According to ICORating, 64% of all attempted ICOs failed and startups raised 48% less through ICOs in late 2018. As a result, many companies are now pivoting to raise money through Securitized Token Offerings (STO), but it is questionable whether investor demand is going to be any different.
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So Ian do you think this ICO/STO fidget has dried up and closed permanently or will the doors reopen once crypto’s begin their resurgence?
I think ICOs have dried up. STOs offer a more regulated path, but are only applicable for a small pool of companies/investors. This might change as institutional investors get more comfortable with Reg A+, but it\'s more likely in the short/medium term that startup\'s will shift back to traditional equity raising. The potential resurgence of the speculative crypto market might have a \'sentiment\' impact on take-up of STOs, but it\'s really very secondary.
There\'s a little to no connection between ICO and STO except for both being fundraising instruments. STO is entirely a different animal and not a magic bullet which would magically solve issues of ICOs. In fact, STOs are way more expensive and time-consuming and involve in a lot of preparation (which is a good thing most of the time). It is not only difficult but also infeasible or impossible to conduct STO at a mass scale if one thinks both are same. No sir, you need to comply with every country and jurisdictions you investors are (or will be), not just United States. There MAY be restrictions on who can invest and cap on number of participants. As much as I love regulations and compliance, I pretty much doubt if STO is going to be the answer people are looking for. Only my opinion and not a legal, financial, or investment advice because I do not have qualifications nor registered as an advisor in any capacity anywhere.
Binod - Good summary. I’ve started humorously referring to them as TIPO... Tokenised IPO... Like the Fiat... 🤣
According to Forbes research 90% of any startups will anyway fail notwithstanding their fundraising method. So, it is useless to target one fundraising method only. In fact, taking this global statistics into consideration 64% is a very good KPI, however we would need to study this number 3 years later again. Meanwhile, it is true that raising millions for just an idea is not sustainable. Real projects with real teams should be invested in, not fancy looking websites and pitch decks. I can tell this based on our experience at 7marketz Inc. both on traditional and Crypto markets side.
Cynthia Harrington, CFA
The ICO market may come back -- there is a place for a funding vehicle that draws capital to a particular asset or economic driver of a company. But they will only succeed when there is a sound valuation and solid business purpose behind the vehicle. STOs are more flexible than selling common stock and could actually become the new IPO market. Right now both are the wild, wild west. Lots of risk -- and lots of opportunity. In my opinion.
\"pivoting to raise money through Securitized Token Offerings\" Oh gosh, here we go again. I thought people had learned by now that the STO is not the answer to a less popular ICO industry. I feel like I am back in November 2018 when everyone changed their profiles from ICO Advisor to ICO/STO Advisor. They may \"pivot\" and then quickly realise they do not have the funds, knowhow or the patience to create a security offering.
So there\'s 26% more left to fail until they reach startup-level success rates. STOs are just a different way to package, albeit I\'d argue no different from good old equity crowdfunding, which had been around for some time before STOs
Jo Svendblad, CPC, E-RYT
Ian this is truly fantastic!
Great cartoon Ian Foley!