Blockchain

Are Venture Capitalists Skeptical Of ICOs?

Are Venture Capitalists Skeptical Of ICOs?

Venture capital firms have turned skeptical of fundraising from initial coin offerings (ICOs). There are already more than 1,700 digital tokens currently listed in the virtual currency exchanges like bitcoin. However, not every coin is enjoying the same kind of confidence suggesting about the existences of wilder one like that of Dogecoin or Deep Onion coin and Jesus coin. Though some experts believe that the cryptocurrency is here to say, others have still doubted whether it is a revolutionary one even as regulators are coming up with newer frameworks.

VCs Attitude

Until now the venture capitalists approach towards the digital currency can be termed as two-pronged one, i.e., elated or ridiculed. While a few of them could be regarded as more evangelists, some of them have gone deeper into Bitcoin or Ether or any other digital coins, as well as, the ICOs. So far, the sector has earned different names or attributes like better than the industrial revolution, it is the renaissance, and it is larger than the Iron Age, VentureBeat reported. Though bitcoin price plunged to less than $7,000 now from close to $20,000 in December 2017, there are people who believe that it would hit about $250,000 by the year 2022.

Interestingly, Upfront Ventures has conducted a survey early this year on the VC-heavy audience that featured about cryptocurrency boosters. The findings were mixed. The survey result pointed out that nearly 80 percent of them were skeptical about ICOs as fundraising vehicle apart from considering it as a flat-out ‘scam.’ As far as bitcoin is concerned, 57 percent of the respondents see a correction before the value reaches zero. Significantly, 62 percent of the respondents felt that it would provide a store value for the long-term.

Another key point is that 83 percent of respondents indicated that they did not have a partner with a focus on blockchain technology. However, 90 percent were highly optimistic on the blockchain for long-term impact. One of the reasons why venture capital firms continued to show more enthusiasm on cryptocurrency than others. There are big-name venture investors who are eager to park big stakes in the digital currency.

During the recent months too, venture capital firms have focused on virtual currencies, Intangible Labs raised $133 million whereas hedge funds and VC firms are putting their money into it.

Plenty of Skeptics

However, there is a lot of skeptics. For instance, Berkshire Hathaway CEO, Warren Buffett, told CNBC most recently that bitcoin was “probably rat poison squared.” On the other hand, the company’s Vice Chairman, Charlie Munger, said, “I like cryptocurrencies a lot less than you do. To me, it’s just dementia. It’s like somebody else is trading turds and you decide you can’t be left out.”

The simple reason that VC firms have is that there is no scarcity of capital for startups from either private equity or VC or corporate venture funds or for that matter any other sources. Therefore, there is no need for ICOs to fund startups. Secondly, the digital asset could be a slot machine. Thirdly, the volatility of digital tokens is high. The most significant point is that the regulatory environment is gloomy. Therefore, VCs are skeptical.

About the author

Fred Krueger

Fred is a successful entrepreneur and investor. His passion to share his knowledge and to analyse the highly unregulated cryptocurrency market brought him here. His experience gives him a strategic edge amongst others.

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