“VC vs. ICO” Panel Discussion in Silicon Valley: Hot Insights from Venture Capitalists and Crypto Hedge Representatives

The event took place on February 28, 2018, gathering over 60 guests and 7 panelists at BootUp Ventures, Menlo Park, CA. Venture capital investors and leading blockchain professionals shared their insights about interaction between blockchain solutions and VC investments.

“The distributed trust ledger is new, and will be a viable business model,” noted one of the panelists; and this provided sufficient reason for a lengthy discussion. Many companies are adding it to their business model, mostly because of the current hype and not real added value. In order to succeed, you need to disrupt a market to add value with the technology.

Let’s check out more opinions from our featured speakers.

A Quick Glance at the Situation Today

Startup companies are studying the ICO phenomenon as another option to raise funds and engage more investors in their businesses. However, most venture capitalists remain deeply skeptical about implementing the ICO structure into their businesses over the short term.

Both countries and individual U.S. states are looking at supporting ICOs with “soft touch” regulation to attract investors. For instance, in addition to companies in Delaware, Wyoming and other states are looking at reserving a spot for ICOs for tax reasons. Moreover, Switzerland lost privacy as a selling point and is considering ICO investments as a potential industry cluster.

Future Perspectives for ICO Campaigns

As the Securities and Exchange Commission (SEC) is looking at ICO’s seriously and filed legal actions against many, this will be a regulated offering as policy takes shape. Companies are looking at more automated compliance with the help of blockchain technology. It will help to meet all business regulations by recording and storing information in the blockchain network and meeting SEC requirements.

Silicon Valley invests in 2,500 companies a year, but only a small percent are profitable. Crypto investors believe this number will greatly increase over the short term.

There are ethical issues concerning the use of blockchain transactions for payments to get around, for example, San Francisco and New York housing restrictions in response to sites like Airbnb. Local governments are concerned they will not be able to track these transactions as Blockchain is peer to peer.

Contradictory Opinions

The discussions were full of smart minds expressing contradictory opinions:
“ICOs as a vehicle for startups to raise capital will surpass the Jobs Act passed last year.”

Another panelist mentioned: “More ICOs will follow the structure of the Jobs Act as their product roadmap.”

The Reason Startups Are Raising Money with ICOs

A couple of VCs pronounced that startups are raising money from ICOs because they could not raise money through angel investors or VCs. Investment quality is lower, which leads to the idea of engaging more investors.

There was another point of view on the idea, as not all startups go in that direction. Most of them see profit in upgrading their businesses for higher speed and a democratized investor and user base. There is an alternative: the safest ICO investments to launch are with accredited investors in private pre-sales.

It is impossible to disagree with some VC assumptions: for example, if you raise money with an ICO for your startup as it exists today, it will be harder to raise later rounds of capital from VCs in series A, B, and C.

VC or ICO?

Michael Sofaer mentioned that “people who market ICOs should be scared. Be careful promoting an unregistered security if you are not a licensed broker/dealer.”

The most useful tips from the panelists on how to launch an ICO were the following:

• Define all the requirements of a security offering (i.e., dividends, etc.)
• Invest in companies, not currencies.
• Don’t try to be clever with regulations.
• Don’t overstate your valuation.
• It’s better to be conservative.
• Read Satoshi Nakamoto’s original white paper, as it is a brilliant example to follow.

Gratitude to the Speakers

The Applicature team is delighted to cooperate with people who are deeply involved in the crypto and blockchain world. The enthusiastic panelists at the event are currently leading professionals dedicated to the fields in which they work:

• Miko Matsumura, Founder of Evercoin Exchange; venture partner at BitBull Capital
• Michael Sofaer, CTO at Brian Kelly Capital Management
• Salil Pradhan, venture partner at Draper Nexus Ventures
• Ashmeet Sidana, Chief Engineer at Engineering Capital
• Svjatoslav Sedov, Founder of The First International Incubator
• Fred Tanada, finance and investments at Draper Dragon Digital Assets Fund
• Mark Stoner, Applicature Business Development Director
• Mykyta Safronenko, Applicature Regional Director in Silicon Valley and panel moderator