The ICO landscape has been arguably the most eventful fintech field of 2017. Prevalent trends are worrying though and portend an overall change of direction in the market.
Currently, more than 75% of ICOs fail to reach their target soft cap. At the same time, regulations in most countries are becoming less favourable especially for smaller startups.
Entrepreneurs appreciate the value of this exercise to help them raise capital for new ventures. This kind of capital comes at a lower price than what legacy fundraising mechanisms have traditionally been able to offer. It also lets the business owners control all the cards.
The downside, of course, is that investors however do not get ownership rights – and often simply no rights whatsoever — as they would from an old-fashioned IPO. Their investment choice is made on the basis of trust in the opportunity’s growth prospectus.
Against this backdrop of increasing scepticism, some imaginative solutions are emerging. One such alternative is the Initial Smart Asset Offering (ISAO). This concept offers an opportunity for existing businesses to raise capital along an ICO model but against assets that are already generating revenue.
Many crypto enthusiasts, often of libertarian persuasion, believe that recent regulatory developments are just an attempt by governments to eliminate an eminent threat to their own conception of business organisation.
Despite the uncertainty surrounding the ICO market, however, demand appears to be rising unabated. For the foreseeable future at least, ICOs are not going anywhere soon. The trend, however, does appear to suggest that finding a middle ground – one that provides some security to investors whilst keeping regulators reasonably happy – will favour those ICOs that opt into the ISAO model. Investor behaviour, hopefully, will help to encourage that trend.