Some have said that Initial Coin Offerings (ICOs) will disrupt the Venture Capital (VC) industry. While ICOs will certainly change the way the VC industry works with some startups, disruption isn’t the right word. I prefer “modify” as a better description.
90% of the ICOs will end badly. They don’t have substance to support the value of their tokens. A small percentage will do well, because they are creating businesses upon decentralized applications (Dapps) that are providing real value, and usually, disrupting an existing process.
The ability for ICOs to continue as unregulated offerings is unlikely. China just shut them down. Russia, Singapore and Canada have issued warnings. The SEC is likely to deem them securities, which mean they will undergo regulation.
Even if ICOs continue as a funding option, for them to work, the company/project offering them needs to have a reason for a token that is tied to their Dapp. While many interesting companies will come into existence using Dapps, many more interesting companies will continue to be created that are not tied to the blockchain.
ICOs are disruptive to VC funding for a very particular strain of company — one that is a riskier bet than most. I believe ICOs will remain a mechanism for both enabling a blockchain Dapp to work, and to raise funds.
However, smarter investors will prevail and VCs will be involved to help blockchain companies get off the ground. Exits for companies and VCs in the future will continue to be acquisitions, IPOs, and (in some cases) ICOs as well.
