(TabbForum) While startups tend to measure ICO success by how much money they have raised, investors, on the other hand, care more about how well the newly issued token they bought performs in the secondary market. And for many the results so far have been disappointing. Too many start-ups and developers are simply jumping on the ICO bandwagon because they smell the money, a scenario that regrettably is taking funding away from truly innovative value-adding blockchain projects.
On Jan. 1, 2017, the price of bitcoin exceeded the $1,000 mark for the first time in three years and continued to rally thereafter. This brought media attention back to bitcoin and also raised awareness about altcoins (Ether, Litecoin, and Ripple, for example), as well as new coins that were being issued via token sales.
Driven by the belief that these newly issued tokens might replicate bitcoin’s price evolution, the ICO market quickly captured investor attention, resulting in several blockchain ICO projects raising tens of millions of dollars. As the market boomed, however, there also came a wave of sub-par ICOs that still managed to raise substantial funds — as well as outright scams. Some leading bitcoin community figures even claimed that ICOs are only a way for developers to get rich, while many others have voiced their concerns about the valuation of projects that do not even have a working minimum viable product during their fundraising stage.
Whether your company is a fintech startup, or simply planning a private placement offering available to a select universe of friends and family, or seeking to raise capital from qualified investors or accredited investors via a Initial Coin Offering (ICO), an initial public offering (IPO) via an exchange listing, a properly prepared offering prospectus or offering memorandum is required by your investors and industry regulators that govern securities offerings. Issuers seeking affordable investor document solutions rely on experts at Prospectus.com.
[Related: “ICO Investment — Due Diligence Basics”]
As record amounts of funds were raised in Q2/2017 and start-up valuations were mimicking those of the dot-com bubble, regulators started to take notice. While most have simply issued guidance statements and alerted stakeholders to the potential application of securities laws to ICOs, China and South Korea took it a step further and banned ICOs outright. These bans dampened the Asian ICO market in early September, as two major investor countries were now prohibited from participating.
Problems arise in major ICOs
Action by regulators hasn’t been the only thing cooling enthusiasm for ICOs, though, as problems have also surfaced with several multi-million-dollar ICO projects after their token sales had completed.
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