- Startup Accelerators in the ICO Market
- What is the future of accelerators?
Accelerators offer young companies to choose the direction of further development. The program inside the accelerator is designed for several weeks. Startups get acquainted with experts who give feedback on the project. Projects may receive small investments for further development.
In one set of accelerator can be several dozen companies. Large accelerators practice the “Spray & Pray” approach, which involves the recruitment of more than 40 projects on the principle of “the strongest will survive”. Startup includes in each set no more than 20 projects.
The growing popularity of ICO.
The beginning of the boom came in May 2017, when the volume of funds collected using ICO exceeded $ 200 million, in June, September and October of the same year the level of collected funds exceeded $ 500 million, and in December 2017 more than a billion dollars. For the whole of 2016, enthusiasts managed to raise only $ 95 million.
In 2018, the ICO continues to beat the collection of funds. For example, following the results of preICO, the popular Telegram messenger raised $ 850 million.
Startup Accelerators in the ICO Market
The ICO boom provoked a change in the investment market. Investors could not stand aside from the new tool that allows you to invest in the expectation of excess profits. Therefore, ICO-oriented crypto accelerators began to appear.
Waves Lab Crypto Accelerator works with development teams based on the blockchain. Startups can count on seed investments of up to $ 300 thousand, as well as legal, PR and marketing support. The advantage can be considered that the accelerator is integrated with the blockchain platform, the production and circulation of tokens, as well as the creation of applications.
To develop its own blockchain platform, the NEM Foundation together with Blockchain Global opened a crypto accelerator in Malaysian Kuala Lumpur. It is planned to spend about $ 5 million to support startups working on the NEM platform.
Support for blockchain projects, which recently launched ICO, also deals with Science Blockchain Incubator. The fund itself raised about $ 13 million under the ICO for future investment in projects.
But not all investors are positive about ICO. The head of the Y Combinator Sam Altman expressed distrust of crypto investment, calling them a bubble. He invited states to take up ICO regulation, and the accelerator itself is in a waiting position. Fintech-investor 500 Startups Mike Sigal said that although he is open to blockchain technologies, he is not going to use the ICO in the fund, as he is responsible for the funds of the investors entrusted to him. Accelerator will continue to study ICO.
The 22X Foundation has created an association of venture investments and ICO. His idea is quite simple – the tokens of the fund are provided with shares in 30 portfolio startups that have passed 500Startups Accelerator and decided to raise funds with the help of ICO. On the official website, the 22X fund reports about $ 22 million of collected investments. The approach and structure is completely reminiscent of Starta’s crowdsale, which was organised by Singapore-based Cross Coin in partnership with Starta Accelerator. On July 4, 2017, the project raised $ 5 million for investments in the accelerator and its portfolio of 70 companies. Starta proposed a token model, in which the organizers of ICO buy assets from the market in the event of the sale of a share of the accelerator’s portfolio company – exit.
Following ICO Starta, accelerator portfolio companies in 2017 conducted crowdsales totaling more than $ 20 million. Based on Starta Accelerator, Starta team created Token Rockets crypto accelerator.
What is the future of accelerators?
Famous accelerators still feel confident using the traditional venture model. This is due to the still disparate scales of the venture capital market and the ICO market. The reason for the wait-and-see attitude of large accelerators with respect to ICO is the lack of transparent legislative regulation. Nevertheless, even such giants as Y Combinator and 500 Startups cannot ignore ICO and are forced to look narrowly at this method of attracting financing. Unlike YC, the 500 Startups accelerator has already taken a step toward a hybrid model and became an investor in the 22X fund, which tokenized a portfolio of 30 companies. All 22X fund startups are included in the twenty second set of the 500 Startups acceleration program.
Another example of a hybrid model is Starta Accelerator, which relies on venture expertise when investing in ICO projects. The hybrid model offers investors additional liquidity. Sale of tokens of the portfolio ICO-project is faster than exit with the traditional venture capital model. For comparison: tokens can be sold at a profit in just 14 months, while in the venture capital market this cycle is 5-7 years.
For example, 500 Startups, which invested in 22X, and Starta Accelerator, which launched the Token Rockets program, show a gradual transformation of the VC under the influence of the ICO.
Participants in the traditional venture capital market interact with each other in a familiar environment. In the ICO market, the rules of the game are only being formed, therefore the risks are higher here. Accelerators who founded crypto-enthusiasts in connection with the ICO boom lack venture expertise. Experienced representatives of the venture capital industry are still taking the first steps and analyzing the prospects of the crowdsales. In changing conditions, the leading positions will be occupied by accelerators, who are the first to adapt venture expertise and scale their investment model in the ICO market.