ICOs are often utilized by startups to bypass the rigorous and regulated capital-raising process required by venture capitalists or banks. During an ICO, a percentage of the cryptocurrency is sold to early backers of the project in exchange for legal tender or other cryptocurrencies. This method gives investors a chance to purchase tokens that may rise in value during or after the project is launched. However, ICOs carry high risks and regulatory scrutiny due to the potential for fraud and lack of legal protections for investors.