ICO AS A METHOD TO ATTRACT VENTURE CAPITAL

Abstract

The article deals with the current state of the global ІСО market, its constraints and incentives, comparisons with traditional methods of attracting venture capital and recommendations on how to maximize the efficiency of such a method of attracting venture capital. The article deals with an issue of attracting venture capital to finance newborn projects in the modern world. The authors pay attention to the difference between traditional and modern instruments to attract venture capital, and define one of the modern methods to attract venture capital – “Initial Coin Offering”, the specific features of this instrument are revealed in the article. The key trends of the ICO markets are outlined in the paper in comparison with the attraction through business angels or venture funds. An important fact that the ICO market is getting more competitive and the investors are getting more cautious, it proved by the percentage of successful ICOs in the timeline.  The process of populization of such tokens as a security token is also explained in the article with the recent examples – tZero. The author stresses on the advantages and disadvantaged of dealing with such method as ICO and on what can be beneficially for Ukrainian economy. The paper also considers the problem of fraud and unfair projects to attract money through ICO and figures out some basic information how to prevent such a situation. The overview of working concept in the cryptonomic among ICO, blockchain and bitcoin is done. The evaluation of performance on the traditional venture capital market and Initial Coin Offering market showed that the amount of investment is much more higher on the ICO market, but the amount of the deals is less. The ICO market volume is around 29 billion dollars nowadays – the activity of the market is described in the paper by years. The high-profile cases on the market of ICO are studied. The key future threats of the market are named. The integration of Ukraine's new investment projects into the global ecosystem of ICO on the basis of transparency and efficiency is extremely important for the development of the venture capital market in Ukraine. Basic recommendations on how to maximize the efficiency of such a method of attracting venture capital are provided.