For blockchain entrepreneurs, initial coin offerings (ICOs) are becoming the way to go. According to statistics released by online publication Coindesk, ICOs have surpassed venture capital (VC) funding as a means for raising cash for their startups. Entrepreneurs raised $327 million from ICOs during the first half of this year. In contrast, VC funding accounted for $295 million during the same time period. Based on Coindesk data, ICOs accounted for less than half of the $500 million overall invested in blockchain startups through VC funding last year.
ICOs resemble crowdfunding in that they offer tokens, instead of rewards, to investors in the product or service. These tokens can be redeemed on digital platforms for currency. Blockchain, which is the platform that underlies digital currencies, is gaining traction in established financial services institutions as a means to reduce costs and enable faster processing. This has led to greater interest among investors for blockchain startups. (See also: The Rise of Initial Coin Offerings.)