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Why would your ICO have been worth anything at all during an acquisition? If it isn’t tied to equity in the company (to avoid securities violations) then what e

Why would your ICO have been worth anything at all during an acquisition? If it isn’t tied to equity in the company (to avoid securities violations) then what exactly would have given it value in an acquisition? Who would have bought it from you for more money and why?

sillysaurus3 9y ago
I meant conceptually. If the startup ecosystem embraces ICOs, then that type of thing can happen. Right now we'd just have to settle for "If Oculus got acquired, the price probably would have gone up." But you could imagine starting a company that promises to incorporate tokens into the structure somehow: Perhaps the founder would say they'll only sell to acquirers that are willing to offer token holders $x, where $x is based on the price over the last month before being acquired. Then it'd be in the founder's best interest to sell as little of the token as possible to cover operations, since otherwise it reduces their chances of getting acquired -- just like normal investment. Also it incentivizes founders to make the company do well: if they can tap into funding when needed (because they have premined coins they can sell), they're less beholden to the valley. That means a smart 18 year old can single-handedly launch and fund a company; no permission needed from some cabal of investors. Moot was 15 when he launched 4chan. If you believed in its future, you could've (a) supported it by buying their token, and (b) possibly made some return on that belief. Obviously, all of the normal caveats apply: most investments don't work out. But everyone knows that. If I want to put $2k into a company, why is the government stepping in to stop me? I can go waste $2k at the casino or squander it however I want. It's my money. Bitcoin itself can be thought of as an ICO. When people buy Bitcoin, we're buying into Satoshi's vision for the future. It's not merely because it's useful. So why is that legal, but ICOs aren't? The overall point is that this is a powerful model, and it could become even more powerful. The rest of the world is embracing it, so the US could find themselves left out by getting too draconian.
- dkersten 9y ago
  If the ICO tokens are tied to some reward on acquisition, then how is it any different from other securities? May as well just sell equity at that stage (perhaps through something like seedrs, which accepts small investments too). If it’s basically just a security like any others, why should it bypass the regulations? If it walks like a security and it quacks like a security, then everything else is just a technicality: it’s a security. Also, what benefit does using a cryptocurrency even buy you here other than as a technicality to attempt to sidestep the laws? Maybe the laws should be relaxed to open it up to more laypeople, but given how easily people get burned and scammed at this stuff, I’m not fully convinced (penny stocks anyone? Or even Bitcoin: yes some people got rich and others will get rich in the future, but there’s a very high chance that a lot of laypeople who bought in recently because of the price surge are going to lose a lot of money). The point of “accredited investor” is that they can afford to lose their investments.
  - DennisP 9y ago
    Someone with $800K in savings who makes $150K/year can easily afford to lose a $5K investment, but is not an accredited investor. That's why we have the JOBS Act now. I'm hoping some ICOs start using it.
- deleted 9y ago
  [deleted]

sillysaurus3 9y ago

I meant conceptually. If the startup ecosystem embraces ICOs, then that type of thing can happen. Right now we'd just have to settle for "If Oculus got acquired, the price probably would have gone up." But you could imagine starting a company that promises to incorporate tokens into the structure somehow: Perhaps the founder would say they'll only sell to acquirers that are willing to offer token holders $x, where $x is based on the price over the last month before being acquired. Then it'd be in the founder's best interest to sell as little of the token as possible to cover operations, since otherwise it reduces their chances of getting acquired -- just like normal investment. Also it incentivizes founders to make the company do well: if they can tap into funding when needed (because they have premined coins they can sell), they're less beholden to the valley. That means a smart 18 year old can single-handedly launch and fund a company; no permission needed from some cabal of investors. Moot was 15 when he launched 4chan. If you believed in its future, you could've (a) supported it by buying their token, and (b) possibly made some return on that belief. Obviously, all of the normal caveats apply: most investments don't work out. But everyone knows that. If I want to put $2k into a company, why is the government stepping in to stop me? I can go waste $2k at the casino or squander it however I want. It's my money. Bitcoin itself can be thought of as an ICO. When people buy Bitcoin, we're buying into Satoshi's vision for the future. It's not merely because it's useful. So why is that legal, but ICOs aren't? The overall point is that this is a powerful model, and it could become even more powerful. The rest of the world is embracing it, so the US could find themselves left out by getting too draconian.

dkersten 9y ago
If the ICO tokens are tied to some reward on acquisition, then how is it any different from other securities? May as well just sell equity at that stage (perhaps through something like seedrs, which accepts small investments too). If it’s basically just a security like any others, why should it bypass the regulations? If it walks like a security and it quacks like a security, then everything else is just a technicality: it’s a security. Also, what benefit does using a cryptocurrency even buy you here other than as a technicality to attempt to sidestep the laws? Maybe the laws should be relaxed to open it up to more laypeople, but given how easily people get burned and scammed at this stuff, I’m not fully convinced (penny stocks anyone? Or even Bitcoin: yes some people got rich and others will get rich in the future, but there’s a very high chance that a lot of laypeople who bought in recently because of the price surge are going to lose a lot of money). The point of “accredited investor” is that they can afford to lose their investments.
- DennisP 9y ago
  Someone with $800K in savings who makes $150K/year can easily afford to lose a $5K investment, but is not an accredited investor. That's why we have the JOBS Act now. I'm hoping some ICOs start using it.
deleted 9y ago
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