Waiting for the results of an ICO can be a frustrating business for investors. As a result there has been a growing number of complaints coming from enthusiastic backers of blockchain technology and the associated ICOs about the lack of information about the progress that is being made on different projects and particularly what the funds raised are being spent on.
Criticism of the ICO environment
Meltem Demirors, founder of Athena Capital and chief strategy officer at startup CoinShares, told Coindesk today: “A lot of the projects that raise money, they’re not really reporting what they are spending it on. I don’t think you can responsibly talk about investing without talking about risk management.”
Demirors is not the only person who is critical of the current environment. Linda Xie, managing director of crypto hedge fund Scalar Capital said at the Blockchain Connect conference: “It’s great that these ICOs allow thousands of people to invest in the project … but thousands of people aren’t going to give you the best advice on how to run this protocol or company.”
They are not alone in complaining about the management of companies and teams involved in ICO fundraisers. But, none of these voices have slowed the demand for involvement with initial coin offerings.
Risk hasn’t curbed demand
ICOs raised $6.3 billion in the first quarter of 2018, which outstrips the total raised in all of 2017. Still, that doesn’t stop expert cryptocurrency investors from questioning whether or not many of the tokens on offer add value to the sector when compared with traditional venture capital. Jalak Jobanputra, founder of Future\Perfect Ventures said, “What I worry about is, we still need to work out governance models with tokens.” She also added, “”I want to see them [token sale projects] start shipping products,” and said that few of the successful 2017 ICOs have yet to prove the real value of their sales by launching usable platforms.
Give us more progress reports
Arguably, many projects need much more time to build the platform, but what many are saying is that project teams should at least issue progress reports . Jobanputra explained the need for more transparency: “The projects we’ve invested in have reporting on par with startups I invest in, which [means] monthly updates on tech, team, [business development] and market progress. Successful founders have found that it is also a great way to enlist the collective investor network for help.”
Let’s be more honest
Demirors echoed this sentiment. She is still enthusiastic about ICOs and wants them to succeed, but simply wants them to adhere to a high standard of conduct. “I’m very optimistic and obviously I love this technology or I wouldn’t spend all my time on it,” Demirors said, “but I do think we have to be realistic and honest with ourselves if this is going to succeed. The way things are going now, I really worry about sustainability.”