A reverse ICO is offered by established companies to tokenize or decentralize their company, raise more funding, or launch a blockchain-based pipeline to their existing business.
Similar to an IPO (initial public offering), an ICO is a method commonly used by companies to raise capital by selling their tokens before people can trade them on an open market.
If an ICO is successful, it typically offers these benefits to early investors and projects:
Higher profits
If there is a high demand for the token, investors get the opportunity to buy it at a lower price before its price rises on the listing day.
High finance
An ICO has fewer regulations than an IPO. Therefore, the number of investors who are able to participate in ICOs is higher than in an IPO.
Access to global investors
ICO helps companies receive investments from all over the world due to the ease of transacting with cryptocurrencies. This will not be possible in an IPO as bank transfers will not be an easy task for investors from different parts of the world.
Reverse ICO vs Traditional ICO
The main difference between a reverse ICO and a traditional ICO is the company that is raising the funds. An already existing company has more advantages than a new company.
-> An ICO exposes the project to fewer legal challenges. This leads to many scams and scams that often occur in Initial Coin Offerings (ICOs). A reverse ICO requires a higher level of transparency which helps gain investor confidence.
-> The company raising money in a reverse ICO usually has a pre-existing user base.
-> A very important difference is that the existing company has a successful business model and many years of experience, however, all this is missing in a new cryptocurrency company.
There are not very many existing companies that accept or use cryptocurrencies at the moment. This is mostly due to the volatility in the cryptocurrency market. For this reason, there are very few companies using cryptocurrencies in their business, resulting in reverse ICOs being a rare event.
