What started off as a Bitcoin/Blockchain experiment of creating Cryptocoins has now started to affect new venture funding.
After the success of the largest ICO in history – that of the DAO, what we see here is this:
- Tens of companies and projects are choosing the ICO route to raise capital instead of seed capital, venture capital or debt.
- Here is a primer about modern methods of raising seed capital, including SAFE
- Essentially all of these are contracts between the funder and the funded entity, that is legally enforceable.
- With ICO’s these rules get rewritten, since geography or jurisdiction usually no longer holds true.
- Most times as in the case of DAO, investors were global and invested even small amounts of money (as little as 10$) into the funding round.
- Enforcement organisations such as the SEC, ESMA, SEBI, etc.. that track funding and capital raising are still ambiguous about what happens to the ICOs and capital raised.
( How do they regulate a capital raising round that is global in nature and where people issue colored coins or tokens in return for money, using contracts that are automatically enforced on a network. )