Initial Coin Offerings (ICO’s) have been a hot trend to track down this year. The crypto sphere been immensely inundated by a plethora of raining ICO’s. That is not it, ICO’s have made news for their risky endeavors and slippery scams throughout this period of gestation. Legally, tracking ICO’s is particularly hard. A recent notion demanded an entire new body of legislature to be formed to govern the domain.
Finding realistic, true, objective and valid data is highly difficult with ICO’s. Even when data is found, whether it is fabricated to look good on screen or created to appeal to the investors without having the smallest stretch of ground to stand on remains questionable for every ICO.
ICO’s that have gained high levels of appreciation are still too new and fragmented. This makes them prone to market failures and shutdowns. However, the hype and sensation built around them seems too desirable to shut down. The ICO space was, until a year ago, a place where big projects could be set up with just little more than a white paper and any one of the sporting 500+ attorneys ready to handle them for fees up to $500,000 plus points.
Fee Structure Variance
Smaller firms and individual attorneys have now entered the market offering very competent services that rival the space that was dominated by legal veterans earlier.
This has resulted in a reduction and difference in the overall legal costs associated with creating an ICO. If a company creates an ICO on U.S. soil, which is, therefore, subject to U.S. Securities law, the cost is approximately going to be $100-$150k. However, an ICO conducted off-shore for example, in the Cayman Islands (no U.S. investor participation) could cost as low as $50-75k. That means the possibility of using an ICO as a startup funding mechanism is now more liberated and profitable as markets expand.
Changes in Format
Jay Swob is a highly regarded crypto sphere attorney. He has been a cryptocurrency enthusiast since its early years. He says:
Large amounts were raised just on a white paper. Now, investors are more concerned with due diligence. More and more they want to see a white paper, a presentation deck, sometimes even a minimum viable product (MVP).
They also want to know the network, meaning the programmatic platform, the technical infrastructure that supports to ICO model. Everything is beginning to change simply because the business is starting to mature a bit.
According to him new, secondary markets developing are to be watched. Individuals who have successfully made chunks of returns in the crypto space are now either becoming “crypto angels” or starting their own ICO crypto funds, this is to enjoy more influence and affluence in the startup investment game.
The next iteration of all this is the position of crypto portfolio manager, Watch for more individuals to enter into this space, but it will not be for the faint of heart. This person will oversee any number of opportunities and investments many times on a 24-hour clock.
The Due Time Required
According to several analysts and thinkers in the market, the net payback period and internal rate of return for an ICO can be very slow unlike the notion around startups that seek speedy returns and wildfire graph spikes.
The time for the ICO to receive investments could range anywhere from three months to over a year, let alone sales. In light of the recent Ether demise, ICO’s have had to worry about making rent.
Indeed, nearly two-thirds of those conducting ICOs are brand new startups, currently. The investors and creators have nominal experience in the domain and only high hopes.
Watch for a hybrid SAFE with SAFT to become the new norm, at least for as long ‘normal’ is defined in cryptocurrency. This will provide companies with greater flexibility. The other hot area will be bifurcation. This will be for those who want the U.S. market. This will be about a dual token, meaning a security token, offered only to accredited investors (and with a 12-month lockup) and a simultaneous utility token to drive a fanbase.
One of the main trends to watch regarding ICOs, however, will be whether this avenue invites more angel investors and venture capital firms to the ICO backyard or neh.
While many people will continue playing safe by operating in the traditional fiat space, many not scared of change and risk are likely to benefit from these recent and fresh developments in the terrain.
New models, new collaborations, improved solutions and hybrid partnerships between the crypto and fiat players keep coming up. The fruition of these ideas could mean a lot of reforms and thorough reimagining of what ICO’s can create. The best bit being liberated and free from the stranglehold of out-dated pattern-matching standards and homogeneous gatekeepers of the startup community and traditional powerhouses. So, Cayman Islands or the U.S. soil?