Cryptocurrencies As a Financing Vehicle

Cryptocurrencies have proven quite successful as a financing vehicle for start ups.

Several years ago many start ups issued cryptocurrencies to finance their businesses or they did initial coin offering or initial exchange offering. Cryptocurrencies are filling in a niche for start up financing moving either before seed financing or between seed financing and venture capital.

Actually initial cryptocurrencies offerings are the latest revolution in finance. They in a way circumvent the lengthy and expensive process of an Initial Public Offering. Initial Public Offerings require stable revenues of the issuing firm, host of investment banks as intermediaries and lawyers to prepare the documentation.

Initial coin offerings do not require per se investment banks or lawyer. Only a white paper as document is needed. Yes, it is true that the amounts raised via an initial coin offering are much smaller and the investor base is much more short-term and less sophisticated than the pension funds and endowments participating in the Initial Public Offering of large and established companies.

Initial coin offerings have actually revolutionized finance and they are a real threat to the equity underwriting business of investment banks. Yes, lately initial coin offerings have subsided and investment banks maintain their hold on public equity issuance and are a large participant in the equity issuance of privately held companies.

But initial coin offerings and initial exchange offerings, I forecast, will again become vey popular as they are an excellent, light load way for promising start ups to finance their businesses without giving up equity stakes. Instead the cryptocurrencies or tokens start ups issue are bound to projects of the issuing company.

The constantly rising price of Bitcoin could be the main factor of the renewed proliferation of initial coin offerings.