Research has found that 62% of all entrepreneurs would now consider Initial Coin Offering (ICO) rather than Venture Capital (VC) fundraising, with 85% of younger business owners between 16-25 more likely to consider ICO over VC.
ICOs, which allow companies to fund the development of their blockchain-leveraged services through the sale of tokens, remain an area of caution for older entrepreneurs, although more than a quarter (27%) of business owners over 55 said they too would consider ICO despite the high-profile volatility of various cryptocurrencies and recent enforcement actions by the SEC.
ICOs were not only attractive to start-up and small sized business, with 73% of larger businesses with 250-500 employees interested in ICO as a fundraising option, closely followed by 72% of businesses with 100 -249 employees. Although confidence dropped to 56% for companies with over 500 employees, 68% of entrepreneurs with companies with annual turnover of between £50m and £100 m wold consider an ICO, followed closely by 64% of companies with turnover between £100m and £150m.
Technology, Media and Telecoms businesses were most likely to consider ICOs, followed by business services, consumer & retail and industrial.
Although ICOs are increasingly being seen as a viable and quick funding option by young business owners, the data shows this is not because they want to sell up quickly. Indeed, 80% of young entrepreneurs have turned down attractive offers to sell their business compared to 46% of older business owners.
Daniel Domberger, Partner and co-leader of Livingstone’s global Media & Technology team, comments: “For many founders, the collapse in crypto prices and the failure of many recent ICOs hasn’t spoiled the allure, and they are considering whether they should continue along a traditional venture capital fundraise path or find a way to jam tokens and blockchain technologies into their business and raise capital through an ICO.
“While new business owners may perceive ICOs as the new normal, VC and private equity remains the go-to funding option for the typical established, shareholder value-maximising business, and they also provide the opportunity to benefit from the network, advice, prestige and governance that a well-established investor would bring.
“ICOs present a novel financing solution for blockchain based start-ups. However, ICOs do not present a revolutionary one-size-fits-all solution for all tech start-ups and can still present various challenges such as scams, compliance issues, regulatory uncertainty and establishing the source of funds can be complex. It also seems inevitable that the volatility and price movements of the tokens will provide an unwelcome distraction for an entrepreneur, whose focus should be on progressing and growing their business.”