An ICO (Initial Coin Offering) is a way for an entity, such as a business, or in this context, a Municipality, to raise funds for a project. Raising funds is a common challenge, especially for a Municipality with citizens that do not want to pay any more taxes. The ICO can be an attractive alternative for a city in need of additional funds instead of doing a Referendum and issuing Municipal Bonds. The ICO offers an additional benefit. It creates a cryptocurrency coin that can be used within the city services and can be bought and sold worldwide. The new city coin can even increase in value, helping the city and its investors.
In our previous post called A Municipal ICO Offers an Alternative Funding Method for Cities, we stated:
This is just the beginning of this discussion. There are laws and regulations that we must respect and improve, if necessary. We understand how to execute a successful ICO for a business project. We need to apply that knowledge and experience to benefit a city wanting to improve the lives of all their citizens, without exclusion, when traditional methods of funding are ineffective.
So, let’s dive into what makes a successful ICO in the business sector and determine if this is a sound foundation for a Municipal ICO.
Attributes of an Attractive ICO
As an ICO investor, I look at some key attributes.
Is the company behind the ICO an established company with a proven history of success?
Many ICO’s are a brand new idea requiring funding. This is not a bad thing. But, it is not an ideal investment opportunity. As an ICO investor, I prefer to see a company with proven success in the industry the ICO will be improving or adding value.
A Municipality has that criteria filled. Not only is the city already established with an existing management team, but its success is easily available to the public for review. This is not a private business that may be able to hide important metrics, number of active customers, year over year revenue numbers, etc. A city’s success or failure is out there for all to see.
Is the ICO adding value to an established industry or sector?
I like to see that an ICO is not just bringing in funds to pump up an old and tired business plan. I want to see that the ICO is either disrupting an industry, or, at a minimum, adding real value and utility to an existing service.
A Municipal ICO would be developing new services for its constituents – new services such as a new library or an after-school program to assist double income or single parents. These services would be disruptive in that they would be addressing modern day challenges, which had no previous solutions.
Is the ICO Team experienced?
Often, I will see that the CEO of the company receiving funding from the ICO is the top technologist – the best Blockchain developer in the group. However, if the ICO is funding a new financial utility or improving Supply Chain and Logistics, then I do not want to see a technologist at the head of the helm. I want to see the industry expert leading the company.
With regards to a Municipal ICO, the city will have their city council, city manager and experienced city staff already in place. That is a huge comfort to the investor. The Team on a Municipal ICO will be knowledgeable and experienced in the industry. And, again, their success record will be out there for all to see. The technologists to execute the ICO project can always be brought on to the Team from the outside.
Will the Coin from the ICO be Circulating
The ICO creates a new cryptocurrency coin. This coin can increase in value if the project and the public or private entity behind the project are successful. It is important that the coin have a regular circulation mechanism, popularly called Token Economics.
The cryptocurrency coin developed from a Municipal ICO will be able to be bought and sold by the city’s citizens, citizens from neighboring cities, and even individuals from different countries around the world. Additionally, the coin can be used within the city as a sort of currency. For instance, the coin may optionally be accepted as payment for a book returned late to the library or an entry fee for a city event, etc. This will create a healthy Token Economics for the new city coin.
Who are the Partners in this project?
If the ICO is truly disrupting the status quo and adding value to an existing plan, then partnerships will be needed to accomplish real change.
A City has relationships already established and can easily bring in partners on a new project. These partners may be from the private sector, like businesses within the community, or from the public sector, like The Rotary Club or other philanthropic organizations ready to contribute volunteers and contributions to assure the success of the project.
An Attractive Investment
The Municipal ICO has the fundamental features most important for an ICO investor and most important for success. This makes a Municipal ICO a very attractive choice for investors wanting to participate in this new and exciting investment alternative called the ICO.