ICO, like any other instruments, are just a means to raise funds or build publicity on the side of the issuer, as well as an investment opportunity on the side of the investor.
There are tons of compliance and regulation when it comes to IPO and Series Funding. ICO represents an "easier" to raise funds via cryptocurrency since technically the blockchain is borderless. There are scams on both sides of the argument. Only that perhaps because of decades of enforcement and regulation, non-ICO fund raising scams are way less simple than most ICO scams.
Take Theranos for example. Despite all the regulations and compliance issues that Elizabeth Holmes and her lawyers managed to overcome, It still ends up being revealed as a "Billion dollar scam". So the assumption that legal compliance translates to no-scam is dangerous.
In many countries, people are locked out of investment opportunities because they lack the network or capital to do so. In the US, you literally are locked out of Series Funding investments if you aren't a millionaire (accredited investor) because SEC is "concerned that poor people can't make sound investments" (extreme paraphrasing here). The rich gets ample opportunities t get richer while the poor are legally banned to do the same thing.
ICO was envisioned to be a way to solve the capital rent in the investment industry. Startups can get funding opportunity from a larger pool of investors while people can invest any amount possible without government intervention and potentially get as much percentage returns as millionaires. Ideally a win-win.
Reality isnt so beautiful though. The compliance and regulations were there in the first place to protect investors from scams and bad faith. Without the regulations, it's the Wild West. Anyone is free to do what they want and the only protection to the investors are their own wits.
It's too early to say whether anything good will come out of ICO, But over the past 10 years, the highest performing investments are all undisputedly ICOs.
<source: steemit.com/crypto/@hilarski/what-ico-s-have-had-the-highest-returns>
This is the sort of scenarios where the free market literally comes to play. Good investments makes overnight millionaires while bad investments leaves the investors with nothing. No one is there to interfere regardless if things went north or south. There's a funny saying where "the most you can lose is 100%, but there are no limits to the gains", obviously not a good advise. though it does shed light to what's going on in the ICO space.
On Whether ICO is the only way. Heck no.
We as Steemians are literally either seeing or participating in another crypto-alternatives to fund raising. Musing.io recently (as of time of writing) just gotten a delegation of 400+k Steem Power. The sort of opportunities that comes with such a delegation is massive. And I can't state all the advantages of using delegation as a form of investment and fund raising mechanism as compared to direct capital investment.
And then there is crypto microloans, or even smart contract itself, where the possibilities are literally endless. Imagine a type of funding round that incorporates FOMO type smart contract in place of Series funding. Where people and firms can "place their bets" on each funding rounds where the funds gets unlocked only when the smart contract requirement is met. Would it work? I have no idea, but it shows what can be done.
What cryptocurrency is doing to finance is akin to how the internet changed the way we learn, or what automobiles did to transportation, or how farming changed the way humans look for food. Sounds grandiose as heck, but I am confident it's what we're seeing.
ICO has irreversibly changed how people look at the idea of fund raising. There will always be scams, and the scams will only get smarter. But the possibility of placing your money even if in minuscule amount as a show of faith and the ability to fund ones company without the restrictions of border is something that we cannot turn away from. it would serve the governments better not to outright ban such a powerful tool. Even doing so in itself might have political ramifications which is an entire different conversation.