Could venture capitalism be on its way out or at least the current form of high risk and high valuation, multiple phase capitalization associated with IPOs that is? Token exchanges are not only gaining significantly in reputation as a more attractive method of raising capital but blockchain technology and ICO’s are the way of the future for some very obvious and practical reasons.
Lets consider ICOs as falling somewhere between the traditional VC funded initial public stock offering and the more social crowdfunding systems, and ascribe the power of disruptive technology to this function, harnessing blockchain encryption technology as a means of protection and verification, then in theory and in practice we are dealing with a platform of sustainable and socially responsible funding; the angle of accountability.
A crypto currency token representing a programmable currency unit secured to a blockchain ─ a constantly growing ledger of accounting records ─ as part of a “smart contract” lucidity in the context of a specific software request.
Smart contracts help individuals exchange stuff like money, property, shares, or essentially anything with an assumed value in a transparent, conflict-free way while avoiding the oversight and encumbrances most notably associated with an intermediary (lawyer, notary) individual or group. Smart contracts don’t simply layout the ground rules and penalties around an agreement but they also automatically enforce them.
In the traditional marketplace contractual, legal agreement, law or the law of obligations is trick to navigate and extremely expensive to draft and to enforcement. As with traditional IPOs it is very important to customize and leverage bespoke relationships with individual investors. Traditionally venture capitalist firms and individual angle investor provide private funding to business opportunities that they deem rewarding. But VC’s and angles are far from impartial parties. They can be either value-added or a real problem. Deals can get messy.
Companies looking to leverage an ICO have the added advantage of building their strategy by placing their ICO on a service such as Coinschedule and have it rated on ICORating, Digrate, or other rating services to help summarize any leaks in the ICO. This is an excellent and cost effective way to start pushing free listings in order to place the ICO.
Ensuring that the ICO venture is well packaged is critical. A well packed ICO is comprehensive of all materials in a language and format that is attractive to the investors (white paper, one pager, website content, etc.). As more professional investors filter into the ICO space there will be more professionals from traditional financial markets among them so there will be an increasing need to attract these individuals with language that they comprehend.
Coins/tokens require an incentive mechanism in order to encourage the broader cryptocurrency community to take part in its protocol and to verify transactions; the analysis of certain economic incentives that are needed to back a specific token.
As with any and all transactions there is of course risk involve with cryptocurrencies. Smart contract security audits are necessary but not sufficient to mitigate ICO risk. A cryptocurrency/ ICO audit works as to assess whether the offering organization is following sound data protection practices. Audits examine the effectiveness of policies and procedures set in place and whether or not the organization is making good on their obligations to follow them. Sound audits include recommendations for improvements.