I see a lot of people wishing or working to bring ICOs back. But Initial Coin Offerings, as we've known them in 2017 / 2018, when projects raised funds directly from retail using immediately liquid tokens (or quasi), are never coming back. The problem with ICOs is an incentive alignment problem. Let me explain 👇 A/ If tokens are tradeable from day 1, then nobody is aligned on long-term value creation: it's a get-rich-quick scheme, and you get thousands of scammers to launch ICOs to speculators. From the investor perspective, your token is nothing more than a memecoin. There is 0 incentive to build anything long-term in that scenario. Note also that this ICO model can only exist in the non-security world. The only projects that did ICOs and are still here today are only here because their founders were missionaries who needed no incentives: they were here to create something in the world they deeply believe in vs getting rich. Founders like that exist: Vitalik Buterin (Ethereum), Martin Koppelmann (Gnosis), Stani Kulechov (Lend / Aave), Kain Warwick (Synthetix), Luis Cuende (Aragon)... are the first ones that come to mind, but they are the exception, not the rule. B/ If tokens are not tradeable from day 1, then you have better alignment in future value creation, but now you need to find investors that believe in your project long-term and are willing to wait (wait = risk + opportunity cost). Naturally, those investors will also ask for some level of investor protection, given the risk they take. In that scenario, you'll find fewer investors and want fewer investors because you don't want to give governance rights to people you don't know. In summary: In the non-equity assets world, pump dot fun has created the ultimate ICO platform. It solves the ICO incentive alignment issue by treating everyone as a trader/speculator. If you're a founder, you can try to build something long-term with a token you launched on Pump Dot Fun... but you have little financial incentive. At best, you bought a ton of your tokens at launch, and you sold high enough to now self-fund your project, but you're now facing a choice with this newfound money: eat glass and stare at the abyss for the next 5 years or.... go enjoy your money and your micro CT influencer status from the beach. Tough... In the equity world, ICOs (as people know them, where retail can broadly participate to fund a project) will *never* come back. Don't get me started on scammy crowdfunding platforms (that's for another post). The only ICO model that works is called the IPO. We can (and should) make IPOs more accessible to more companies, that would be an excellent thing for the economy (and I would love to see it happen). But, as of now, IPOs are for $10B companies growing 30% YoY, so it will take a long time and lots of regulatory work & political will to make IPOs accessible to early-stage companies.
Oussama Ammar
1mo
100% true
Looking for Singularities — #Storyteller 😈 - #Entrepreneur ❤️ - #Investor 🦄
1moBtw why no one talk about Sweden ? It is the most IPO friendly country in the world but I have no idea if it works or not as a model. Would love to see this explored more.