The Ethereum-based digital asset management platform ICONOMI raised over $10 million in September of last year during its ICO (Initial Coin Offering). $5 million of the haul was “earmarked for the ICONOMI.performance fund that would invest in promising ICO projects,” but as ICONOMI soon found out, evaluating new projects and their teams is no easy task. There are lots of projects to sift through and as more and more Ethereum-based companies pop up every day to vie for their pieces of the ICO pie, it’s becoming more challenging to assess them all accurately.
The ICO, by its very nature, is a hybrid model – one part crowdfunding and one part IPO (Initial Public Offering) – but the immediate issuance of liquid, tradable digital assets (Tokens) to all ICO participants makes them quite appealing to investors. Since tokens are immediately liquid, investors don’t have to wait years for an IPO or liquidity event to see returns. The crowdfunding element also provides individuals who have limited capital resources a small-scale ability to participate in funding projects. In this regard, ICOs seem like a win–win for everyone.
But what happens to the traditional role of the venture capitalist or incubator in this newfound ICO model in regard to key components like mentorship, vetting, public relations, and networking connections? These are the things that often play a more crucial role than money when it comes to nurturing aspiring startups into real-world success stories.
For example, seed incubator Y Combinator subjects startups to a rigorous trial by fire process before selection. It’s necessary to vet the projects and their teams with a high degree of scrutiny to ensure investors that the ventures they finance will offer the highest probability of positive returns. Airbnb, Dropbox, Twitch, and Quora all sprang to life out of Y Combinator, returning billions of dollars to their investors and providing valuable public services to customers all around the world. So it’s hard to argue that the company’s intensive screening process is without purpose.
When it comes to ICOs, speculative investors often have little more to go off of then a white paper and some team bios on the project’s website before making a final decision about whether to invest.
This is why ICONOMI is turning its current mentoring program (started in November) into a separate venture called Cofound.it that will provide the same level of vetting and counseling to ICOs that is typically provided to startups by traditional venture capitalists and incubators, albeit in a distributed way.
Cofound.it is “a distributed global platform that directly connects innovative projects with investors while enabling experts worldwide to provide necessary support to teams. And by paying those experts in the very tokens the companies issue, the incentives for all the participants are truly aligned.”
A decentralized approach to mentorship could prove to be more efficient at providing ICO teams with high-level guidance than traditional accelerator programs as it can pull human resources from a much larger base. Cofound.it “partners include Deloitte as ICO evaluator for selected ICOs, Wachsman PR to help with PR and communication, and Novak Rutar Legal that will assist projects in finding and executing the best legal options.” ICO projects can apply via a selection process and if chosen by the Cofound.it team, they will receive coaching from the above-mentioned launch partners. “Cofound.it also helps in executing the communication strategy by helping write and optimize content, and monitor and engage with potential investors on social media channels.”