In January, SureRemit a Nigerian non-cash remittance startup raised $7 million through an initial coin offering (ICO). The ICO financing round was backed by South Korea’s largest cryptocurrency fund Hashed, which has previously backed several blockchain and blockchain-enabled projects like Airswap, Ethereum, and Simple Token.
SureRemit is the first in West Africa and Nigeria and one of the only few in Africa to successfully pull off an ICO. Besides normal venture funding, can ICOs be a means for startups to raise funds in Nigeria?
Let us first examine ICOs from a Nigerian perspective.
What is an ICO?
An initial coin offering (ICO) is a means of raising funds through cryptocurrencies — like Bitcoin and Ethereum — for a venture or startup via the internet in small amounts from a large number of people.
Basically, a company offers up their own coin that emulates a Bitcoin structure in exchange for funds to grow their businesses and investors buy these coins in the hope they will appreciate in the future for liquidity
During an ICO, potential investors get a token (share of the company) and a promise of future profit in exchange for their investment which is usually — but not exclusively — in cryptocurrency.
In starting an ICO, companies announce projects, publish a whitepaper detailing what the project is about and proceed with sales.
According to a Fabric VC report, startups and projects raised $5.6 billion last year through ICOs.