Will Initial Coin Offerings change how capital is raised?

Cryptocurrency such as Bitcoin and Ethereum continue to make headlines with many crypto currency startups raising funds using ICO (Initial Coin Offering)  which is akin to a Kickstarter campaign albeit instead of receiving a product as an investor, you receive a “coins”  in the new crypto currency in exchange for the value of money you put in.  You receive “Coins” instead of  “Shares”.

Cryptocurrency is not a new “Payment Method”.  It has more in common to paper currencies backed by governments:  Dollar, RMB, Pounds, Yen, etc.   Crypto currency however is a decentralized currency and not controlled (or manipulated) by any government or agency.  Giving it a truly democratic, universal and non privileged or biased “Access” to anyone that has access to the internet.   It will not be a privilege of a few and will never be locked down or controlled by banks as seen in recent banking history.   In recent past, bank withdrawals of your “own money” has been curtailed in Argentina, Venezuela and Zimbabwe.

IPO – Initial Public Offerings are generally offered by startup companies that have proven their business model, had considerable success in previous rounds of financing and are already making great progress on market adoption and even cashflow.   ICO however are offered by companies that are very early in their company life cycle – which mean they’re generally very High Risk from the investor’s perspective.

This trend however will continue because holders of crypto currencies need a channel to “spend” or “invest” their capital.  ICO has also been effective at raising money very quickly and from non traditional (aka institutional investors).    This also will continue to change.    Pantera Capital has recently raised a $100M hedge fund that will be used on invest in cryptocurrency startups.

Notable Initial Coin Offerings:

Ethereum – Raised $18 in 42 days

Bancor Foundation – Raised $153M  in 3 Hours  (June 2017)

The DAO – Raised $150M (May 2017)

Status – Raised $103M  (June 2017)

AEternity – Raised $63M (June 2017)

Aragon (Enterprise Management Platform) – Raised $25M in 15 minutes  (June 2017)

For a list of upcoming ICO events  visit  TokenMarket’s ICO calendar