New age fundraising. That is the new term we coined here at Valley Date Venture Partners for ICOs, IEOs, STOs and the likes.
Last week, we delved into the differences between VCs/PEs and startup funding.
Some of you had follow-up questions, some had praised the article and some were left flummoxed.
We also spoke about the legal entities engaged in such fundraisers.
There are even groups out there which speak about the best locations to register such funds for taxation reasons.
Fundraising is not treated equal, and today there are even more ways to get money in the bank:
- Traditional (VCs, angel investors, LPs, etc.)
- Family (FFFs)
- ICO/IEO/STO, etc (new age fundraising).
Crypto and why you should be bothered
Since Bancor and the likes made headlines with very high-level fundraising for such novelties, others have tried to copy the success.
All you needed was a whitepaper and a couple of promises and you had secured $100 million within 2 hours.
These were susceptible to fraud, as would-be investors didn’t bother to engage in due diligence.
The reason was: you only needed a white-paper, not a real business plan, no PPM.
Many have said that Equity-Tokens are 21st-century’s stocks and backed by real, tangible assets.
Today we see even more funds, some of them are dedicated completely to blockchain and crypto-currency.
Fortune500’s engage in crypto-currency
You’ve naturally heard about Facebook’s announcement of Libra, its new cryptocurrency.
It’s not something unheard of to think that a giant like Facebook would come up with that, but it’s not really crypto either.
Libra is gatekept and a closed system, while other coins such as Bitcoin, Ethereum and the likes are open.
So it means this crypto acts more like a fundraiser for Facebook’s market cap than a real solution for regular money.
We shall treat it as such.
What is the future of fund-raising
Since there is more than one way to raise funds, there is no problem of running more than one fundraiser at a time.
A company could raise some of the money traditionally and some of the money via an ICO/IEO/STO, etc.
It doesn’t mean you could just put a whitepaper, which costs about $5,000-$15,000 to write, not to mention the exchange listing.
An ICO could cost a startup or a fund anything between $60,000 to $1,000,000 to produce, meaning that there’s a need for other means to back it up first.
That is exactly why you could mix-and-match between the two:
What should funds (and startups) know about this
ICOs and the likes are expensive to produce.
It means that startups must now show proof of a well-written whitepaper and a letter of intent (LOI) or an existing listing on an exchange when fundraising.
Micro-investments shouldn’t go straight for funding of an ICO/IEO/STO without real proof that the team behind it can follow through.
So to summarize:
- White-paper – written
- LOI or an existing listing
- Proof of Concept/Minimum Viable Product
If not all are met, investments become trickier as there are incurred costs not described in the original fundraising.