Discuss: How does the ICO boom affect traditional VC funding?

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Initial coin offerings (ICOs) are having a moment, so much so that it has even outpaced early-stage VC funding. In the last two quarters, ICOs have raised over US$2 billion, at an average of US$10 million each – 10 times more than the average value of angel and seed funding in the same period.

At the same time, there have been warnings of a bubble as well as scams. Asian governments have also responded to the phenomenon, whether in the form of regulations or all-out bans.

How do ICOs affect traditional VC funding? Will it become the go-to fundraising method for startups? Or will regulation slow down the momentum? To start off the conversation, we asked three venture capitalists for their thoughts.

Editor’s note: Answers have been edited for clarity.

Nikhil Kapur, senior investment manager at Gree Ventures

Of course, this whole sector and fundraising mechanism are in turmoil right now. However, once the dust settles, I do believe in blockchain as a technology and in ICO as a combined fundraising and business model innovation.

In my opinion, ICOs can become a great way for companies to validate their product-market fit, get the flywheel rolling on scaling, and allow early liquidity for shareholders and employees. With all these advantages, I foresee ICOs becoming a big part of the fundraising options for blockchain-based startups. That said, blockchain in its current form is likely to remain a niche technology for a few years, at least.

While ICOs can help mitigate the product-market fit risk, technology has yet to replace a VC’s understanding of an entrepreneur. Thus, I see seed VCs playing a crucial role in mitigating team risk, helping build a product, and take it to market. Then, instead of Series A funds, I expect the company to be funded by ICOs.

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