As a corporate funding tool, the initial coin offering is quickly gaining ground on the more traditional initial public offering, first-quarter data show.

ICOs raised $5.82 billion during the quarter. That’s a whopping 98 times the $59.5 million brought in during the same period a year ago, according to figures from ICO listing portal Coinschedule. IPOs, meanwhile, brought in $7.3 billion in the latest quarter, up 35.2 percent year over year, according to figures supplied to ThirtyK by PitchBook.

During the first three months of the year, the number of ICOs soared to 161 deals from 18 deals in the year-earlier period, according to Coinschedule. Compare that to the 16.7 percent year-over-year increase in the number of IPOs in the first quarter, when a total of 35 deals were conducted, according to PitchBook.

“If a company has the means to IPO, it should do so,” Buelau says. “But for startups or companies located in countries where IPOs are not possible, ICOs are a good alternative.”

The first-quarter performance of ICOs is influenced by the impressive performance of ICOs last year, Emmanuel Tokunbo Darko, vice president of marketing for ICOWatchlist, tells ThirtyK.

“More and more tech companies, especially those with an element of blockchain, are resorting to ICOs over traditional VCs due to the impressive performance of token sale events in 2017,” Darko says. “As such, there are significantly more ICOs in the first quarter of 2018 as compared to that of 2017.”

ICOs vs. IPOs – Which to Choose

But going the ICO route is not for all companies, says Alex Buelau, founder of Coinschedule. He says ICOs tend to be primarily used by startups and protocol projects, such as bitcoin (BTC) or ethereum (ETH), while IPOs are used by companies that are ready to begin their growth phase.

Nizar Tarhuni, associate director of research and analysis at PitchBook, tells ThirtyK the companies that are going the IPO route tend to be significantly older, with a median age of 9.4 years when they conduct their offerings.

He added that although there was no spike in venture-backed IPOs in the first quarter, he expects the IPO market to remain strong through the remainder of 2018.

Market Performance, Regulations, ICOs

ICOs are facing increasing challenges as cryptocurrency prices decline sharply and as government agencies such as the U.S. Securities and Exchange Commission seek to impose regulations on the industry.

Although Buelau says Coinschedule continues to see about 20 ICO submissions on a daily basis despite the drop in cryptocurrency values, Darko says ICOWatchlist has noticed some companies changing their fund-raising targets or adjusting their ICO live dates to the second or third quarter, when a market recovery is anticipated.

Meanwhile, some companies are shying away from ICOs, Buelau says.

“Right now, established companies tend to avoid cryptocurrencies because of the perceived risk,” Buelau says. “If a company has the means to IPO, it should do so. But for startups or companies located in countries where IPOs are not possible, ICOs are a good alternative.”

He says if the SEC eventually regulates ICOs, it will put established companies at ease and they may begin participating in ICOs.

Due to the increasing regulatory scrutiny of ICOs, which Coinschedule supports, ICOs are trying to avoid participants from difficult regulatory jurisdictions such as the U.S. and China, he adds. In the first quarter, Buelau says, he noticed some companies are even avoiding receiving funds from the public and just doing private placements.

“In my opinion, this is not healthy for the industry and not really what ICOs are supposed to be about,” Buelau says.

Dawn Kawamoto
Dawn Kawamoto is an award-winning technology and business journalist, whose work has appeared in CNET's News.com, Dark Reading, TheStreet.com, AOL's DailyFinance, and The Motley Fool. She has also covered the technology jobs and careers market for Dice.com.