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Venture Capitalists or Initial Coin Offerings?

This article is written by Nardine B. M’barek, a Contributor Author at Startup Istanbul.

During Startup Istanbul 2017, we had the pleasure of welcoming Mike Butcher amongst us. Mike is a well-known journalist and writer, who has been conducting researches within the field of Cryptocurrency and Blockchain. In his speech, he explained to us how are VCs possibly going to be affected by ICOs.

 Mike Butcher, a famous journalist and writer who conducts researches related to the domain of cryptocurrency and blockchain, was our honorable guest during Startup Istanbul 2017. His speech was mainly about ICOs and Venture Capitals, as well as which one of them will be the favorite option of startups later on. 

We have first of all, agreed on the fact that ICOs will possibly not replace traditional Venture Capitals; since, as Mike Butcher described them, ICOs are just a new way of starting your project, a kickstarter that could open multiple horizons for numerous startups. As ICOs are a new possible way of funding any startup, they will not, as we said, replace Venture Capitals, but are going to change the structure of investment in an interesting way. So the question that now arises is at what level are ICOs going to have an effect? Is it during the early funding stages, where startups are looking for investment, or is it during the late stages where it is rather hard to get considerable investment especially in Europe? 

ICOs are indeed a great way to get fast liquidity, and that factor could be a huge game-changer to some, or maybe to all startups. Since ICOs are an efficient way when it comes to quickly raising money, then it will have of course a great effect.

As a matter of fact, speed is a primordial aspect when it comes to launching one’s own startup, and this could be guaranteed by ICOs. That is why latest stages are the ones who are probably going to be more affected by ICOs, since the early stages are not the tricky ones, as Mike said, but the latest stages are, especially, as we mentioned above, if you are in Europe, then late-stage funding is a little bit hard to secure. 

How things now are really going on, is that ICOs are in fact not representing an actual threat to traditional Venture Capitals, it is the other way around. Investors are the one who are disrupting ICOs, since they are getting involved from the beginning. Most money is actually on pre-sale due to the investors’ demand.

What Venture Capitals are doing right now is that they invest in these pre-ICOs, which makes them get access to liquidity in a faster way. They also get better pricing, and preferential terms, which is helping them in most cases. This in a way or another, kind of validates to ICO, and gets the project coverage. Mike commented on this by saying that “traditional investors are not just investing in the ico, they are also taking a traditional equity for cash, for traditional cash in the company.”

Now, when it comes to ICOs, you need to be a professional before getting involved, or else you will be losing of money. For those who are professional enough, and capable of getting into this field, it could be a great kickstarter for your startup, and a very important source of funding.

 

29 August 2019

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