Invisible, intangible currency disrupts the real world. Now, a wind of change based on blockchain blows the startup industry. How will this change affects the future of venture investors? Choi YoonSup, a CEO of Digital Healthcare Partners recently brought up a discussion about ‘blockchain and venture investors’ on his Facebook page, and venture capitals, startup accelerators and startups gathered to discuss it.
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Role of venture capital will shrink= One of outstanding schemes in fundraising for startups these days is Initial Coin Offering (ICO). The process of ICO is simple and individuals can easily raise capital in short term. In the United States, fundraising through ICO has soared since May last year. On September 2017, it exceeded $800 million, 2.6 times of cash investments. Currently, ICO has become a main financing tool not only in the U.S. but also in Japan and Europe. How will the role of venture capital change?
Kim SeoJun, CEO of Hashed, predicted that the role of venture capital will be greatly shrinking. He said that financing through ICO in the initial stage has already overtaken that of venture capital all over the world and ICO is expected to substantially replace venture capital in San Francisco.
Jung JiHoon, a professor of Kyung Hee Cyber University, and Lee HeeWoo, a former CEO of Cognitive Investment agree with this idea. Professor Jung predicted that the influence of venture capital has become gradually shrinking while ICO will be a mainstream and even the ICO ratio especially in series A will become greater. Mr.Lee also predicted that ICO will gradually replace VC industry in large funding market. He added, however, that we will see how startups will design and develop new blockchain based coins and tokens.
Ryu JungHee, a CEO of Future Play, said that even though the way of financing has changed, venture capital will continuously support startups to develop technologies, products and businesses in its initial stage. For early investors, however, ICO may be a better choice to improve return on capital.
Some say a new model will emerge. Mr. Choi who raised the discussion expected that with large fundraising through ICO, VCs and angel investors will carry out a strategy of early exit. As a new model is introduced, the existing roles may become even greater. Professor Jung said the role of information provider on ICO portfolio investment and current status will become even more important and they can earn profit out of the information fee. Current financial assessment and transaction have become an ecosystem and many will compete each other in the market.
What if venture fund consists of ICO?=Then, what about venture fund comprised of ICO. Currently, all types of ICO are prohibited in Korea. We can find examples of funds consisted of ICO in other countries. Mr. Kim takes examples of TASS and Cofound.it which attracted investors with Bitcoin and got financing through Ethereum.
Some are concerned about side effects. Han SangKi, a CEO of Techfrontier, expressed concerns by saying that ICO can be abused since there are no difficulties and distortions in venture fundraising. He added that issues regarding ICO and fundraising including coin prices, interlock and distribution of investment profits should be considered.
