VCs Competing with ICOs In Digital Currency Market

Venture capital is so last month. Seems the VCs are no longer sitting alone on top of the mountain and controlling new investment capital. The reason? ICOs (Initial Coin offerings). By doing an ICO capital is raised faster, easier AND you don’t have to give up hunks of equity. So, you think President Trump is under siege, try being a venture capitalist and having these new tokens coming at you from everywhere. Hmmmm, steamships, floor traders, now venture capitalists.

(Bill Taylor/CEO)

“NEW YORK — U.S. venture capital firms lining up for a slice of the burgeoning digital currency market are grappling with a novel challenge – some of the hottest tech startups that sell the coins just don’t need their money.

Only a few years ago, digital currency entrepreneurs, like other Silicon Valley peers, had to line up to pitch their ideas to venture capitalists, who controlled their destiny as virtually the only source of funding.

So-called initial coin offerings (ICOs), where new tech companies using blockchain technology can raise millions quickly by creating and selling digital “tokens,” with no regulatory oversight, have turned traditional relationships upside down.

Blockchain, a public online ledger of transactions, gained prominence as a technology that underpinned the first digital currency, bitcoin.

“The day when VCs were the elusive elite and primary source of capital for startups has ended,” said Jamie Burke, founder and chief executive officer of VC firm Outlier Ventures, which specializes in blockchain and other technology investments.

“When a startup can raise $35 million in 30 seconds without any dilution, the genie is out of the bottle and it isn’t going back in,” he said, referring to Brave, an open source web browser that blocks ads and trackers, which sold its Basic Attention Token in June.

By mid-July, tech firms raised about $1.1 billion in 89 coin sales this year, roughly 10 times more than that in the whole of 2016, according to data compiled for Reuters by crypto-currency research firm Smith + Crown. (Graphic:
Coin sales have already eclipsed funds blockchain firms received from venture capital, which invested over $300 million in equity in the sector in the first half of this year, Coindesk data showed…”

Full Story: New York Times