Outlier Ventures Research has just released our latest research report titled ‘All You Need to Know About Initial Coin Offerings’.
Further to our commitment to open-source: our data (Blockchain Angels Blockchain Ecosystem Tracker — 1070+ startups and growing) and our analysis (Monthly Blockchain Market & Investment Update) to support and help the ecosystem grow, we are going to be publishing regular free research reports that investigate developments in the community.
Some key findings from the report include:
- 12% of all bitcoin and blockchain projects that have raised money have used a network token presale
- Crowdsales have raised roughly $240 million to date. TheDAO was the largest crowdfunding campaign in history raising at the peak $180 million.
- The debate around whether or not tokens are securities misses the broader business model innovation that network token presales are driving
In the report we look into 5 themes in the Crowdsale/ICO/Appcoin/Network Token Presale space:
- How terminology around blockchains, initial coin offerings (ICOs) and tokens is leading to dangerous levels of market misunderstanding
- Where network token presales fit into the broader crowdfunding market
- Regulatory challenges around network token presales & securities law
- Business model implications of network token presales
- Broader potential of tokens to enable blockchain-chartered companies
“In time tokens may come to represent a fundamental shift in the structure of companies, but already network tokens are having an impressive impact by providing a new business model for open-source and protocol development.”
As a venture builder and investment partnership, we ourselves wanted to understand the role of ICOs in the broader context of fundraising. Specifically to see if there was still a role for a dedicated equity-based crowdfunding platform for blockchain startups. Our findings, the highlights of which are broken down below, confirmed our view ICOs whilst truly revolutionary still have many risks and limitations and are best suited to very specific instances:
- ICOs are broadly used to fund highly technical blockchain infrastructure for which only early adopter developers can understand the need and where the capital requirement is immediately high.
- This is particularly important now private money in the VC world, especially Silicon Valley money is drying up, due to the lack of big exits.
- The ICO seems to be less relevant where a startup is an application (or DApp) whose use-case should be clear to a traditional professional investor who can provide not just capital but an address book and vertical expertise to help make it happen.
- The majority of startups are put off by both the legal uncertainty and additional complexity of managing so many smaller investors early on in their development cycle.