In this article, the project leader Digmus, Michael Nazaruk, answered the most frequently asked question: why ICO and not Venture Capital Investment?
When I talk to investors about Digmus, the most common question they ask is something like: “why did you go for an ICO and not for time-proven venture capital financing?” What’s interesting, Russian investors who are familiar with the situation in our venture capital market also pose the same question. Apparently, they do it out of courtesy.
Big investors know that the situation in the Russian venture capital market is not the most favorable one. Due to unstable economic conditions last year, the volume of deals reduced almost by 30%. It amounted to a mere $165.2 million (according to PwC and the Russian Venture Company reports). Only 180 deals were concluded last year.
It is extremely difficult for a start-up company right now to raise significant venture funding as competition is fierce. The project is thoroughly analyzed and a start-up that might have problems with implementation and that requires some time for launching will be left out.
Unfortunately, venture investors still don’t have common understanding of what features make a start-up company succeed. Some of them want to see a beta that someone else has already been using, others look for a total absence of competitors and still others demand a detailed cost plan covering three years…At the same time, the majority of them delay decisions.
Digmus is not a simple project at all. The development of an operating platform requires significant costs which include not only the creation of an IT-product but also marketing as the success of the system depends on its popularity rate among consumers. Venture investors don’t like it as they seek fast money and prefer less risky companies.
That is why our team has decided to raise funds through an ICO. This market features another principle of making money. Investors placing funds in tokens realize that an ICO is highly risky. They are not scared by the necessary marketing expenditures and the fact that the operational product hasn’t been developed yet. Moreover, marketing costs that improve product awareness among consumers attract ICO investors. The same can be said about the launch of an alpha or a beta – the cost of tokens on the exchange is increasing fueled by good news.
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