ICO vs. venture investment. Who is bigger?

 There are many talks that ICO will destroy all types of investment or it will die itself. In fact, all of this is not true.

We decided to clarify things on this topic and introduced a new rubric where we will compare ICO with traditional investments, for example, venture capital.


ICO in its form is very similar to IPO. In the first case, the company issues tokens, in the second - shares. The issue of shares is available only to organizations with huge capital. Investors buy shares of the company and become its co-owners (someone with greater rights, someone without, but nominally shareholders - the owners of the organization).


During the ICO, the project issues tokens, which investors can buy. In this case, they do not become owners of the company and do not receive a percentage of the profits. Investors in ICO earn money when the price of the token that they bought is growing or these tokens are exchanged for products and services of the company.


In this case, there is no difference between the blockchain project and the usual start-up. Both can choose ICO and IPO. Both can collect money by traditional means through venture funds. It depends on the goals and objectives of the company and not on the blockchain.


What is the difference between traditional venture investments and ICO? There are 4 main points:


Payback period. Traditional venture funds promise to return investments within 7-10 years, and ICO in 1-5 years.

Own. Venture investors often receive a stake in the company, investors in the ICO - no. They own tokens, which value grows with the growth of the company. Tokens can be sold on crypto-exchanges or exchanged for project services.

Legal form. Traditional venture investments are usually tied to existing laws. ICO is far from being regulated in every country.

Investors. As we have already mentioned hedge funds and other large players are investing in venture funds. Anyone can take part in the ICO.


Where is more money? In venture capital investments or in ICO?


In 2018, investments in ICO are much higher than in 2017. Only in the first 2 months of this year there were more money invested than in 4 months of 2017. But not everything is so clear.


For the whole last year and for the first months of 2018 there were twice less ICOs than investment rounds of traditional venture financing.


During the same time period, 527 fundraising companies were established. 68% of them received funding through venture funds and only 32% through ICO. But even here not everything is clear.


Even with fewer deals, ICO collects more money. 78% of all investments belong the ICO, and 22% belong to the traditional rounds.


For 2017, blockchain start-ups raised $ 1.3 billion through venture funds and $ 4.5 billion in the ICO process. There is a logical explanation for this. ICO can involve many more people than traditional venture capital investments. We must understand that traditional investments have already outlived their "explosions" and are in a more or less even stage. In 2017 there was a boom of ICO.


We outlined the main differences between venture investments and ICO and showed the most important figures. We stand for ICO and we are doing it for our project - briastorm.io.


What kind of investment is closer to you and why? Write in the comments.