Why ICO’s will be the future of startup funding
For new companies there is a sea change as new technologies are gaining traction. However there is a PR battle that must be waged. We tend to only see cryptocurrency and blockchain make headlines when the price dramatically rises or falls, or when a theft or scam occurs.
We tend not to see the great innovations in crypto make the news, the homes being built in Latin America from the DASH Foundation, the food being bought with crypto in Africa or in this particular discussion the great new companies coming up in the space.
One recent comment I read was centered around ICO’s being called a step above a scam (and it seems maybe some have an even lower opinion).
When I see some calling ICO’s and cryptocurrencies tulips, akin to how the famous flower was extremely over valued in the 1600’s, is a laughable conversation. It seeks for some unknown reason to discredit
It derides capitalism and companies building solutions, saying that any business raising capital through an IPO, an ICO or via private investment is now in the business of selling high priced flowers instead of trying (and sometimes failing) to build a sustainable business that would improve their lives and likely everyone around them.
We should have a bit of definition. What is an Initial Coin Offering (ICO)? Well at its basic level it is the ability for a company usually (for now at least) a start-up or early-stage Enterprise, to raise capital from a global community to fund a future product or service. Believe me there are big, well established brands out there looking to “tokenize” their produces and services and I can easily see a future where you will have tokens from all sorts of businesses you interact with. Think the future of currency combined with a high revamped model of in-store credit, that can be traded instantly.
No matter how successful a new technology has been there are always detractors and people looking at it from a negative point of view. Let me be clear, this is vital to any technology, industry or well-functioning democracy. It is important that we look at both the upside and the downside of any topic, including financial implications.
I just listened to a podcast featuring Peter Schiff, for those in the financial industry may recall that he was one of the few people in 2007 and 2008 calling the housing crisis and furthermore mortgages in general a house of cards waiting to collapse. He was a negative, single voice calling the current situation untenable.
I found a lot of value in his past and even current opinions, whether I fully agree is another matter, but we should never dismiss even one voice out there in the wilderness saying that there is a upswing or downswing in a financial Market. Perhaps that single voice is at times even more relevant. It takes a lot of fortitude and lack of preserving one’s own self best interest to stand up to a chorus and shout against the wind.
However that is not exactly what we’re dealing with here. Blockchain and cryptocurrency detractors seem to be coming out of the woodwork whenever a negative piece of financial news hits the page. It is of course no different when it comes to ICO’s and their failures, or successes , which seems to be left out of most opinion pieces when they talk about the industry in general.
The ICO model is not unlike the Kickstarter.com funding mechanism that many people are likely familiar with.
“Hey I created a brand new widget!… but I don’t have enough capital yet to create a business… Hmmm… Hey Mr. Joe Public, would you mind pre-paying for this cool new widget so I can build a company and get it made?”
This model, pre-funding a business idea, has been successful. We have seen upwards of 36% of Kickstarter products launched gain the funding they needed and be successful. That is thousands of companies and ideas that may have never left the idea stage, now being sold worldwide, creating an untold number of jobs and opportunities.
On that that note, I’ve seen trusted sources showing that anywhere between 50% — 90% of startups fail. I don’t know who to believe, but at minimum launching a startup is proposition filled with pitfalls to navigate, some of which are totally out of the startup’s control and some they should have absolutely seen those cliffs.
So what are the statistics for ICO’s surviving? Well, just like with “normal” startups the statistics are pretty hard to nail down. We see reporting on figures anywhere from 50% — 75% of ICO’s have failed.
Even with these nebulous numbers, are you noticing a trend? It’s appears that startups and ICO’s are following a similar trendline, maybe its half, maybe its 25%, but the story overall seems the same, many startups dont survive, but that’s ok.
The free market is doing it’s job to let the good companies and ideas rise to the top and jettison the ones that either cant make it or is too early / late for success. That doesnt mean that all startups are bad and we should just stop letting companies get up and running… A “baby and bathwater” analogy fits well here.
So why the “hate” towards ICO’s if in many ways they appear so similar to the traditional startup? I don’t think anybody would seriously be talking about stopping “traditional” innovation and business, but like anything “new” there is always the (mostly well meaning) concerns.
I can only guess but but I have a few thoughts. Because an ICO can be started by nearly anybody anywhere in the world, the fact that cryptocurrency is pseudo anonymous moving towards being almost entirely anonymous (which is a great thing for privacy and most importantly security, but that’s for another article) and anybody with an idea could at least give an ICO a try might mean that there are more failed companies potentially in the ICO space the in the traditional startup world.
Of course we need to weed out scams and bad actors. So knowing who the principles are, having a strong team and business plan is important for projects that dont need to be anonymous. Many are focusing on the potential downsides of any startup or ICO’s, but we should be looking at all the huge benefits as well.
We have companies coming up with completely new business models, able to upend industries, drive efficiency and enter markets that we’re close to them until very recently.
We now are seeing a system that allows companies to raise capital from pretty much anywhere in the world. A truly democratic system. If you have a good idea backed by a good team with a strong need in the market for it, you can raise capital through private investors and through the public.
This level of exposure that the internet has given us coupled with the ability to raise capital from anywhere in the world no matter how much money the potential investor has from $1 to a million dollars was literally not possible only a few short years ago.
This new technology and burdening market is doing what the free market system always does, cuts through endless regulations, removes the barriers of allowing people of certain net worth to invest in companies or be bogged down with endless paperwork to get your company on a stock exchange.
Building a company, making a product and service that people want and need is the mission of any company and what they should be focused on. Having to spend precious time and capital on just getting up and running is something we all should be looking to reduce or eliminate for these companies.
We are now seeing the future, a way for startups and business to be even more efficient now, driven by the power of cryptocurrency, blockchain and the internet. I’m really excited to see what great companies come out of this new era.
Sources
https://www.forbes.com/sites/kenrapoza/2018/02/26/most-cryptocurrency-startups-icos-succeeding/
http://fortune.com/2018/02/25/cryptocurrency-ico-collapse/
https://www.entrepreneur.com/article/308447
Gilbert A Darrell is the Founder of Horizon. He has 18 years experience in information technology and telecom solutions, a veteran in Fire and EMS Services, a crypto enthusiast and a member of the Bermuda Government’s Cryptocurrency Task Force.
Horizon Communications is an upcoming fixed wireless internet and cellular service provider looking to provide services in Bermuda, the Caribbean, and Central America before expanding internationally.
While utilizing 4th generation and soon 5th generation wireless technology, it will also heavily incorporate blockchain and cryptocurrency technology, one of the 1st ISP’s in the world to do so and the 1st to tokenize their services using an Initial Coin Offering (ICO).
More information can be found on their website — www.HorizonComm.co
