Now, when the Telegram is planning initial coin offer (ICO) worth more than a billion dollars, and the demand for them is four times exceeded the offer, and in January was taken a new record for the amount of token sales of $ 1.4 billion for 67 ICO — it’s hard to believe that it will not always.
Chart courtesy of Token Data
However, now more and more projects refuse to open sales, preferring gradual raising capital in private — similar to the accepted practice of the non-public sale of shares of closed pre-sales and/or simple agreement of investors on a future release tokens (SAFT). According to the report Token Data, in January the projects whose owners refused to open the sale in favor of closed, has attracted $ 180 million in private capital. Among such projects — Olympus Labs, Nucleus Vision, Coinfi, Shipchain and others (most of which, frankly, unknown to the General public). According to some estimates, 50-75% of this amount was received as a result of closed pre-sales.
Why is this happening
We believe that this phenomenon has several possible causes:
- Fear of new sanctions by the securities and exchange Commission (SEC). The founders of the projects prefer to deal with trusted private investors. Yet there are no clear standards governing the sale utilitarian tokens. And although agreements give the SAFT project founders and investors some sense of stability, recent events show that such agreements are not fully satisfied with the SEC. Complex workarounds do not always help (remember the problems encountered by the project Tezos).
- Institutional investors are recently more actively invest in such projects, which may be due to fear of lost profits, improved infrastructure or increased understanding of market opportunities. This gives the founders of the projects the opportunity to obtain sufficient funds without resorting to expensive, time-consuming and risky outdoor sales.
- The rising cost of ETH in the last months of 2017 has shown that many projects which met in closed sales in September and October, the result was more capital than expected, and does not need additional funds from public sales.
- In most projects scenarios (for example, sales in the corporate sector) or patterns of tokens (e.g., tokens work (work, tokens)) such that distribution to end-users is not necessary, and with institutional investors that invest on middle and long term, more profitable to work than with smaller players.
- A demonstration of intent. Best teams thus serves as a market signal that they are open to inspection and audit by professional investors, demonstrating to other market players the seriousness of their intentions. Typically, public ICO is susceptible to adverse selection.
- The market could come a new generation of founders who appreciate and actively seek the support of traditional investors in the construction company and the subsequent management of it.
- More common sense. The founders finally come to understand the critical importance of the network design and the economic characteristics of the tokens for long-term success of the project, and thus have the opportunity to bring these aspects to perfection before launch. After the release of the token room for manoeuvre will remain much smaller.
What does it mean
We believe that this year you can expect the following trends:
- The growing popularity of alternative distribution models token-oriented use and limiting speculation: faircoins, model with payment tokens (work-to-earn) (such as Earn, SteemIt, Gems), forks and free distribution of tokens (airdrop). And from the point of view of legislation, the opportunity to earn or win tokens is less risky than selling them.
- In projects with open utilitarian sales of tokens, where a wide distribution to end users makes sense — will introduce and develop the model, improved in the aspect of management and pricing (e.g., DAICO offers interactive and coins).
- The increase of the importance of insider information (the attachments lock in profits, sales) and demand. The approach of Aragon and District0x to transparency will become the new standard, and we hope it will happen soon.
- A sharp increase in the amounts of the respective legislative norms token-actions caused by the emergence of platforms such as TrustToken, Securitize, Polymath and Templum.