The Impact of ICOs
Crowdfunding has been growing in popularity as a way to raise money for companies trying to launch a product or service. Initial Coin Offerings (ICOs) have only accelerated this growth as they exploded in 2017 and 2018. Over the past 2 years, we saw thousands of ICOs and billions of dollars raised through them. The ICO for EOS alone raised over 4 billion dollars. While this is a wonderful way for companies to raise funds without taking on a backbreaking amount of debt, it does expose the investor to more risk. Fortunately, we are seeing fewer, poor-quality ICOs and just about as many high-quality ICOs. This is due to tighter regulations in the industry. The SEC has been more vocal and action-oriented over the past 24 months so hopefully we can find a happy medium between excessive and non-existent regulation.
Randi Zuckerberg, Mark Zuckerberg’s (Facebook’s CEO) sister, agrees that crypto-crowdfunding is not going away anytime soon. She’s working with a company called Pledgecamp which is similar to Kickstarter but integrates cryptocurrency as a means to help fund the projects. Pledgecamp believes that transparency and implementing a Know-Your-Customer (KYC) protocol will be important to the long-term viability of crypto-crowdfunding. Pledgecamp plans to go live sometime this summer, their whitepaper can be accessed here. Laying out a road-map with certain deadlines can alleviate some of the anxieties that investors experience. If a certain portion of the funds are released to the company every time they hit a milestone, then even if they fail, the investor can still get back a certain percentage of what they put in. Other businesses, or soon-to-be businesses, should keep their eye on this if they’re interested in using crowdfunding as a means to raise capital.