What Is An IEO Or Initial Exchange Offering?

There are a wide variety of ways to raise capital for your start-ups or your ventures. There’s debt where you’re taking out loans from bank’s credit unions and other lenders.

You can raise equity to investors so you can give up shares of your company, you can have a blended type of funding round where you have debt and equity. Some of that is done through what is called a convertible note.

There’s another way that some startups have raised capital and that has been through what is called an ICO or an initial coin offering. However, there’s a new type of fundraising effort that is done through what is called an IEO or initial exchange offering.

So what are the differences between ICO and IEO.

Differences between ICO and IEO

• An initial coin offering is when a company creates their own type of cryptocurrency and they just turn around and sell that to the end user or investors. The end users could be anyone with business that sells a product but the only way that people are going to be able to purchase that product is to buy your coins and so you sell those coins out into the marketplace before your product is actually made and that’s how you raise capital. It’s almost like a customer pre-sales. In other words, it just includes turning around and selling an ICO or an initial coin offering to investors so people who just believe in what you’re doing and they believe that the value of your company is going to grow and they invest in your coins. The whole process is done by you, there’s no middle party.
• An IEO or an initial exchange offering becomes more popular and is pretty similar to an ICO but the key point here is that there’s a middleman. An exchange is actually helping you manage that offering so companies like Binance that help sell cryptocurrencies and create these IEO’s. An initial exchange offering has that middle party that is managing the sale of these coins from the startup to the investor. There’s a little bit of a due diligence period and research to understand the strength of the startup which is offering these coins so this trust is created in this type of offering.

Conclusion

They are not dramatically different in both. You’re selling a coin in some sort to investors or pre-sell to potential customers but an IEO just involves another party to that transaction so that IEO is becoming more popular.