How does One Attract Major Investments?
At some stage business owners start looking for sources of additional funding to implement their grand plans. In this article, we will cover the legal mechanisms of raising investments and consider specific types of investments.
1. Fundraising through ICO, IEO, IPO
ICO, literally standing for “initial coin offering”, is a type of investment raising through the sale of a fixed quantity of new cryptocurrency units in a one-off or accelerated issue. ICO’s emergence is connected with the overall popularization of cryptocurrencies and the general availability of this crowdfunding method. The ICO investment market stopped growing in 2019 due to a lack of regulation, a great number of shady projects and deceived investors.
ICOs were replaced by IPOs and IEOs. The difference is that with IPO (Initial Public Offering) investors get real shares and with ICO – so-called crypto shares which enable investors to receive their share in the company profits but are not actual shares within the legal meaning. IPOs are regulated on the legislative level.
IEO (Initial Public Offering), opposite to ICO, is managed by exchange houses on behalf of the startup attempting to raise funds with its issued tokens. So there is a view that IEOs may help rule out fraudulent projects thanks to the involvement of the exchange.
2. Fundraising through investment (hedge) funds
Hedge funds are actively managed investment pools subject to regulation and administered by professionals with a view to gaining absolute return, and have a unique framework of payments for the asset management services. It is important to be aware that hedge funds are not mainstream, and one must have certain knowledge, skills and freely available money to invest successfully in hedge funds, also focusing on business growth on an international scale. The bottom seed funding to launch an overseas investment fund is 300,000 euros.
3. Crowdfunding platform (e.g. Kickstarter)
Anyone even slightly involved in the world of finance probably knows what Kickstarter is. There are quite a few online platforms similar to Kickstarter which bring together people who want to raise investment for their projects and people who would like to support promising young companies. Crowdfunding platforms get their profits from fees on transactions which may amount to thousands of dollars. It would be wrong to assume that this investment raising tool is an easy one.
4. Forex brokers
Forex (FOReign EXchange) is an inter-bank international foreign exchange market, and Forex brokers are companies granting their clients access to financial market trading, with the most advanced ones covering the whole range of financial assets. In the last 10 years, the Forex market has gained strong popularity in a number of countries, especially the CIS. The explanation is simple: a desire for additional earnings and weakness of the stock exchange. And with the investment demand increasing, we will see new broker companies emerge everyday globally and the market to grow.
Launching a financial company (and obtaining the relevant license) is a time-consuming and costly process one should approach with the help of professionals.
The SBSB team has been doing FinTech for over 6 years now. We create international financial and payment companies on a turnkey basis and provide comprehensive follow-up support.
Should you wish to delegate the implicit legal matters to qualified experts, we will be happy to help you. And you are also welcome to attend our events. Do not hesitate to request a free online consultation in our Telegram chat.