Binance founder and CEO Changpeng Zhao just threw the financial gauntlet, defending the ICO and citing its dominance over traditional ways of raising capital.
“Through my own experience, and watching hundreds of other projects at a close distance, I would say raising money through ICOs is about 100 times easier than through traditional VCs, if not more. With the ease of raising money increased, logic says there may be 100 times more startups, well-funded startups, where ICOs are allowed.”
Zhao argues that raising venture capital is a brutal experience. To get attention from VC investors, he cites the need for exhaustive powerpoint presentations, business plans and company decks, a board of directors, bridge loans and more. And after all that, you may not get much in the end.
“VC lawyers insist on some totalitarian terms that essentially gives them absolute power and ownership of your company and hence delays the whole investment process… And at the end of a six months cycle, maybe getting $150K USD worth of angel investment.”
Or, you can do the alternative, skip the headache, start an ICO and raise funds directly from the people just by:
“Writing an awesome white paper about your passionate dream project and raise $20M USD in 10 days, from thousands of people around the world who speak your language, understand your vision, use your product as soon as it is launched, spend all day beta testing your product, or discuss with you about new neat (and sometimes useless) features that you haven’t thought about.”
Of course, ICOs have issues of their own. Scams are everywhere, and there’s a high rate of failure. Investors need to be cautious.
“As an ICO investor, this, of course, requires you to do your homework too. Don’t just follow the herd. Invest in projects you understand. Read the whitepaper. Follow the founders for a while before you invest in them. If you find anything good or bad, share it. You need to contribute to the crowd that you are part of…
Most ICOs are new startup projects, and have a high rate of failure, just like in traditional startups. This is nothing new. Most ICO investors already know this. ICO investors are early adopters (and learners).”
Finally, Zhao got a bit meta, pointing out that a lot of VC money is actually being poured into blockchain. Alphabet, the parent company of Google, for example, just used its venture capital arm to invest in Basis, a stablecoin startup.
“Guess what most VCs do today? They invest in ICOs now! VC groups, unlike other large slow-to-react organizations, have their nose on the money. That pretty much says it all! Unfortunately, many other large organizations who are responsible for economic development and public wealth are not as nimble. The faster movers will reap exponential benefits. Don’t get left behind.”
In a recent hearing held by the US House of Representatives Subcommittee on capital markets, Congressman Bill Huizenga also lamented today’s climate for businesses and entrepreneurs:
“Unfortunately, from a regulatory standpoint, it has become increasingly apparent that our capital markets are becoming less and less attractive to growing businesses due to the quote-unquote ‘one-size fits all’ securities regulations currently in place. Let’s work together to reverse this negative trend of declining IPOs and focus on capital formation.”
Binance made its name in part by adding exciting young cryptocurrency and blockchain projects to its platform. The exchange is now an undisputed leader in the crypto world, earning more than $200 million in profit in Q1 of 2018.
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