Startup ICO Funding; Risk Strategies for ICOs
August 5, 2018
Important Risk Reduction Strategies for ICO Investments
Bitcoinist July 31, 2018
Topic: Startup ICO Funding
Blockchain investors are not necessarily risk averse to Startup ICO Funding. They’re generally comfortable with the amount of volatility that exists in the market today.
For most, this is a small trade-off compared to the benefits brought by Startup ICO Funding. When a startup builds its token economy correctly, it gives investors a number of perks such as quick liquidation and flexibility dealing with assets.
Each individual investor in the market has the option to sell their tokens if they lose faith in the project, or see that there will be no demand for its tokens moving forward. Some investors choose to wait and sell their tokens when they grow twenty or thirtyfold. Likewise, other investors choose to liquidate their assets as quickly as possible if the startup is not suited to face competition.
However, taking advantage of these benefits does not mean that investors shouldn’t mitigate the amount of risk they assume when making an investment in the first place. To the contrary, the flexibility of startup ICO funding is precisely what experts use to hedge these investments.
FUNDS AND DELAYED DECISIONS
For example, there are many strategies that investment funds already use to avoid risks. An important one is that they make a delayed decision on a percentage of the whole value of an investment deal. A fund may pledge $1 million to a startup but only be ready to risk 25% of the investment. In this case, it negotiates with the startup the condition to get back $750,000 from the $1 million pledge if the deal is revoked. This means that it will only risk losing $250,000. Either way, the fund can then sell the tokens it bought at any time if things go south.
Although this approach is often exclusive to investment funds, individual investors may also find it interesting since funds are rapidly becoming one of the best possible investment options. Today there are more and more funds working with a larger pool of individual investors, and some offer significant opportunities such as this to evade risks.
Startup ICO Funding
Therefore, when looking into startup ICO funding investment it’s important to pay attention to what transactions are taking place between the fund and the startup. A general rule is that risk-averse funds receive smaller discounts than larger funds which are investing without avoiding risks. In the end, it usually boils down to a decision between risk or discount.