Forget an IPO, Coin Offerings Are New Road to Startup Riches
Two obscure companies with no sales raised nearly $400 million combined in recent days from outside investors. How did they do it? Via a new, unregulated fundraising method that has no connection to Wall Street and is based in the world of cryptocurrencies.
These fundraisings, called “Initial Coin Offerings,” are exploding in value. So far this year, companies have raised more than $1 billion this way. That is 10 times the amount raised in 2016, according to Smith & Crown, a digital-currency research firm.
“It’s very hot right now,” said Marco Santori, a partner at Palo Alto, Calif.-based law firm Cooley LLP, who advises startups on structuring their coin offerings. “For the last six months, it’s been about 60% of my work flow.”
The excitement around these coin offerings has helped fuel this year’s sharp rise in virtual currencies bitcoin and ether, which investors typically use to purchase coins. In the first half of 2017, Bitcoin rose 160%; ether rose 3,350%.
What is Bitcoin? What can Bitcoins be used for? How has Bitcoin transformed our understanding of currency? Learn more in this video series by the Federalist Society.