ICOs Becoming Exclusive Playgrounds for Rich Investors

Wealthy investors are becoming the main source of funding in initial coin offerings (ICOs), making these token sales seem more and more like an exclusive club for the elite. Some of the biggest ICOs are now being launched through private rounds, Bloomberg writes.

Blockchain startups have raked in a total of $18 billion from ICOs so far in 2018, which is five times as much as the aggregate amount raised last year, Bloomberg said, citing data by CoinSchedule. This massive increase is attributed to the fact that new ventures are reaching out to accredited investors, which mostly means wealthy ones, the news agency noted.

“The space went from three things to think about to 30 things to think about, and those 30 things are very analogous to traditional finance,” Lex Sokolin, head of fintech strategy at London-based Autonomous Research, told Bloomberg.

The strategy of launching private sales has proved so successful that Telegram abandoned its plan for a public auction after collecting $1.7 billion in this way. Tatatu and Basis, which raised $575 million and $133 million, respectively, also got the money through private sales.

Taking the private route seems a more prudent choice for startups given that market regulators have stepped up their scrutiny of ICO rounds. With growing awareness of digital assets among wealthy investors, the space to shifting towards something more akin to traditional venture capital investment.

Uriel Peled, co-founder of Tel Aviv-based Orbs, noted:

“If you can raise money in the private sale, today it’s the best kind of ROI [return on investment] for the company because it comes with the least uncertainty and the least risk for regulations.”

Peled was speaking from experience as his company has raised $120 million through a private sale to private equity players, strategic investors, and venture capitalists.

The report echoed data released by startup tech solutions provider Snowfox Technology, which noted an ICO boom in the first six months of 2018 and said that momentum kept building up.

SnowFox Technologies ambassador Mike Raitsyn told Cryptovest that ICOs raised nearly $722 million from January to June compared to the $655 million collected in 2017

“The average investor's check in the ICO project varies from $40 to $5,900, so the ICO market is again experiencing a deficit of large investors willing to invest in the project an amount more than $50,000. However, the average amount of investment in the project in June 2018 is twice as high as in the same month in 2017,” according to Snowfox.