Mumbai-based online car rental platform Drivezy has raised $5 million from its first round of initial coin offering (ICO), chief executive officer Ashwarya Singh said.

Existing investors and high net worth individuals (HNIs) from Japan and Singapore participated in the round.

An Initial Coin Offering is an unregulated means of raising money from potential investors using crypto currencies such as Ethereum, Bitcoin and others. A start-up uses the ICO route to circumvent the regulatory steps required by venture capital funds, private equity investors and banks.

For the current round, Drivezy limited the ICO to investors who have a minimum net worth of $1 million or those with an income of more than $200,000 per year. Drivezy plans to use the money to add 800 cars and bikes to its platform. The company announced its ICO offering in October 2017 in Japan through a tie-up with Japanese fintech company Anypay which is also an investor in Drivezy.

Drivezy operates on peer-to-peer (P2P) models that allow car owners to lease their vehicles, which are then rented out to registered customers on the platform.

The company currently claims to have more than 1,300 cars listed by more than 800 owners. It also has more than 500,000 registered users.

In the ICO, Drivezy’s investors were allowed to purchase cryptographic tokens which entitle them to a share of revenue, generated by rental transactions on the platform. For the current round, the company sold close to 3 million tokens.

Drivezy offered the ICO on the Ethereum blockchain with the price pegged at 0.00141 ETH per token. This means that each token offered to the investor costs 0.00141 ETH or $1.20 (at the time of publishing of this story). In an email interview, Singh said that the money raised from the ICO route will be exchanged into dollars via crypto currency exchanges in the US.

The value of Ethereum tokens change in real-time according to the market and investing huge amounts into a company via the ICO route could pose a higher risk to the investor. However, each investor is entitled to receive 95% share of monthly revenue earned by vehicles on the rental platform.

For the purpose of offering the ICO, the company also launched its own crypto coin named RentalCoins which will be used to pay for rides in the coming months, and to invest in shared vehicles operated by Drivezy.

The start-up allowed users to pay for vehicle rentals using Bitcoins in October 2017 but later discontinued it due to high-costs. “Unfortunately, we had to discontinue the pilot due to the escalating transaction costs which are often as high as $60 per transaction. We shall however stretch the scope of RentalCoins in the second phase to cover crypto transactions on our platform," said Singh.

The company plans to raise up to $15 million through multiple rounds of ICOs. Till date, it has raised around $15 million from the regulatory route—VCs and other investors. Its earlier Series A round that was closed in October 2017 saw participation from investors like Das Capital, Axan Ventures, CrowdWorks, IT-Farm, White Unicorn Ventures and others.

Drivezy’s ICO offering comes at a time when several countries including India are looking to regulate the use of crypto currencies. While presenting the Union Budget, 2018, finance minister Arun Jaitley said crypto currencies are not legal tender in India.

Chinese regulators also imposed a ban on ICOs and crypto currency exchanges in September 2017, which led to a huge drop in value of crypto currencies like Bitcoin, Ethereum, Ripple and others. Bloomberg reported in September 2017 that Bitcoins dropped by 9% after the Chinese crackdown.