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Growing Importance of Pre-Sales in Crypto Fundraising

Growing Importance of Pre-Sales in Crypto Fundraising
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04/30 – 05/06

WEEKLY RECAP

  • Total market cap. reached $460.77 bn (a 6% increase), where 7 day transaction volume slumped 14.2% for top 100 crypto.


WEEK AHEAD

  • 7 May: US regulatory body expected to discuss legality of and response to Ethereum’s 2014 ICO
  • 11 May: EOS to release its EOSIO Dawn 4.0


THOUGHTS OF THE WEEK

The cancellation of Telegram’s much-hyped public ICO is under the spotlight in the crypto world this week. Telegram decided to scrap their planned public ICO claiming that they have already received $1.7 bn from two rounds of private pre-sales, which is more than sufficient to develop their blockchain platform Telegram Open Network (TON) and fund their estimated $400 mn spending over the next 3 years, according to TON’s whitepaper.

Telegram’s decision is consistent with a growing trend of funds primarily being raised through pre-ICO sales. As noted in our chart of the week, 50% of ICO prospects raised 80-100% of total funds through private pre-sales in April, compared to 23% in February. On an average basis, ICO prospects raised 71% of total funds through private presales in April, a significant increase compared to the same figure in February (53%).

Telegram’s private presales were filed to SEC in compliance with  Rule 506(c), and raised a total of $1.7 bn from 175 accredited investors for TON. In general, prior to launching a public ICO the token is offered at a significant discount to early investors (mostly to so called whales) during the private pre-sale, and this price is expected to appreciate in subsequent funding rounds. This is supported by the fact that the GRAM was priced at $1.33 in the second round of private pre-sale, compared to $0.38 in the first. Despite the fact that the TON is still under development, and the funding process is only just completed, GRAM trading is active in the secondary market among investors who want to buy into TON. This further limits Telegram’s fundraising ability in a potential public ICO.

From Telegram’s case, we can see that the incredible success of this fundraising drive is made possible by the interest received from private investors in the pre-sale. This trend is likely to continue until regulations relating to ICOs are more clearly defined and transparent to the general public. Until then, many blockchain projects may increasingly rely on the relative regulatory clarity of fundraising from pre-sales as opposed to fundraising via public ICOs.

 

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