21 June 2018

IPO or ICO?!

If a startup grows rapidly and expands internationally, the financial requirement increases. Currently, one in four German startups is considering an IPO in order to raise the necessary money. For example, 22 percent of founders say that going public is conceivable for them in the future, some are planning an IPO. This is the result of a survey commissioned by Bitkom among over 300 startups. Last year, the proportion of those who could imagine an IPO was significantly lower at 14 percent. In 2016, however, the stock market was even more attractive and a talking point for 38 percent. "An IPO means great organisational effort and high preparation costs for a startup. Such a step requires careful consideration," says Bitkom President Achim Berg.

In principle, only 14 percent of startups want to exclude an IPO, so this figure is at the level of previous years (2017: 14 percent, 2016: 13 percent). 6 out of 10 startups (58 percent) state that an IPO is currently not a topic for them. And 6 percent could not or did not want to give any information. On average, start-ups in Germany will need fresh capital of 3.1 million euros over the next two years, significantly more than in 2017 (2.2 million euros).

An alternative to an IPO has for some time been a so-called ICO, an initial coin offering. Funders and startups are connected via the blockchain technology, which enables tamper-proof exchange of information. A bank as central intermediate instance is no longer necessary. At the same time, the blockchain architecture allows the coins or tokens issued by the startup against payment to be linked to certain events, such as a certain date or a certain company value. If the event occurs, payment is made automatically. Currently, 3 percent of the startups are planning an ICO, 12 percent consider the coin issue conceivable in the future. However, every third start-up (37 percent) also says that an ICO is currently not a topic, every fifth (20 percent) basically excludes such a way of raising capital, 13 percent have not yet formed an opinion on it or do not want to express it. And 16 percent of startups don't even know what an ICO is. "An ICO is significantly less regulated than an IPO, which is both an opportunity and a challenge for startups and investors. This makes careful planning and implementation all the more important, because startups are breaking new legal and technological ground," said Berg.

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