Providing capital

There remains a perception that Initial Coin Offerings (ICOs), and increasingly Security Token Offerings (STOs), are a simple, low-cost way to raise money. This may be true for the right team, but budgets have greatly grown. One project, called Financecoin, simply copy-pasted the README file from DogeCoin on BitcoinTalk and succeeded in raising over $4 million. Whether or not they did anything useful with the money is not known to the author, invoking again another problem with the space.

Those days are gone—it's now widely agreed that it costs between $200,000 and $500,000 to do an ICO or STO in this increasingly crowded and regulated space. It's not clear, though, that many of the good projects would have had a problem raising capital anyway.

The great majority of token sales are to support très chic tech projects, some of which would be as well suited to conventional fundraising. It's impossible to do an Initial Public Offering (IPO) or reg A+ without the assistance of an investment bank or brokerage, and those firms largely herd towards tech and healthcare. It's safe to say that blockchain hasn't improved access to capital for projects with strong teams with good concepts and previous startups under their belts.

Certainly DAOs are largely not of interest to investment banks; those remain solely within the purview of distributed teams doing ICOs or STOs.

Some projects with a social purpose have succeeded in raising money via conventional channels—Lemonade, an unconventional insurer organized as a New York B Corp, closed a very successful Series C last year. Benefit corporations seem to be the new darlings of mainstream venture capital firms, such as Andreessen Horowitz and Founders Fund.

This seems to be a good fit for blockchain as well—benefit corporations and charities similarly need cash but may not be suited to the multiple rounds of fundraising and eventual exit required of them by VC. Fidelity Charitable collected $22 million in Bitcoin and other cryptocurrencies in 2017, and that segment of charitable contributions is expected to continue to grow.