65 projects have raised $522M in ICOs this year, according to Smith + Crown; investors should be aware of the unregulated nature and potential for abuse in ICOs
Last week I wrote about the bull market … Tweets: Paul Cohen / @sonicviz : “a small team of computer engineers in Lithuania raised $14 million in 45 minutes by selling a coin, known as Mysterium” + 10 for balls http://twitter.com/... @nytimes : Want to raise $35 million in seconds? For tech entrepreneurs, it's possible thanks to the initial coin offering. http://www.nytimes.com/... Michael Rapoport / @rapoportwsj : People yell DIGITAL CURRENCY!, raise $$ in exchange for IOUs for nonexistent products. Nope, no potential for fraud. http://www.nytimes.com/... James Wang / @jwangark : Money raised at seed / ICO (inflation adjusted): Google: $1.6m AirBnB: $0.6m Uber: $1.7m Ethereum: $19m Brave: $35m Bancor: $150m Matt Galligan / @mg : 1. Companies that do ICOs will need to build in a solid framework of self governance so that the capital is used wisely over time. Dan McArdle / @robustus : Lockups? Eg, for seed, lockup all but $1-2m for 2yrs, then $5m next 2yrs, etc. Follow ~"standard" VC series sizing/timing via onchain locks. Jon Russell / @jonrussell : Despite what you read about well-intentioned theories, today's ICO are just about $ for companies and buyerspic.twitter.com/Iqq4kejzvG Jon Russell / @jonrussell : That'll change with future token sales — but for now many are money grabs for ambitious projects that are yet to launch
Context & Ripple Effects
This New York Times piece lands mid-arc in the 2017 token boom: a month earlier, TechCrunch had already run a Q&A on ICO mechanics and legality and what they mean for VCs, and the fundraising curve was steepening fast — from $225M in 2016 to over $4B for the full year, per Autonomous Research. The article's data point, Smith + Crown's count of 65 projects raising $522M, sits alongside speed-of-light anecdotes like Mysterium's Lithuanian team pulling in $14M in 45 minutes and Brave's roughly $35M sale.
What makes the piece durable rather than dated is its warning track: analysts flagged ICOs as unregulated and abuse-prone at exactly the moment retail money was flooding in, and the subsequent record — 531 of 902 Tokendata-listed 2017 projects failed or went dormant — read like a confirmation of Michael Rapoport's 'IOUs for nonexistent products' critique.
First-order effects
- Retail buyers of tokens like Mysterium's are purchasing claims on unbuilt products with no regulatory backstop, so the only protection is the investor caution analysts are explicitly advising.
- VCs face a parallel funding rail that bypasses their term sheets entirely — the question TechCrunch's earlier Q&A posed — as teams raise in minutes what a seed round takes months to assemble.
Second-order effects
- The abuse risk materializes on schedule: the Tokendata analysis showing most 2017 projects dead or dormant pushes credible teams to distance themselves from the retail free-for-all, accelerating the shift toward private-sale ICOs restricted to accredited and strategic investors.
- Tracking firms like Smith + Crown become gatekeepers by default, since their counts and success-rate tallies are the closest thing the unregulated market has to diligence infrastructure.
Third-order effects
- If the pattern holds, the ICO market re-creates the accredited/institutional divide it was meant to dissolve — ordinary investors get excluded after bearing the losses, while later-stage capital professionalizes around structures like Dan McArdle's proposed onchain lockups that mimic VC-style vesting.
- Sustained fraud and failure rates make regulatory intervention the likely endgame for a market whose pitch was operating outside it, converting an informal funding channel into a compliance-bound one.
The trend: Token fundraising scaled from $225M in 2016 to $13.7B in just the first five months of 2018 while failure rates climbed, pushing deal structures from open retail sales toward accredited-only private placements.