An initial coin offering is a sophisticated process that requires a deep knowledge of technology, finance, and the law. The main idea of ICOs is leveraging the decentralized systems of blockchain technology in capital-raising activities that will align the interests of various stakeholders. The steps in an ICO are listed below:
Identification of investment targets
Every ICO starts with the company’s intention to raise capital. The company identifies the targets for its fundraising campaign and creates the relevant materials about the company or project for potential investors.
Creation of tokens
The next step in the initial coin offering is the creation of tokens. Essentially, the tokens are representations of an asset or utility in the blockchain. The tokens are fungible and tradeable.
At the same time, a company usually runs a promotional campaign to attract potential investors. Note that the campaigns are commonly executed online to achieve the widest investor reach.
After the creation of the tokens, they are offered to the investors. The offering may be structured in several rounds. The company can then use the proceeds from the ICO to launch a new product or service while the investors can expect to use the acquired tokens to benefit from this product/service or wait for the appreciation of the tokens’ value.