The three letters on everyone’s lips this summer are: ICO, or Initial Coin Offering, which promises a fledgling team of developers millions of dollars on little more than a white paper. For this reason, ICOs are quickly becoming the fundraising model of choice for up-and-coming projects, instead of the antiquated venture capital method that is still the norm.
In aggregate, the ICO market to date has raised upwards of $380 million, according to Forbes Magazine. That number is projected to grow to $1 billion at the close of 2017, according to William Mougayar, the organizer of the Token Summit conference, leading the discussion on ICOs. These staggering numbers have forced people, even the ICO doubters, to pay attention to this exciting space.
Not to confuse token ownership with equity ownership in a company, ICO token issuers only promise liquidity, rather than stake, to their token buyers (for all intents and purposes, “coins” and “tokens” are used interchangeably in this context). Because of this, investors find themselves with more options and less long-term risk. This has proven to be very appealing for many investors.
Before ICOs, investing in early stage startups was a privilege exclusive to venture capitalists and accredited investors. This new crowdfunding model opens the gates for the general public to invest in early stage startups before they go public, just like an IPO (initial public offering). The security that blockchain technology provides ICOs has taken away a lot of the skepticism that investors had about this new investment model.
ICOs have become something of a fad in the nascent blockchain ecosphere and has since garnered criticism from members in the community, where some are calling it a means to scam “dumb money,” or naive investors. However, the history behind the birth of the ICO model paints a very different picture.
In 2014, while the bear market was looming over Bitcoin, venture capital funding plateaued while the market sat on ice. Bitcoin’s price had dipped to $200 in 2015 (it’s currently rising towards the $3,000 mark) and generalist VCs took to other industries for better returns. Yet the entrepreneurial fire within the blockchain space kept roaring, seeking out creative alternatives for backing.
Enter Brock Pierce, the mastermind behind the ICO model. He recognized that current venture capital models were outdated, and that the security and flexibility that blockchain technology offered Bitcoin could be applied outside of the massive cryptocurrency.
2013 marked the year the very first ICO was born. Pierce introduced the crowdfunding model to raise capital for Mastercoin (now Omni), the first ever token sale that was open to the public. In a month-long fundraiser, the team raised over $500,000, demonstrating to other would-be blockchain projects that a crowdfunded model was not only feasible, but also easier and more lucrative than the venture capital route. People took note, and ICOs have only grown since then.
To Pierce, venture capital as we know it is done:
“I think I just killed venture capital forever as the model works.”
The ICO model provides incredible liquidity to a previously illiquid market. Where VCs would wait two or more years for a project they invested in to generate profit, they can now see immediate returns, allowing them to remain flexible and have better granularity with when they invest or sell. In the case of the ICO, liquidity is generated the moment those tokens are introduced to the secondary market—the cryptocurrency exchanges.
Normally, venture capital funding is limited based on location and only presented to a few investors. ICOs’ ability to completely ignore these constraints is one of the main reasons why Pierce believes this model is the one for the future.
“I think IPOs are dead….Our market is global….Why would I want to do a local listing when I can do a global listing using more efficient technology?”
There seem to be two sets of visions. One is that ICOs are revolutionizing how startups are funded, where ICO is the model which ultimately breaks the boundaries of borders and opens up a global audience of investors to blockchain startups. The other is that ICOs are going to fizzle out of existence as soon as they become regulated. One thing is for certain though, according to Pierce, “Everything’s about to change.”
It is undoubtedly going to be a big summer for the ICO investment model. If Pierce is right in his belief that this model is an upgrade on the traditional VC model, investment as we know it may be changed forever. However, if people are unwilling to change and are afraid of the unfamiliarity associated with blockchain technology, ICOs may have to sit on the back burner or step aside until the world is ready for it.
One such ICO that’s taking place this Summer is CORION, which promises to be the easiest point of access to the crypto world. It aims to be the cryptocurrency for everyday use, being stable against USD. This is exciting for those looking for an accessible cryptocurrency for everyday use.
For investors, CORION has a coin release feature, which allows users to gain coins over time as the platform itself grows. This growth can be as much as an impressive 2.5% per day. In addition, CORION offers a wallet function which allows for seamless P2P (peer-to-peer) transactions. CORION’s promise is undeniable, and this forward-facing cryptocurrency’s success could prove a victory for the entire crypto world. You can take part in this ICO by visiting their website here.