The deep vetting process inaugurated by a partnering Exchange may be one of the key advantages of an IEO. It introduces a new, albeit centralized, level of ICO security — the exchange itself takes charge of the security aspects of token sales. The larger, more legitimate exchanges will want to maintain their good image and carry out their own due diligence for each of their projects.
Projects profit with an IEO by making their token available to pre-existing clients of the exchange; an active audience that is already in a position to trade the token. The project also reduces marketing budget costs, as much of this is absorbed by the natural marketing range of the exchange.
While investors enjoy immediate liquidity with the token guaranteed to be listed on the exchange, it still makes investors susceptible. Investors need to maintain trust in the exchanges, which have had their security-related issues in the past, and the returns that these partnerships will generate can potentially be more focused on the value of the coin traded, rather than on the actual opportunity and operation of the company business.
Factoring in regulation, especially in appealing markets such as the US, many start-up projects are developing wacky tokenomic structures to drive the utility token theme forward and circumvent the SEC and other financial sector regulators. Many projects entering the crypto currency domain are attempting to provide a utility token solution that should not even be in the crypto or blockchain space in the first place.
Those who want to invest in an IEO must be diligent and seek immediate financial counsel. IEOs must still be structured as utility tokens (a service or use) or security tokens (a heavily regulated financial instrument) to be compliant, in a number of regions.
Going by my own experience in ICO consultation, I can say, with utmost confidence: as the crypto winter melts and markets recover, more and more projects will try to benefit from the introduction of their own IEO.