So, what does a VC look for in an ICO (Initial Coin Offering)? Well (snicker), how much money can they make is certainly number one. Oh yes, and keeping out of jail ranks right up there too. But, to be serious, here is a very good insight and list of what venture capital firms (and investors) would be looking for in an ICO. I know, ’cause we are doing one. More on that soon.
(Bill Taylor, CEO)
“Despite a recent cooldown in the market, ICOs are still a very hot topic for venture capitalists, due to their phenomenal potential for high returns.
There’s a growing sentiment within the investor community that Silicon Valley isn’t what it used to be, and that they’re missing the future while searching for the next Facebook or Uber. While Bitcoin has been fluttering around the fringes of the investment community for a few years now, 2016 and 2017 have seen cryptocurrency projects leap into the spotlight, with a corresponding increase in attention from VCs. At the CryptoFinancing 2017 conference in London I engaged several investors with this question: What does a VC look for in an ICO?
Long Term Value of the Token
VCs are not day traders. They’re looking for an exit at some point, but they’re not looking to pump and dump. These are men and women long accustomed to following US and EU laws against insider trading and stock manipulation, and thus are not prone to behaving maliciously like certain bad actors have in the current crypto space.
They want to look at the fundamental usage case for the token being offered, and see that it has the potential to grow in value by being useful to the token users and achieving widespread adoption. This criteria can be difficult to evaluate due to the blockchain industry being in its nascent stages, and thus requires a twin dose of vision and confidence in your ability to see where the market is heading.Having said that, in many ways it’s not unfamiliar territory for a VC. To paraphrase a quote from Dr. John Clippinger, “It used to be you’d ask a startup how they planned on being profitable and giving you an ROI. With an ICO, you have to ask them why people will want to use their token.” This is the defining question any startup doing an ICO must be able to answer well…”