What is Initial Exchange Offering (IEO)?
Initial Exchange Offering’s or IEO’s are an emerging and increasingly popular method for start-up companies to generate cash via crowdfunding. IEOs are similar to Initial Coin Offerings or ICO’s but with some key distinctions.
IEOs list themselves on already existing trading or IEO platforms. By utilizing the platforms already existing functionality and reputation, the start-up markets itself to prospective investors. Once the IEO’s target goal is reached, investors are rewarded with the respective amount of coins or tokens.
Some popular IEO hosting platforms include Binance, Kucoin, Bittrex, and OKEx Exchange, and many others.
Pros and Cons of Initial Exchange Offerings
IEO’s benefit from a host of advantages that are not found through other crowdfunding methods. One of these key benefits is the increased reputational perception of IEOs due to the reputation of the hosting platform.
As the host of the prospective IEO has its own legal and reputational responsibilities to consider, the hosting platform is incentivized to employ its own diligence and best practice standards. These can include greater degrees of alignment with financial trading standards, such as better Anit-Money Laundering and Know Your Customer practices.
Another advantage of IEO crowdfunding is the operational benefits that can be found on the hosting platform itself. Different hosting platforms have different degrees of cyber security and perhaps even better user bases. This means that different hosts can offer better safety for users and IEO’s alike, linking prospective investors with prospective start-ups in a safe fashion.
IEO’s however are not without some drawbacks. One key disadvantage that IEOs have is the high level of investment and operational cost associated with hosting the startup on an IEO platform. Each IEO hosting platform will have its own operational costs and requirements. This increases the bar for entry for startups. However many would consider the benefits received by start-ups, to offset the cost of entry.