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Our vision of ICO industry development will be briefly drafted in this article. The main question to be answered: why role of ICO’s expertise is growing?
Some statistics
2017 was a breakthrough year for ICO technology. Forbes cites the following statistics: over the past year, more than 230 ICO projects have raised a total of $ 3.7 billion investment. The average successful ICO campaign of 2017 has brought their founders $ 15.7 million — so to speak, this is an average amount in industry. For comparison, 96 successful ICOs raised only $ 96 million in 2016. It means that flow of funds in ICOs in 2017 increased more than 38 times!
In the current year, only preliminary Telegram’s ICO has raised $ 850 million in just two weeks of February. Indeed, it could even raise much more as investors’ hype around this event was incredible. In total in 2018 Telegram plans to attract up to $ 5 billion during main ICO. Apparently, these plans sound quite realistic. And how many more major IT companies can announce ICO this year?
Why ICO continues to gain popularity?
ICO has several important complementary advantages vis-à-vis traditional IPOs and crowdfunding:
• Simple launch. To set up an ICO, which is currently not regulated by law in any country of the world, you don’t need anything apart from an idea that can attract investors. There is no permits, agreements and other bureaucracy.
• Rate of fundraising. “Bancor” (crypto currency exchange ICO platform) managed to raise $ 80 million only in few hours. ICO of “Brave” — “browser of the future” has raised $ 35 million in just half a minute.
• Anonymity. Only investor knows his investment amount. But anonymity leads to a problem of investment guarantee (will be covered below).
• Ease of participation and low entry threshold. Amount of investment can start from couple of dollars. Cryptocurrency wallet is the only thing you need to become an investor.
ICO’s fast and simple fundraising allows start-ups to focus on developing their product instead of investing in PR campaign and investment’s legal alignment.
“Regulated” or not anonymous ICO — a new industry trend
In 2017 one of the most successful ICOs was “Filecoin” — project of Californian company “Protocol Labs” on maintenance of distributed data storage. One of peculiarities of Filecoin’s ICO was participation of only verified large investors, both companies and individuals. According to the same pattern Telegram has held a record-breaking pre-ICO which has raised $ 850 million from only 81 investors. So namely average entrance threshold for investors was about $ 10 million.
“ICO Rating” agency has recorded a noticeable decrease in the number of successful ICOs during 2017. At the beginning of the year half of ICOs had raised claimed amount, but by the end of the year only 20% managed. Consequently, there is loss of hype around industry, market becomes more mature and investors are becoming more experienced, major and careful.
This is caused by large investors (e.g. venture funds) who entered crypto-currency market. They have become fully convinced that crypto-currencies and ICOs are not a time “bubble” nor a pyramid scheme, but a new level of economy development. Large investors want to guarantee their investments and are ready to give up anonymity for this. For example, several large businessmen publicly stated that they have invested in Telegram, although no one forced them to disclose information about their investments.
Another possible cause of demand for “regulated” ICOs is a number of high-profile cases of fraudulent crowdsales, such as “Opair”, “Confido” or “Eros.vision”. Founders of these crypto-currency pyramid schemes disappeared with raised money, taking advantage of anonymity of crypto-currency transfers and credulity of investors.
Increasing number of fraudulent ICOs and reduction rate of successful ICOs have generated growing demand for ICO’s expertise — an opportunity to receive expert and analysts advice on crypto-currencies. Expert community is one of features of mature financial market, which ICO industry and crypto-currency market are becoming in general now.