Democratizing access to early-stage capital raising has been the raison d’etre for initial coin offerings since their beginning, but many investors quickly find that some investors are still more equal than others.
Retail investors have discovered it is difficult to dislodge well-funded venture capitalist from their role in capital formation.
“Today, if you look at ICOs, they look like early-stage registered rounds where there are syndicates as well as party rounds in some cases,” said Michael Steinberg, a general partner at venture-capital firm Reciprocal Ventures, during a panel at the Empire Startups conference in Midtown Manhattan. “If you look at March’s figures on the total funds raised through ICOs, 60% of that was done in private sales, which is code for institutional money.”
Steinberg attributed the increased investment by professional money managers to venture capitalists adapting to a new funding model.
“I think that the yearly returns of some of the tokens were so eye-popping and venture capital firms are a pretty curious bunch and they adapted pretty quickly to it,” he added.
The US financial regulators also have tilted the playing field towards professional investors by deeming many ICO offerings as unregistered securities, which often limits participation to sophisticated and accredited investors.
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