Crypto boom spawns blockchain accelerators to help startups raise funds with ICOs

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Until the start of this year, less than US$300 million had been raised through ICOs – initial coin offerings. As of October 11, that figure had reached US$2.67 billion, according to Coindesk’s ICO tracker.

Source: Coindesk ICO tracker.

ICOs raised three times as much money as VC funding for blockchain startups in the second quarter of this year, according to CB Insights. That trendline is most likely going up as cryptocurrency trading shot up last week, after a short lull last month when China banned ICOs and clamped down on exchanges. The bitcoin rate rebounded to reach a record level of US$5,800 by the end of the week. The higher the bitcoin value, the more resources available to those who want to diversify their cryptocurrency holdings with new coins.

Source: CB Insights.

Startup hubs around the world are buzzing with excitement over this new form of raising funds, mixed with fears of a bubble. Many ICOs are based on nothing more than whitepapers, and scamsters are plenty in this new age gold rush. But as the blockchain technology underlying cryptocurrency gets wider interest, an ecosystem is emerging to support a “decentralized and democratized” alternative to VC funding of innovation.

“We are interested in how companies like Y Combinator can use the blockchain to democratize access to investing,” says the Silicon Valley accelerator’s president Sam Altman, even though he thinks “ICOs are definitely a bubble right now.”

Anybody with cryptocurrency can participate in wealth creation via an ICO, unlike VC funding which is mostly confined to accredited investors and high net worth individuals.

The Startereum program partners angel networks in five cities to help blockchain startups with seed funding, building products, and doing ICOs.

For startups, it can be a faster way of raising funds than chasing VCs with a narrow view of what’s fundable and scalable. That too without diluting equity. But those who are serious about it – and not just get-rich-quick schemers – need an understanding of how to apply blockchain technology and what is essentially a new financial model.

Not surprisingly, incubators and accelerators are coming up to evangelize blockchain and back early innovators. IBM has launched a blockchain accelerator, offering to provide coaching as well as IBM’s blockchain software. US fintech consulting firm Synechron has started six accelerators, each with a different use case for blockchain such as cross-border payments, KYC (know your customer), and mortgage lending.

In Asia, Japanese VC Global Brain has said it wants to invest in ICOs and started Blockchain Labs for community-building and knowledge-sharing. Singapore blockchain startup founders Kai Cheng Chng of Digix and Jun Hasegawa of Omise are on its advisory board.

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