Rise of the ICOs


There was a lot of excitement during the 2017 ICO frenzy; however, there’s not a lot of corresponding patience. An ICO happens during the very first stages of a project and not after it’s mature enough to go public in the traditional stock exchange model.

Yes, cryptocurrency startups raised billions of dollars through ICOs. That may be the most money any of these projects will ever be able to raise until they start generating their own revenue.

According to CCN, ICOs aren’t cashing out their war chests because “all ICO balances have a burn rate since projects must use their cryptocurrency funds to pay for operating expenses.”

Unlike traditional startups, the investment rounds aren’t incremental, they’re much more like Kickstarter or any other fundraising site. Most ICOs have a goal, like Kickstarter. And, like Kickstarter, the project is generally just a glimmer and a plan when the money is being raised. When you invest in Kickstarter to fund a movie or book you want an author to make, you’re not just unlocking access to them through some sort of extortion.

It’s not like the Wu-Tang Clan’s album Once Upon a Time in Shaolin: it’s not already made and then Wu-Tang wants to raise funds to release it? Kickstarter—and ICOs—make everyone who contributes—invests—into a friend and family investor. In most cases, ICOs are made up exclusively of friends and family funding. It really never even gets to Angels or round A. An ICO is just a manifestation of lots and lots of friends and so much family.

Bread needs to bake, sauce needs to reduce, ribs need to smoke, and ICOs need time to gestate between the moment of insemination, the Token sale, and when a fully viable product, app, or service emerges, after birth.

One of the biggest differences between an initial public offering (IPO) and an initial coin offering (ICO) is that most companies that decide to go public are already quite mature and are often well past their startup days. They offer a prospectus, which discusses the health and viability of an already-running and staffed business. ICOs, on the other hand, offer white papers explaining the vision.

The majority of ICOs are companies that are not even gestating yet. They might not even be pregnant. In many cases, Token sales often represent the project that is only just a twinkle in their father’s eye. At the white paper level. In many cases, the ICO comes in at the time in a traditional startup’s life when it’s getting friends and family funding ($25,000 to $150,000) or maybe its first angel investor.

IPOs require underwriters in the form of investment banks, something ICOs don’t need at all. They’re apples and oranges. ICOs have more in common with Kickstarter than “going public” traditionally via an initial public offering. After going public, public companies are endlessly scrutinized and there are many expectations and restrictions that a publicly-traded company needs to adhere to that privately-held companies needn’t, including fair disclosure and quarterly and annual reports.

It takes 266 days—nine months—to gestate a human baby. For a sperm whale, 590 days; a rat, 21 days; a lion, 108 days; a horse, 342 days; a mouse, 19 days; and an otter, 86 days. Gestation runs the gamut. Some projects are really huge (a whale) and some are more modest (a mouse). So too are all the projects that are benefitting and will have benefitted from the money raised during the ICO gold rush. Some are evolutionary mice and many are revolutionary whales. Some ICOs, like Crypterium, want to bank the unbanked and completely dethrone and unsaddle the entire traditional payment card and banking industry.  That might take at least the gestation period of the elephant, 660 days, or roughly 95 weeks.

There’s a wrong assumption that last year’s initial coin offering (ICO) boom was a series of bank robberies, train robberies, and a fire sale rolled up in one. It isn’t true. It’s only been a year. All that money poured into all those Tokens didn’t get dumped into the sea. They didn’t buy a boat. Once the money is raised, it can take years to completely change the world in the ways that many of the ICOs have envisioned in the in prospectuses and white papers.

We all feel this way whenever we make any investment. Not only because of the obvious risk (imagine if playing Texas Hold’em took 18-months-per hand?) but because everyone wants access to their liquid money, especially when it’s mixed with lots and lots of frothy profit (win!). We want access to our retirement accounts (can’t wait ‘til 65), we want access to our inheritance (die, already, dad!), and we also want to see the value of all the Tokens we bought in good faith in support of all the revolutionary projects, businesses, apps, and platforms they promise, both in things we’d surely love to use, but in the promise that their delivery will bolster their valuation and the value of their Tokens—at least to where the money invested in the ICO can vest to at least a 25% profit (but I know you, you want 50%-100%-150% profit, am I wrong?).

Hodl ‘em. Don’t fold ‘em, don’t walk away, and don’t run.