The Strategist

ICOs helped raise over $ 1 billion in total

07/12/2017 - 10:53

In the current year, start-ups attracted over $ 1 billion through the ICO, which is ten times more than for the entire 2016, says The Wall Street Journal, citing data from Smith & Crown, a crypto-active research company.

gdsteam via flickr
gdsteam via flickr
The middle of this year is marked by two large crowdsale. ICO was carried out by software manufacturer Dynamic Ledger Solutions (Tezos) and a startup, specializing in blockchain technology products. Together, they raised nearly $ 400 million, more than Blue Apron (supplier of ingredients and recipes) managed to raise during its IPO at the end of June ($ 300 million).

At ICO, investors buy the company's digital tokens, which can then be exchanged for either the start-up’s product, or traded on an exchange. ICO is somewhat similar to IPO, initial public offering of shares on a stock exchange, but the difference is still quite noticeable. Unlike shares, tokens do not give the holder the right to share in the company and dividends.

The hype around the initial placements of coins greatly contributed to sharp growth of crypto currencies Bitcoin and Ether. Both were actively used to buy tokens of new blockchain startups conducting ICO. In the first half of 2017, Bitcoin grew in price by 160%, and Ether - by 3,350%.

Companies that raise money for ICO often have no product at all. Dynamic Ledger, founded by an ex-trader of Morgan Stanley and Goldman Sachs, has been operating for three years, and was established this year. For comparison: Blue Apron’s history has lasted five years, the company is friendly to investors, and the revenue amounted to $ 800 million in 2016. Two years ago it attracted capital from investors and was estimated at $ 2 billion.

According to the British company Dealogic, the amounts raised by both start-ups are comparable to average value of funds raised through traditional IPOs. In 2016, the average amount attracted by US joint-stock companies was $ 219 million. Since January, high-tech companies have placed shares at $ 5.9 billion compared with $ 900 million a year earlier

ICO carries considerable risks. "A wide range of investors in their majority have no idea in what they are investing," said Francis Pouliot of Bitcoin Embassy, an information and analytical company. "Even start-ups with a good future can be a bad investment."

One of the largest ICOs was held by EOS platform for "smart" contracts. Its first round kicked off on June 26 and ended on July 1. The blockchain start-up has collected Ethers, equivalent to $ 170 million in five days.

Another blockchain start-up Tezos attracted 42,078 bitcoins and 181,619 averages, equivalent to more than $ 150 million, in the first two days of the ICO in July this year. Tezos’ founders positioned it as an alternative to the Ethereum network protocol of secure and time-tested smart contracts.

About a year ago, The DAO, a project for decentralized investment management, stopped selling its tokens. Everything was good at first – the crowdsale brought more than 12 million Ethers, an equivalent to about $ 165 million then (more than $ 4.3 billion today ). On June 17, 2016, a hacker discovered an error in the code and withdrew $ 60 million from the DAO. This hit not only the fund, its founders and investors, but also the entire community and the DAO tokens in turn lost 60% in price.