Now that the ICO market has matured, companies are looking for additional ways to raise capital. This has led to the creation of a new class of ICOs called the “Reverse ICO.” Those with an established customer base can issue digital tokens on the blockchain as a replacement for their traditional shares. Each token holder gets a share of the profits and becomes involved in the decision-making process.
One of the most recent examples of Reverse ICO is Ground X, the blockchain subsidiary of the South Korean internet giant Kakao. Ground X managed to raise $90 million in a private coin offering that attracted participation from various high-profile venture capitalists. The success of their capital raise is indicative of a rising Reverse ICO market, where successful companies are those with a tokenized business model.
I see this decentralized approach as a fresh alternative to the “created from a white paper” model offered by most ICOs, where the key market strategy, including user acquisition and product development, is unproven and therefore more demanding and risky in viability, time and resources.
Another advantage a Reverse ICO can create is facilitating the adoption of cryptocurrencies. Buying and trading crypto still present formidable trust and technical barriers to the general population. An established business that has good understanding of its customers can leverage the right triggers and desirable outcomes to incentive users to effectively use its issued cryptos for products and services they are accustomed to buying with fiat.
I’m expecting that scenarios such as these will encourage companies in sectors ripe for blockchain disruption to make the opening move, and create a tokenized version of their own offerings. Also, equity tokens may be offered to both vested suppliers and early adopters that have a stake in the firms’ financial success, which is realized would eliminate the hassle of executing a share registry and meticulously tracking share ownership.