Getting capital to start a business in the traditional sense is determinant upon whether venture capitalists or angel investors buy into the idea that an entrepreneur is selling or not. Unless you have a significant nest egg put away somewhere or your family is rich, the traditional method of getting finance for your startup can be tricky. Venture capitalists not only require partial ownership or equity in the business you are proposing, but they can also out rightly reject your startup ideas. Therefore, while looking for ways to fund your startup, how about you consider Bitcoin?
Fundraising using Bitcoin is relatively new compared to its other derivable benefits. Regardless, using cryptocurrency to fund your business can be daunting if you do not know the ropes. Yet, raising capital for your startup is just one of the many ways of taking advantage of cryptocurrency.
1) Raise funds through ICO
Initial Coin Offering or ICO is a way of crowdfunding that is gaining ground among startups requiring capital. ICO is the equivalent of Initial Public Offering or IPO. However, unlike IPO, ICOs do not require the long process of vetting or being restricted by so many regulations from the authority like its traditional counterpart. The most important aspect of an ICO is the design of the project you are aiming to launch. According to research carried out by Wharton professors, “nearly half of all ICOs in 2017 and 2018 failed to raise any money at all and 76% did not even meet their minimum funding goal”. Proper planning will help you avoid this pitfall.
You can design your ICO by yourself or get experts to carry out the design structure. The first step is to develop the idea you want to fundraise and create a white paper around it. Your white paper tells the audience what the project is all about, your target fund, and facts that will convince your prospective investors about the project. At this stage, you must have decided on the blockchain you want to build your tokens upon. Tokens launched in ICOs are utility tokens. Most projects are based on the Ethereum blockchain but Binance Smart Chain is also gaining popularity.
2) Initial Exchange Offering (IEO)
Rather than taking up the giant task of looking for investors for your startup, partnering with an already established crypto exchange is a sound way of raising funds. Initial exchange offering developed is a process of fundraising by offering a token through an exchange. The ease of access to an already established public makes initial exchange offering more attractive to startups than initial coin offering. On the flip side, ICOs provide more anonymity for entrepreneurs while IEOs give the project some credibility.
As a startup looking for capital, using an initial coin offering means you need to look for investors that will subscribe to what you plan to sell or the service you want to render. To participate in IEO, startups have to register with crypto exchanges that are usually centralized. Startup owners must also be willing to pay the necessary fees for the service rendered by the exchange. In most cases, the crypto exchanges will take a percentage of the token offered on their platforms.
Some successful IEOs include; Bittorrent, Fetch and Matic Network, all on the Binance Launchpad platform.
3) Launch an Initial Dex Offering
Initial Decentralized exchanges Offering is another way of raising funds for your startup with crypto assets. Rather than offer your token or coin via centralized exchanges or using initial coin offering, IDOs are ways of launching a new crypto asset via a decentralized exchange. In a decentralized exchange, you can trade a pair of digital assets based on liquidity pools. IDOs provide a fast means of crowdfunding for startups and eliminate some of the rigorous steps involved in ICOs.
Just like in IEO, the crypto exchanges manage the IDO projects for startups. In the case of IDOs though, you can organize your coin offerings by yourself with the support of the decentralized exchange. There is also the elimination of fees in IDOs. If you are looking to raise immediate funds for your small business, IDOs might be your best shot due their liquidity.
4) Use your Bitcoin as collateral for a loan
If you already have Bitcoin but you need money for your business without selling your asset, you can use it as collateral for a crypto loan that you can convert to fiat currency. Bitcoin investors who wish to hodl their assets until a bull run might find themselves needing cash to fund their business. In this instance, instead of selling your Bitcoin and regret later, you can put it down as collateral for a loan from centralized exchanges.
Reputable exchanges are onboarding crypto-lending as it is a way for both the lender and the borrower to make money. This is similar to borrowing from a bank to finance a startup; you cannot trade your Bitcoin while it is used as collateral. However, unlike a bank loan, the verification and validation process is reduced as long as you already have a wallet with the exchange. Check BestBitcoinExchange to learn more about how and where to get a crypto loan
5) Accepting Bitcoin as a means of payment
Digitalizing your business is not only through accepting credit cards from customers. By accepting varied and diverse means of payment, you can increase your customer base and expand your business. Introducing Bitcoin as a means of payment for your startup does not only remove charges that exist with credit cards, it also provides a safe means of payment than the traditional payment methods.
The advantage of cryptocurrency payment revolves around the security and high processing speed it provides. As cryptocurrencies are recorded on the Blockchain, successful payments cannot be reversed. While you can build a more robust and diverse client base for your business, you might want to add other forms of payments in order not to push some people away.
Fundraising for your startup does not have to be through traditional means. You can get capital for your new business or expand an existing one using Bitcoin and other cryptocurrencies.