Why Venture Capital Still Matters in an ICO World
The $6.3 billion invested into ICOs during the first quarter of 2018 already exceeds the $5.5 billion for all of 2017, yet it pales in comparison to the $61 billion in venture capital investments last year.
While traditional investors have historically stayed on the sidelines, they’re starting to see that cryptocurrency is here to stay. Their confidence is being bolstered in part by news such as Bitcoin Futures starting to trade on the Chicago Mercantile Exchange.
As investors turn attention to blockchain and cryptocurrency projects, they’re looking for safe ways to get involved. Some funds have started to earmark a portion of their portfolio to currencies such as Ethereum, Ripple and Bitcoin, and toward the ICO investments they believe are solid, whether due to their pioneering work or for their high growth potential – think infrastructure and platforms.
ICO Investors also place a high value on validation from their earlier stage counterparts, whose venture investment alone is an implied endorsement.
Take NYNJA, for example, which built its communication and e-commerce platform on the foundation of a traditional business plan, complete with revenue projections and models, and by approaching traditional investors.
As NYNJA developed its communication platform and on-demand freelance marketplace, issues arose around how international payments could be made across borders without friction. When blockchain technology arrived, it was clear that an ERC20 token could provide a universal payment mechanism that would work brilliantly within the structure of its platform.
“We didn’t need the money,” said Salvatore (JR) Guerrieri, co-founder, CEO and board member of NYNJA, “but we saw a huge opportunity for the token to serve as a method for helping freelancers in our platform to get paid.”
And thus, the NYNJAcoin token was born.
Traditional investors liked the idea, too. An ICO could bring the funds needed to develop product while serving as the currency the product would inherently use to create revenue.
As the blockchain market matures, venture-funding models will continue to complement and validate token sales, creating even higher valuations and more successful ICOs. New and old models will coexist in a blockchain world – one won’t replace the other, instead they will build upon each another, facilitating innovation that simply wasn’t possible before.
“The traditional style of fundraising is being enhanced as we add cryptocurrency investment models onto it,” Guerrieri said. “I think of ICO investments as an extension of the traditional venture model, lending itself to all kinds of innovation and new possibilities. It’s not that ICOs will just take over traditional investing. The two will coexist in creative ways, facilitating concepts that simply couldn’t have existed before.”