Initial Coin Offerings versus VC Financing
Previously, venture capital (VC) was considered “smart money,” while ICOs seemed to attract more “silly money.” But that could soon change as the crypto community is rapidly catching up in terms of knowledge, judgment and financial talent. If startup shares were to be “tokenized” more often in the future, i.e., issued with participation rights as crypto coins, VCs may cease to represent anything more than simply slightly better-informed or more judgmental investors in the coin space.
Mainly “smart money”, i.e. knowledge, experience and network in addition to capital. In addition, venture capital can have a signal effect for other investors, for example, if the individual VC is considered to have special judgment power in the business area in question. Of course, this is different for ICOs with many thousands of subscribers — however, there are also already the first crypto funds, which presumably have a similar signaling effect. However, there are also VC rounds just before or after an ICO, with startups looking to take advantage of both (fast money and smart money).
Divided into two. The utility token ICOs that have virtually descended upon us as a glut in the past year (which, according to the current legal interpretation, do not constitute a security in contrast to the so-called “Security tokens”, which are similar to a security and are subject to a prospectus requirement and financial market supervisory measures), which are not even ready for use in the absence of completion of the product offering or even prototypes of the coin issuer, will hardly be placeable in the future and will also generate many long faces with regard to past transactions.
On the other hand, coins that have a working value-added use and where blockchain technology is used in the product, where it brings advantages over traditional solutions, will succeed. The same is likely to be true of well-made security and asset-backed tokens, which, as their name suggests, securitize rights similar to securities or are backed by specific assets, which some market participants expect to see a diverse range of offerings in 2018.
About German Startups Group
The German Startups Group is an early-stage investor and describes itself as one of the most active players in the German startup scene. The Berlin-based company says it has stakes in more than 25 startups, including such household names as online eyewear retailer Mister Spex, delivery service Delivery Hero, music service Soundcloud and fintechs CRX Markets and Scalable Capital.
In terms of financial strength, however, the German Startups Groups is comparatively small. The total of all financial assets amounted to just under 24 million euros at the most recent balance sheet date (June 30, 2016). Berliners hold only very small stakes in most of the companies. — In February 2018, German Startups Group issued a convertible bond in the amount of EUR 3 million with a five-year term and a conversion price of EUR 2.50 per share. German Startups Group is represented in the SCALE 30 index of the Deutsche Börse segment of the same name.