The world is quickly moving towards a tokenized economy and companies with traditional business models are now looking for ways to cash-in the trend. The success of messaging app Kik has encouraged other businesses to opt for a reverse ICO, which is a method of fundraising that allows traditionally designed companies to take advantage of the crypto craze.

An ICO Is an Easy Way

The latest figures from research firm Autonomous Next suggested that ICOs raised close to $6 billion in 2017 alone. This year’s numbers have already totaled $9.1 billion.

A well-made whitepaper and a few discounts are helping several companies raise capital that they could have never achieved in a traditional IPO or VC funding. The industry has not been saved from controversies and frauds. As issuing ICOs is comparatively easy, it is becoming an easy target for scammers who want to make a quick buck.

For traditional companies, the road could be slightly different. As they already have established businesses, the questions about legitimacy are less pronounced. At the same time, however, they could also have a tough time in convincing investors that they have a genuine blockchain-based value proposition.

Using the Reverse ICO Route

By conducting a reverse ICO, these companies can sustain for longer and gain a technological edge on their competition. In general, a startup with a distributed ledger idea or use case holds an ICO to get the funds necessary to develop their product.

In a reverse ICO, an already-established and highly-centralized company issues tokens to decentralize their business. The company first offers tokens to the investors, as a replacement for their traditional shares.

Each token holder gets to share the company’s profits and become involved in their decision-making process. In essence, a reverse ICO is simply a traditional share allotment event, except for the fact that transactions are made in dedicated tokens over a blockchain network.

As established companies already have a working business model, these reverse ICO events become more secure, and there are fewer risks of fraud and capital loss.

Who Did It Right?

Kik opted for the reverse ICO route. The app has over 300 million users, and it raised over $100 million during the token sale in 2017.

The company was having a hard time putting up with Facebook Messenger and WhatsApp, which are both hosted by Facebook Inc. and have bottomless pockets. Kik was dependent on ad-revenue for survival.

Through the reverse ICO, the company shifted from the ad-supported revenue model to a blockchain-based model that now focuses on its native Kin token, which allows incentives based on user-activity and helps developers in creating their own business models.

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