Until now ‘Fintech’ has had a rather timid relationship with crowdfunding – and to put it bluntly many Fintech founders would have rather be seen dead in a ditch than crowdfunding a million dollars or two – even as a first step.
Initial Coin Offerings (ICOs) are crowdfunding on steroids – a very different world, and have a very different image. The fact that the number – the raise – sometimes go above $250 million certainly helps. As does the $20 million average raise so far (see ICONewsDesk.com). An order of magnitude greater.
Not only are there much nearer the sums that fintech startups need to really get their kick-start but ICOs, although clearly a form of crowdfunding (from inception and even more clearly so as time passes) so not and will not have this image problem.
Jamie Dimon and the incumbents know this. So they’d like to create an image problem with wild statements about Bitcoin only being fit for criminals and such.
So in 2018 we can expect to see more in the way of regulatory attacks from the incumbents too – perhaps the kind that prompted Jay Clayton’s no doubt temporary blindness as to when tokens are securities and when they’re not. Which stands little scrutiny.
We should, no MUST, prepare to repel them with reasoned, more balanced, arguments and evidence – and a demand for evidence from the other side of the arguments.
But ICOs are just for creating coins, right? Wrong. Or just for fuelling Blockchain projects? Wrong again. Although this is currently the conventional wisdom – and was evident at the World Funding Summit 2017 last week, more on which soon – it’s wrong, and cannot hold for long.
Yes in the short term people will prefer blockchain based projects and startups both because it ‘feels right’ that the Blockchain should somehow be funding itself and because of the promise of rapid growth from building the new blockchain based ecosystem. We’ve certainly already seen a spread from hard-core funding of core tech, protocols and coins into other forms of tech and innovations more loosely connected to or using blockchain.
But what gets funded is simply a choice for the crowd and there is no intrinsic reason that that has to be a hard-core blockchain based technology, product or service.
The besetting sin of those who predict the tech future is to assume that the new will 100% sweep away the old – whereas the reality is that in most cases it partially displaces it and we end up with both.
As has been observed not everything needs to be ‘on the blockchain’ – or will necessarity benefit from it. For some Fintech applications is will be crucial because it is transformative (and someone will take that step and reap the rewards). For other it may just slow things down or add cost needlessly.
However that does not mean that it cannot be funded by a crowdfund… or an ICO. So yes, we will see a mountain of blockchain activity bringing many genuinely transformative fintech solutions to the fore in 2018. Which in itself will light a fire under the sector. But the technology is not – never is – the point, but the enabler. It’s the transformation and so the benefits that matter – that make the innovations we see mushrooming better, and fitter- in the Darwinian sense.
So expect to see an explosion of innovation in the coming months as the myths are blown away and the reality dawns that ICO are not just for blockchain – they’re for fintech too… and for other innovations that can deliver transformation.
Oh, and if the SEC are daft enough to continue spreading fear uncertainty and doubt all that will do is hobble the USA and its innovators while the rest of the world get on with transforming it.
In which case perhaps it will be left to the next President and his appointee to ‘Make America Great Again’ by unleashing it’s true potential for innovation?
Barry E James is author of New Routes to Funding, an influential commentator and global thought-leader on Fintech, ICOs, Tokens and Crowdfunding & their innovation & regulation. A serial entreprenur with a deep background in tech and innovation over four decades he advises ICOs, Crowdfunds and Blockchain ventures on strategy. The instigator of the regulatory ‘Innovation Unit’ (and so sandboxes) he is also co-chair of the joint Westminster Crowdfunding Forum and All-Party-Parliamentary-Group. He is co-founder and CEO of TheCrowdfundingCenter and ICONewsDesk which collect and provide data and unbiased analysis.