“The initial coin offering seems to be winding down, or at least transitioning from a college blow-out to a wine and cheese gathering”
Jeff Kauflin, business journalist, Forbes
No one can dispute the fact that the feverish enthusiasm for the ICO investment has over the past six months slightly diminished. The buzz word of 2017, still ever so important in the investment world, is experiencing what once could call “the end of the honeymoon period” Catalysed by those unlucky investors who have had “their fingers burnt” with scam ICOs they are now sharing around their scepticism of the whole system, making the ICO face a challenging sea change.
The end of the honeymoon is, of course, par for the course. All new trends are faced with “an enthusiastic fever” followed by a cooling down. More significant, however, is whether such enthusiasm is followed by a hesitant lull or a dire death and silence. Thankfully for the investment world, the ICO is faced with the former and it is indeed clearly a lull.
You can almost hear a sigh of relief in the background as this form of investment has been a revelation to those Start-ups and projects with big, viable ideas but unfortunately no proven track record. The ICO can only be seen as an easier path to get a project up and running when faced with the long progress VC entails. Indeed the VC process, in the past, has put the brakes on many a good, innovating venture. This is certainly why we have seen over the last five years, many an unknown genius succeed by means of crowdfunding or the ICO. It is more than certain that the more conservative VC would have most certainly failed them. An easier and faster means of gaining capital, these two fundraising methods are certainly not just part of a trend that will crash and burn as years to come. They are the answer for small fry to succeed and grow big.
Productivist can certainly be put in this category. Backed by a small, but relatively unknown team it is now coming to the end of its ICO at the beginning of October. This innovating project, driven by what can be only described as a winning team will be thankful that it has chosen this path.
Although it is definitely true that the last months have been less than sensational for ICOs when compared to 2017, they still remain a good choice for unknown rising stars. Indeed, their sheer viability and potential for future investors is clearly apparent and its popularity has pushed governing bodies to issue regulations making it a more secure environment for investors. The EU’s integration of ICOs into its GDPR along with ECON publishing on the 10 August new rules for participative financing, are just two clear indicators that the ICO’s lull in popularity is but a lull. In the USA, SEC are on top of the job passing legislation which will prosecute ICOs which are held without KYC procedure. All this indicates that the ICO is to be taken seriously and is here to stay.
In December 2017 Indiegogo — a crowdfunding platform got involved in ICO funding integrating it to its platform. Although currently facing teething problems, it is certainly a shrewd move given the difference in these two great methods of investment. While crowdfunding remains mostly local, the ICO is global and not restricted to a region. This of course means they have a much bigger outreach to potential investors and therefore the possibility to raise substantially more capital. It has therefore opened the door to those projects who would normally never have considered crowdfunding while at the same time they found that VC was almost unattainable.
Indiegogo’s choice however probably is not just weighted on this factor but perhaps also on the fact that crowdfunding does not reward its investors. While it is true that some write to thank those who contribute or sometime even stretch to offer small gifts such as a t-shirt to show their gratitude, it is never lucrative to those who invest. This is exactly what makes them not in the same league as the ICOs investment process which offers the potential for returns as the project develops.
So there is a positivity in the background; even when faced with a decreased synergy of enthusiasm. While governing bodies; and indeed those entities heavily involved in the ICO process, have caused unnecessary concern by putting into place standards to reassure the investor’s pocket, their implementation makes sense. One could argue that the only negative outcome of this move to regularise the ICO is the hesitation to buy which it has caused and has affected many projects in the past few months. Clearly a paradox, when they are designed to protect the investor’s interest. Unfortunately it is those sceptical Investors which are partly responsible for what we have called a “lull”. They however remain still lurking in the background murmuring warnings against dubious practices such as ICO ratings which have been purchased rather than earned.
However, we must remember that where there is money, there will always be room for corruption and bad investment experiences. That is simply the investment game and those returns promised are there because investing in a new venture is indeed sometimes highly risky. Those standards, however, being progressively put in place are inevitable and it is undoubtedly those standards and practices which will allow the ICO to rightly progress and flourish thus helping to allow young enthusiastic geniuses to become champions in their field.
In the meantime one thing, however is certain. This lull has put on a damper on projects currently in ICO process and one is lead to wonder how many good, honest ideas out there have failed. For those, like Productivist, reaching the end of the ICO there is an accelerated drive to ensure their project is a winning one. For those projects which have already found success, it is clear that the heart of their concept will be always fired by their brilliance, conviction and determination which is what encouraged them in the first place. Such elements are sometimes not so easily found in VC but they are qualities which will help them become high achievers and make those who back them certainly that too.
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