Initial coin offerings in Private Equity

Hello Monkeys,

Has anyone thought of the strategy to use initial coin offerings as an exit for a private equity firm? (Initial coin offering; ICO, is the offering of smart contracts of value. This would be a similar strategy as an IPO, but with new technological applications and legal aspects)
I am looking for new opportunities from blockchain technology. Do you see this as feasible? Would it be an interesting dissertation topic?

Looking forward to your responses.

Comments (26)

Jul 12, 2017

ICOs essentially are the sale of credits or "tokens" that can only be used on the seller's platform, in order to raise capital. Think of it as a sale of coupons that you can use to redeem goods and/or services by the merchant, except these coupons are powered by blockchain technology.

Given that it is not a liquidity event, I'm not certain how it could possibly be a divestment avenue for a PE firm. Developments around the ICO are still highly nascent and I believe that if VCs are still shy in dipping their toes in, PE firms would continue to be isolated from any involvement for the time being until investment models are firmed up.

Jul 12, 2017

"Think of it as a sale of coupons that you can use to redeem goods and/or services by the Merchant, except these coupons are powered by blockchain technology."

Well, it is possible to have profit sharing coins. These would almost identical to shares, but not officially shares.

"Given that it is not a liquidity event, I'm not certain how it could possibly be a divestment avenue for a PE firm. Developments around the ICO are still highly nascent and I believe that if VCs are still shy in dipping their toes in, PE firms would continue to be isolated from any involvement for the time being until investment models are firmed up."

Wouldn't it be an adoption of investment banks to have their own blockchain coin markets? They can do exactly the same as on a standard IPO, but then with a coin and their own blockchain?
Or have a start-up investment bank that offers the crowd sales of these coins for PE firms?

*I know it is still very experimental, that's why I would consider it a very interesting topic for a thesis. A good combination of finance and innovation."

Jul 14, 2017

Does part of the difficulty not also lie in the method for purchasing the tokens from these ICOs? As far as my very limited knowledge extends, you have to buy said tokens in BTC or ETH due to the lack of regulation behind ICOs? Even if this is acceptable, the wild volatility in both cryptos makes it a pretty scary concept when calculating the returns.

Would be super interested to see how blockchain technology could work in IB / PE, but I think the technology is still far too nascent, and the ICO market seems to be mad at the moment, with kids fresh out of college and no work experience, seeking and achieving double digit million raises with little more than a vague concept and a marketing degree...

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Jul 14, 2017

For example, $185M rise in several days - https://venturebeat.com/2017/07/01/185-million-in-...

Jul 14, 2017
uncle_tom:

For example, $185M rise in several days - https://venturebeat.com/2017/07/01/185-million-in-...

I've been kind of monitoring it for a while. The amount raised is nowhere near how much they actually take in.

Jul 14, 2017

Not sure but still pissed i missed the chance to make such easy money

Jul 14, 2017

Not too late. Buy Iota

"There's no reason to be the richest man in the cemetery. You can't do business from there." - Colonel Sanders

Jul 14, 2017

President Underwood was right. We must take the war to ICO.

To be serious, I think it's a bit of a fad that will exist up until the next tech crash. It could survive beyond that, but right now it's solely speculative and unlikely to generate anything serious.

University of Chicago

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Jul 14, 2017

SEC has to get involved at some point right? Seems like too easy a way to fleece unsophisticated retail investors.

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Jul 14, 2017

SEC regulates only US market, now you can register firm anywhere, for example Singapore and Hong Kong are the hotest locations

Jul 14, 2017
jec:

SEC has to get involved at some point right? Seems like too easy a way to fleece unsophisticated retail investors.

Some ICOs aren't offered to potential buyers in the U.S. since they don't want to get tangled up with the SEC.

Jul 14, 2017

I've been very involved in cryptocurrencies for the past year. It amazes me how this community hasn't caught on. I haven't seen a thread about crypto since @Eddie Braverman posted his write-ups about Bitcoin being a ten bagger. One would figure this would be the perfect demographic (Millennial finance professionals with a bent for technology). Where ya'll at?!

Jul 14, 2017

Agree with you, that technology is questionable and the future is not visible yet. But what is real, the market is big and it's growing very fast and millennials are using it.

Jul 14, 2017
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