Investing into Blockchain Projects
Experts recognize three principal schemes to invest in blockchain projects today:
- First, a project developer issuing digital tokens to distribute them among the community of crypto enthusiasts (practically, repeating the model of Kickstarter and other internet crowdfunding platforms). Having developed the project with the use of initially collected money, the developer comes to the sources of venture capital to finance the project in full.
- An initiator starts inviting venture capital investors to launch the project, and then conduct an ICO for total funding (a strategy opposite to the first one).
- A project developer conducts an ICO in the one-stage scheme but issuing asset-backed tokens (taking real-world assets and putting them on a blockchain makes ICOs looks like IPOs – Initial Public Offerings of shares).
Meanwhile, a composite intangible asset-backed model to invest in blockchain projects is also possible. These projects will be initiated in logistics, industry, healthcare, etc., to be developed till the stage of a prototype. Project developers protect their interests adequately due to the use of a joint-stock or partnership form of intellectual property’s sharing. ICOs or the new form of corporate crowdfunding CSF (see below) would be sources of projects’ initial financing. Projects, capitalized and advanced in this way become attractive to venture investors. Due to the use of this model and regulators’ efforts to create a civilized crowdfunding market, ICO becomes a segment of it. In turn, crowdfunding is part of a comprehensive investment system to fund innovations, the system that includes venture funds, angel investors, corporations, government agencies (incubators and accelerators for start-ups), and micro-investors.
To express the essence of the changes in the ICO system we can say that “trust,” the concept underlying DLT itself, originally aimed at creating automatic mechanisms to replace the old “agents of trust” – banks, registrars and government departments. Today begins the struggle for the trust of real investors whose behavior, unlike the “irrational” micro-investors of ICO is entirely rational. Real investors would like to:
- understand the unique technological or business features of a project that make it attractive to invest into;
- see the financial justification (in figures and facts) of project organizer’s promises – solid proof of potential profitability of a project;
- ensure that the intellectual property of the project is appropriately executed and protected;
- verify that the project organizers are acting within the framework of the current legislation (more precisely, they can adapt creatively to the constantly changing system of ICO / crowdfunding regulations).