Initial Coin Offerings Raising Unjustifyably Large Amounts?

There are a lot of Initial Coin Offerings (ICOs) coming up. Given all the hype surrounding all this activity, I want you to understand something.

Pretend, for a minute, that your favorite ICO is instead a small startup tech company in Silicon Valley with the exact same idea, team, and stage of development. They decide to seek out some funding from a venture capitalist.

Assuming they can even find one to invest, what form do you think that investment would take? Most likely they might find a deal for something like $3 million, if they gave the VC half the company.

If you had a really incredible idea, team, etc., you might (rarely) be able to get as much as $10 million. Any more is going to require a working product already in the market, already with an audience, giving the VC more than half the company, or something like that. Even with all that, about $20-30 million is probably the cap except in very rare cases.

Now take a look at your favorite ICO. How much are they raising? I've been seeing companies launching ICOs to raise $50 million, $100 million, $150 million, etc..

By any standard of startups, those amounts are ridiculous, and cannot be justified...without a very good reason. Ask yourself why to avoid the insanity.

Take a few examples (disclosure: I own some of each of these):

Lisk - ICO was Spring 2016. Kick-ass idea and plan, to build a platform that could rival and even improve upon Ethereum. Now 1 1/2 years later, they are just getting ready for a flurry of activity and initial release of their platform. So, at that time, they were very early in development. Amount they raised? $6.2 million

Bitquence - very strong idea, potentially the killer app for cryptocurrency, though still early in development with alpha release a few months away (at ICO time). But with a good team that has the potential to make it happen. Amount they raised? $7 million

Civic - another fantastic product idea, and they already had a working version available for download in the app store, and even already had some business partners using it. With these successes already in the bag, they were able to raise $33 million.

So be careful. There is a mad rush by companies to push out ICOs while they are all the rage and before regulators crack down. Many have nothing more than an idea, and potentially a decent team. Others are likely pure scams. Yet, many are looking to raise high-7 or even 8 figures in funding.

Be very sure before you throw money at them chasing after lottery winnings.

(No need to ask me which ICOs I'm buying, I have made a deliberate decision not to invest in any of them, even the ones I like.)