At Clarity we have had an intriguing year working with a number of clients who are either preparing for an ICO (Initial Coin Offering) or are looking to consolidate and increase brand awareness after a raise.
We have written about ICOs in the past - but now is a good time to take stock and look to see if we can spot any emerging trends that will shape ICOs in the new year. Has the ICO had its day? Will it evolve into something else? Here are our thoughts.
1 The rise of the STO - Yes another acronym for you to get your head round. We think that 2019 will see the preeminence of the Security Token Offering (STO). Many of the companies who developed ICOs in 2017 traded on delivering goods and services in exchange for the investment. The guarantees they offered came to be known as utility tokens. There are still companies offering utility tokens, but due to all manner of influences, from clampdowns by regulators, an increase in self-regulation, and wariness of investors, these have largely been superseded by protection that an STO provides. A recent Bloomberg report showed that the majority of more than $18 billion that has been raised this year via ICOs has been through STOs. In tandem with this is the way that for many ICOs much of the money has been raised via a pre-sale with established investors buying securities. These are in many ways more analogous to the typical ways which businesses raise money by offering investors more protection and equity in their businesses, well aligned with more highly regulated financial markets such as the US. We think STOs will be the way that most ICOs will develop in the future.
2 Established startups are looking at ICO/STOs - Many of the original companies who developed ICOs were nascent startups often only with a solid team and an MVP. Those days are gone now as investors become increasingly more savvy about what they invest in. What we could see in 2019 is more established companies raising investment through an STO. The scenario that we think is going to become ever more pertinent is a start up which has gained some traction and is making money will look to expand their business via an STO. The way they will do this is to rationalise their business procedures by employing blockchain and smart contracts and then potentially looking to see how a token could take their business into new areas. We suspect many of the ICOs of this nature will be for new companies spun out of existing business. There is also the opportunity for higher profile companies to raise money in this way too.
3 The first wave of ICO companies will consolidate and start to behave more like traditional enterprises - Some of the initial ICO backed companies raised a lot of money and it has taken time for them to start to develop the businesses they promised their token buyers. Next year will see a shake out and we think we will see more ICO companies start to behave like established enterprises, posting accounts, acquiring rivals business and expanding into new areas.
4 There will be more high profile flops - The last six months have been interesting as we have seen some very interesting looking businesses attempt to raise money via an ICO and fall way short of their initial targets. Examples include Civil and EQUI (which didn’t actually reach a sale). It only goes to show that if the product isn’t right and you don't make it easy for investors to acquire the token (one of the accusations leveled at Civil) no matter how strong the management team is and how great the deal the token raise will fail.
5 Messaging and brand awareness pre-launch will become pivotal - This has been an ongoing trend throughout 2018. Many of the most successful ICO companies have worked hard on their messaging and brand awareness long before they issue the white paper, which has served them well. We have worked with several clients in this way. Other things could change too. White papers may start to look a little more formal. There will be a rush to get big industry names to act as chairs. In short the ICO world will start to mature
6 The innovation will keep on coming - One thing is for sure, blockchain is going to have a profound impact on the way many enterprises, both nascent and established, operate. The are still huge opportunities for companies to harness the technology to innovate and this will lead to many exciting new ventures, some of which are sure to be funded through ICO/STOs.
At Clarity we are passionate about all kinds of emerging technology. We are working to help turn crypto and blockchain companies into market leading, innovative brands. If you want to find out how we can work with your tech company contact us via the home page.
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