, app or service. Binance coin (BNB) is a project developed with an Initial Coin Offering in July 2017. Around 100 BNB were available for public sale during that period and sold at around 15 cents per token.

With the money it received from the crypto fundraising, the Binance team used 35% of the total funds to upgrade the exchange system and improve the Binance platform, 50% for Binance branding and marketing, and the remaining 15 % was reserved for unprecedented circumstances and emergencies. Over time, the Binance Coin has evolved greatly and has become an important digital coin. The future also looks positive for BNB, and if we look at the BNB price prediction, we can see that the value of this cryptocurrency can increase in the following years. 

This article will explore crypto fundraising, so keep reading to discover more. 

Image source: https://unsplash.com/photos/a-pile-of-gold-and-silver-coins-sitting-on-top-of-a-red-cloth-a7zeRE0SMnk 

A look at traditional fundraising and the switch to crypto fundraising

In traditional fundraising, there are two main sources of funding: equity and debt. Things are quite straightforward with the debt alternative, as businesses can raise debt by asking a bank for a loan. In equity fundraising, enterprises can raise funding from private investors, ask family and friends, or bootstrap. However, blockchain improved some things and introduced crypto fundraising, a more efficient and accessible option. This new alternative has gained a lot of popularity and is a preferred choice for many businesses. 

What are the most popular options in crypto fundraising? 

Private Placement

Some projects might initially consider a Private Placement, an option given only to a selected group of investors who can invest in some tokens before the official launch on the market. This phase is also known as the "token presale", where the project can sell tokens in the early development phase when it  is still being developed. This token presale is usually used to raise funds for the project's early developments. 

There are advantages and disadvantages to Private Placements. These Private Placements are very risky, so investors can lose their entire investment if the project can't deliver its goals. However, there is also good news: if the project succeeds, investors can make huge profits, especially given that people can buy these tokens at a high discount. 

Public Offerings

Initial Coin Offering (ICO) 

An ICO refers to a company raising funds by selling the tokens to public investors. In the crypto sphere, a lot of happy stories have been created with an ICO, where users can meet a lot of benefits. In the case of utility tokens, by investing in them, users can obtain various products and services within the protocol. Investors can also invest in governance tokens that offer them different rights, including voting for the direction they want a specific project to head. Of course, some tokens provide both governance and utility features. 

In an ICO, the crypto project is developed with a whitepaper highlighting all the important information about it. This whitepaper aims to offer enough details to capture the attention of investors and make them invest in the project. The most successful ICO occurred with the launch of Ethereum in 2014 when the project managed to gather the funds needed to launch Ethereum. 

Initial Exchange Offering (IEO)

An Initial Exchange Offering (IEO) was created to address the problems associated with ICOs. In an IEO, the projects are analyzed in detail before by a crypto exchange. In this crypto fundraising, the crypto exchange is responsible for verifying the crypto project, evaluating its credibility, and preventing scams and malicious actors. 

The advantage of IEO is that the exchange's involvement can increase the interest, exposure, and credibility of a crypto project. In an IEO, the crypto project must pay a listing fee and a token amount for the services the exchange offers. 

Initial Decentralized Exchange Offering (IDO)

The IEO process had one disadvantage that presented some shortcomings, given that this option was centralized. So, people also wanted a decentralized alternative that would cut intermediaries out of the way while reducing human errors and fraud, diminishing fundraising fees, and speeding up the processes. 

IDOs work on Decentralized Exchanges (DEXs), a platform where transactions occur directly between crypto traders. 

Last remarks

Cryptocurrencies have forever changed many domains and improved them with a new addition, which is the case with crypto fundraising. This crypto fundraising offers a new and improved way for companies to raise capital more efficiently, flexibly, and cheaply. As you can see, there are many crypto fundraising options that both investors and companies can consider depending on their special preferences. With the novelty features that the blockchain and crypto space have brought, raising funds is nowadays possible in ways that have improved from the past. 

We have many successful stories of crypto fundraising, showing that this option is viable and can be used on a larger scale.