What is an ICO, and how do crypto projects raise millions of dollars?

Introduction to the concept of ICO

For the successful launch of any crypto startup, having sufficient funding is a key factor. Blockchain projects often require significant investment at early stages — from smart contract development and tokenomics design to security audits and market entry.

Lack of funding remains one of the most common reasons for failure in the industry. Moreover, in conditions of high market volatility and increasing regulation, the crypto sector is susceptible to changes in the investment climate.

According to Galaxy Digital data for the third quarter of 2024, the total volume of venture investments in crypto startups fell by 20% compared to the second quarter. If crypto startups run out of funds or fail to attract new capital, this threatens the closure of projects.

There are several ways for Web3 startups to raise capital, including attracting private investors, receiving grants from private companies or government organizations, or conducting crowdfunding*.

* Crowdfunding — a way of collective financing of a web project, in which funds are raised from a large number of people, usually through online platforms.

Many crypto projects view crowdfunding as one of the funding stages, along with private investment rounds. One of the most common methods of crowdfunding in the cryptocurrency space is an ICO.

What is ICO: basic definition

What is an ICO? Initial Coin Offering, or ICO, refers to "initial token offering" and is a form of fundraising that involves issuing digital assets on the blockchain. ICO is a type of token sale*.

* Tokensale — the sale of tokens.

In other words, an ICO is a type of crowdfunding that utilizes a smart contract on the blockchain, ensuring the autonomous transfer of assets after the token sale. Most token sales have been conducted on the Ethereum and BNB Smart Chain (BSC) blockchains.

The stages of a token sale are the same as in classical crowdfunding, except that instead of specialized online platforms for fundraising, a blockchain with smart contracts is used. Another difference is that in the case of a successful launch, there is no need to return funds to investors after the ICO.

It is assumed that, over time, tokens issued through an ICO will be utilized in the project in some capacity, and investors expect to profit from their future growth.

The primary advantage of an ICO is the opportunity to purchase tokens at the lowest price before they are listed on exchanges. But at the same time, investors are at the highest risk because the project may fail or turn out to be a scam.

Success and risks of ICO

Statistics show that only a small portion of ICO projects succeed and thrive. According to Coinopsy research, more than 60% of crypto projects have become "dead" due to a loss of investor interest.

Another study conducted by Enterprise Risk Mag showed that in 2019, only 10% of ICO projects were successful. Examples of such projects, apart from Ethereum, include Nextcoin (NXT), whose token rose to $1.94 in 2017, bringing its investors a profit of over 11,000,000%. However, despite such stunning results, the project did not survive the "crypto winter," and its token is no longer traded on exchanges.

Two other well-known projects, Neo (NEO) and Stratis (STRAX), generated over 300,000% profit for their investors after the ICO, although these cryptocurrencies are now also performing poorly. The NEO price has fallen more than 97% from its all-time high, and STRAX by 77%. The situation clearly illustrates that the survival of projects depends not only on the success of the ICO itself but also on competition and trends in the crypto market.

However, there are also examples of more unsuccessful ICO projects, one of which was Dragon Coin (DRG). Notably, Dragon Coin raised over $400 million through a public token sale, making it one of the most significant ICO projects in history. Even such prominent and successful projects as NEAR Protocol (NEAR), Solana (SOL), and Sui (SUI) attracted smaller amounts of investment. Despite the impressive amount raised, the Dragon Coin project quickly failed, and investors' investments ultimately went unrewarded.

Stages of ICO and its features

To better understand what an ICO is in practice, it is worth looking at its key stages:

1. Concept development. At this stage, developers form the basis, usually described in the project's technical document (White Paper). This allows future investors to study the project in detail before investing and analyze its prospects;
2. Investor attraction. As a rule, the project team launches a marketing campaign in the media, social networks, and other channels even before the token sale starts;
3. Token sale. The ICO itself can also take place in several stages. For example, developers first conduct a pre-sale (a preliminary sale with a discount, also known as Pre-Sale or Pre-ICO), and then proceed to the main stage — the public token sale.

The key product, which can be either a blockchain or a standalone application, is typically launched by developers after the token sale; however, it sometimes happens the other way around. Some projects, such as meme coins, may not have any product at all.

To purchase tokens during token sales, native cryptocurrencies of the network in which the ICO will be held (e.g., ETH, BNB, SOL) are typically used. However, in some cases, stablecoins such as USDT or USDC are also used in initial coin offerings (ICOs) or token sales.

In the case of an ICO, a project can conduct a token sale at any time without approval from anyone, freely setting the price of its asset. This makes ICO one of the simplest ways for projects to raise funds; however, this same feature also opens up enormous opportunities for fraud.

According to statistics, nearly 30% of ICO projects issued between 2013 and 2019 were found to be fraudulent. Fraud problems in ICOs prompted regulators to begin regulating the sector. In some countries, such as China and South Korea, token sales were banned. Many online platforms, including Baidu, Tencent, Snapchat, and Yandex, have banned ICO advertising.

Examples of the most successful ICO projects

The most successful ICO project can be considered Ethereum, which is the leading altcoin and ranks second in market capitalization after Bitcoin. As of September 2025, Ethereum's market capitalization is approaching half a trillion US dollars.

It was the Ethereum platform that held the world's first public token sale, raising $18 million for $0.40 per token. The value of the Ethereum cryptocurrency increased more than 10,000 times from its ICO price, reaching up to $ 4,100 and peaking at nearly $ 5,000.

Although there are hundreds of other ICO projects that have raised significantly more than Ethereum, none have come close to the success of the leading altcoin.

Gradually, the ICO format gained increasing popularity, and the real ICO boom occurred in 2017, during which projects managed to raise a total of $6.1 billion.

Here is a list of the most successful ICO projects by the amount of funds raised:

• EOS — $4.1 billion (2017—2018);
• Telegram (GRAM) — $1.7 billion (2018);
• Bitfinex — $1 billion (2019);
• Dragon Coin (DGN) — $407 million (2018);
• Huobi Token (HT) — $300 million (2018).

Main types of ICO

ICO is the first form of fundraising through token sales, but later, other types appeared, each with its own characteristics:

• Initial Exchange Offering (IEO) — initial exchange offering. Similar to an ICO, but the token sale occurs on specific exchange platforms after the project selection. A significant difference is that participants often need to undergo identification (KYC);
• Initial DEX Offering (IDO) — initial token offering on DEX exchanges. Immediately after the sale, a liquidity pool is formed for new tokens, and users can trade them on the DEX;
• Security Token Offering (STO) — initial offering of tokens recognized as securities (tokenized shares). STO differs from classic ICO as it is conducted strictly according to regulatory requirements;
• Initial Twitter Offering (ITO) — initial token offering on the social network X (formerly Twitter) via the Mask Network protocol.

Conclusion

Understanding what an ICO is helps investors and developers navigate the world of crypto financing more effectively. Despite the risks, ICO remains one of the most critical fundraising tools for Web3 projects, capable of bringing investors both colossal profits and severe losses.