The Initial Coin Offering Madness continues
The madness in ICO markets continues. As much as I’d like to write about something else, we are on an unprecedented series of events for entrepreneurship and startup financing.
Yesterday a company raised $150M from the crowd. One hundred fifty million dollars is not an unheard of amount in and of itself. However, consider this is a seed investment in a company that has no product. No customers. No trading history. This company is called Bancor.
The company was paid $150M, for a product – which doesn’t exist – but that token holders think has a fantastic expected value (EV) of greater than 150M.
The EV is >150M and the company presently worth at least it’s assets of US$150M equivalent in cryptocurrency, and yet the company hasn’t released a single line of working code to the public.
Now token holders will counter that a board member is a notable VC Tim Draper, and their team does look very good. But this is madness using traditional startup valuation, discounted future cash flow (DCF) projections or perhaps even common sense. It may turn out to be a brilliant investment for token holders. Certainly, one would expect an impressive product to result from a 150M seed round.
Why is this happening?
Instead of having to go cap in hand to every venture capitalist in town, begging for money – the startup did what’s referred to as an “ICO” – or initial coin offering. The general public, anonymously, purchased tokens in the Bancor startup.
Bancor isn’t the only one to do this, as Brave raised 35M in less than 30 seconds and there is a trail of other startups who within just the past month have also done the same. Everyone is making money now – but this bubble will burst at some point. Bubbles aren’t always bad, and there is a lot of money to be made before the bubble pops. If you do decide to purchase any tokens, purchase them wisely, and don’t say you weren’t warned.
Quote of the day: Five to 10 Years From Now Asia Won’t Need America: Nomura chief economist at Nomura Holdings in Singapore, believes the rapid growth of Asia’s consumer markets will make up for the U.S.’s absence.
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