How the SEC gave cover to ICO entrepreneurs to give investors a lousy deal


#1

Raising money from Angels and VCs, unless you live in Silicon Valley and are wired to the big money guys, was lousy. Worse still if you are a woman or a minority. So the ICO is the entrepreneur’s revenge. But it has overshot the runway and the SEC is the one giving entrepreneurs the cover to offer this lousy deal.

I am seeing 3 types of ICO:

  1. Scam or just hopeless proposition. The chance of business success is close to zero. I have a few simple scam alerts to spot these. About 90% of the current batch sadly.

  2. Great pitch & team; in normal mode they would have raised $100k to $1m in Seed - maybe more if it is really complex tech like Ethereum. Now they are selling coins without any equity. The excuse is “SEC won’t let me sell Equity”. I won’t detail these as I admire the entrepreneurs and want them to succeed but do not want to be seen promoting the ICO. About 9% of the current batch I reckon.

  3. Something where I can envisage using the coins right now, albeit for something non-mainstream. This is like Ethereum in 2014 and Bitcoin in 2009. This is about 1 in 1,000. They may or may not be good investments but who cares - it will be a bonus but not the reason to do it. One like that could be Trutheum (see thread on Fintech Genome on Trutheum). Also possibly Civic and Filecoin (but I need to dig more into them). About 1% of the current batch methinks.

The 9% should be able to offer equity as well as coins. The ability to give early adopters a financial stake in the future is a game-changer. Today only cash capital is rewarded. What if cash capital and social capital and intellectual capital were all aligned? Imagine Mark Zuckerberg’s next door neighbour at Harvard with the same simple brilliant idea offering the first 1,000 users a big % of the equity. He or she would be vastly wealthy and 1,000 people who made it happen would have had their lives changed. And Mark Zuckerberg and Peter Thiel would just be ordinarily wealthy folks not celebrity billionaires.