The Problem with ICOs

The latest blockchain craze is ICOs – initial coin offerings. Coins are cryptocurrency units created to represent just about anything of value. They can have intrinsic value, such as a gold-backed coin, or simply represent an idea. Coins (a.k.a. “tokens”) are attractive to start-ups that want to raise capital completely bypassing the venture capital route.

ICOs are often managed in a blockchain.  If they are on the Ethereum blockchain, transfers and assignments can be 100% automated. As of this writing, Ethereum seems to be the go-to network for creating and managing initial coin offers. One start-up, Bancor, raised an eye-popping $150 million. With results like that, it is no wonder that many start-ups are glammering to be the next big ICO.

So what’s preventing any rag-tag group from introducing the next $150 million coin introduction?  Simply stated: lack of awareness. There is a proliferation of hundreds of other coins all competing for the same dollars. Throw in illiquid markets and you have what amounts to a marketing problem. As any good start-up knows, marketing is everything.

In the real world, initial public offerings of stocks require an investment banking firm acting as an underwriter, well-connected institutional investors and network of retail investors.  It is very well established.

The ICO network, on the other hand, is not part of the mainstream.  Some believe that it will never reach the expectations of experienced investors and that it will quickly crash and burn.

Tradefor takes a contrary view.  We look forward to servicing the ICO market as a marketing tool that addresses pricing issues in illiquid markets.  Start-ups will be able to offer both conventional financing offers and cryptocurrency offers in a unique adtech platform that features a growing network of interested investors.