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How is this dissimilar from raising VC money? > The problem is that you're giving money to a relatively unknown company while speculating that the company will

How is this dissimilar from raising VC money? > The problem is that you're giving money to a relatively unknown company while speculating that the company will create inherent value. That's what seed round VCs or angels do. Sure, they tend to invest only in peeps they know personally or through their network to try and control for too much failure. But the same could be done for ICOs...only invest in those that have teams you know well, or can meet, or who will take your call and answer your questions. >Unlike with stocks, you don't have ownership in the company or any voting rights. Same thing happens in VC rounds as later round investors dictate terms and dilution to early round investors. > There is nothing stopping the company's creators from distributing the ... money to themselves Same thing with VC money...one can hire friends, acquire companies one might have stock in already, buy a swanky office, go on lavish company parties, etc. > there might be a board, but since the company isn't public who knows who the board is Verbatim for VC-backed private companies. The "who knows" depends on the due diligence of the investor. Sure, most professional VCs will define who the board is ie. require board seats. But those boards can and do change in later rounds. It's up to the ICO investor to do due diligence. There's no law for ICOs that I cannot email or call the founders and ask about their board. If they refuse to answer, that would be a huge red flag. All that said, I completely agree: > the SEC is right to step in so there aren't a ton of unregulated securities going around and a lot of consumers potentially getting screwed. Most retail investors cannot possibly spend the time and effort and money to do proper due diligence regardless of whether it is an ICO, IPO, OTC stock, etc. Most mom-and-pop investors should just buy ETFs with zero fees. Schwab has some great examples! For professional investors...I think ICOs are a fantastic tool that adds competition to the marketplace...and should scare the hell out of VCs and PE since the days of 2 and 20 without question seem fleeting. EDIT: formatting

zachruss92 9y ago
The difference is huge, VC can only be provided from accredited investors.
- bobwernstein 9y ago
  Capitalism. Just worry about yourself. No ico is forcing anyone to invest. Just like Kickstarter doesn't. Or Casino's. Or the stock market. Or equity crowndfunding.
  - chowells 9y ago
    Is your claim that capitalism is so magical that it justifies all abuses of the poor and weak done in its name?
- rficcaglia 9y ago
  Allow me to clarify. I 100% agree with requiring accredited investors for ICO participation (or IPO or CryptoKitty speculation, etc). My blue collar parents could hardly be expected to spend the full time effort required to do due diligence on an ICO while they were working 2 jobs to make ends meet. In fact they did quite well investing in mutual funds and receiving a pension from a stable employer. As an aside, I disagree that the current accreditation is a good measure of being "qualified" - anyone who inherited $1M can be accredited - but it's what we got; at least one bad investment decision won't bankrupt a foolish heir. Investing in an ICO has essentially the same risks as investing as an angel or VC. I have both invested and received investment and the due diligence process varies greatly from firm to firm, angel to angel. The good ones make good decisions, largely based on lots of hard work. Anyone interested in investing in an ICO could do the same. I have looked at many ICOs and have probably spent over 100 hours of hard work doing due diligence on the few ICOs that looked legit. I pulled the trigger on one, and passed on many more. To me what ICOs represent are a fundamental shift in the marketplace from a closed door, network based, "clubby" process to a transparent, data rich, open process. Not that they cannot be gamed, especially when early investors get different coin prices, etc. Due diligence is definitely required. The pain this is trying to solve is to allow companies who need access to capital to get it without having to visit Sand Hill Road or apply to incubators. It's not a silver bullet, it's just a different way. The SEC shutting down scams is a good thing. The SEC chilling all ICOs is a bad thing and protects the status quo and limits innovation. A legit business - even if just an idea - should be able to put its idea and data out there and the founder's experience and expertise, and let the market (of professional investors) decide. I think the SEC should have a version of some of the Excel sheets you find on Google to check whether an ICO is legit or not. It should not require lawyers. It should be based on Yes or No questions. If a founder can pass that test, the SEC should back off and let the market decide. But yes, ICO participation should be limited to professional investors. But if there is innovation allowed, maybe there could be a retail-focused ETF for ICOs, for example.

zachruss92 9y ago

The difference is huge, VC can only be provided from accredited investors.

bobwernstein 9y ago
Capitalism. Just worry about yourself. No ico is forcing anyone to invest. Just like Kickstarter doesn't. Or Casino's. Or the stock market. Or equity crowndfunding.
- chowells 9y ago
  Is your claim that capitalism is so magical that it justifies all abuses of the poor and weak done in its name?
rficcaglia 9y ago
Allow me to clarify. I 100% agree with requiring accredited investors for ICO participation (or IPO or CryptoKitty speculation, etc). My blue collar parents could hardly be expected to spend the full time effort required to do due diligence on an ICO while they were working 2 jobs to make ends meet. In fact they did quite well investing in mutual funds and receiving a pension from a stable employer. As an aside, I disagree that the current accreditation is a good measure of being "qualified" - anyone who inherited $1M can be accredited - but it's what we got; at least one bad investment decision won't bankrupt a foolish heir. Investing in an ICO has essentially the same risks as investing as an angel or VC. I have both invested and received investment and the due diligence process varies greatly from firm to firm, angel to angel. The good ones make good decisions, largely based on lots of hard work. Anyone interested in investing in an ICO could do the same. I have looked at many ICOs and have probably spent over 100 hours of hard work doing due diligence on the few ICOs that looked legit. I pulled the trigger on one, and passed on many more. To me what ICOs represent are a fundamental shift in the marketplace from a closed door, network based, "clubby" process to a transparent, data rich, open process. Not that they cannot be gamed, especially when early investors get different coin prices, etc. Due diligence is definitely required. The pain this is trying to solve is to allow companies who need access to capital to get it without having to visit Sand Hill Road or apply to incubators. It's not a silver bullet, it's just a different way. The SEC shutting down scams is a good thing. The SEC chilling all ICOs is a bad thing and protects the status quo and limits innovation. A legit business - even if just an idea - should be able to put its idea and data out there and the founder's experience and expertise, and let the market (of professional investors) decide. I think the SEC should have a version of some of the Excel sheets you find on Google to check whether an ICO is legit or not. It should not require lawyers. It should be based on Yes or No questions. If a founder can pass that test, the SEC should back off and let the market decide. But yes, ICO participation should be limited to professional investors. But if there is innovation allowed, maybe there could be a retail-focused ETF for ICOs, for example.