Bitcoin Explained: What's an Initial Coin Offering?

Having got to grips with “cryptocurrency” and “blockchain”, now Bitcoin enthusiasts must grapple with a new term: initial coin offering or ICO. But what does it mean?

James Gard 22 August, 2017 | 7:40AM
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Bitcoin

Know what an initial public offering is? What about initial coin offering? ICOs, according to Pitchbook’s Evan B. Morris, allows technology start-ups to raise millions of dollars by offering early investors access to its software services. Imagine if Google in its early stages launched a digital currency to use its products – its virtual tokens would have surged in value as the company succeeded, and they would have been tradeable with other investors who would be keen to capitalise on the success of the firm.

Companies have now raised $1 billion in funding so far this year, according to research from Smith & Crown. Industry publication CoinDesk estimates that this year ICOs have outstripped venture capital (VC) funding for start-up ventures. Web giants such as Facebook, Google and Twitter relied on VC funding to raise money in the early years.

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James Gard  is content editor for Morningstar.co.uk