Just when most of the regulatory bodies across the globe have been seen cracking down on Initial Coin Offerings (ICOs), Zhao Chanpeng CEO of the world’s biggest cryptocurrency exchange Binance thinks it otherwise.
In one of his latest blog posts on Monday, May 7, Zhao said that ICOs are one of the most “necessary” functions of the crypto markets. Zhao in blog straight away pitched ICOs against the Venture Capital fundraising process and claimed that raising funds through ICOs is “100 times better”.
He said: “Through my own experience, and watching hundreds of other projects at a close distance, I would say raising money through ICOs is about 100 times easier than through traditional VCs, if not more. With the ease of raising money increased, logic says there may be 100 times more startups, well-funded startups, where ICOs are allowed.”
Zhao believes that the support provided by VCs is hyped in the startup culture and argues that the majority of the VCs simply have no idea of the projects they are investing in, nor do they understand the technology.
Zhao wrote: “While some professional VCs investors are truly experts in their field, and genuinely trying to help entrepreneurs, I find the vast majority of ‘professional VCs’ have no clue about the projects or field they invest in. Many of them have zero startup experience and don’t even have a basic understanding of the technologies involved their fields.”
While discussing the ICO scams that have surfaced in the last few months, Zhao defends his views by stating that this fundraising process is still in its nascent stage and only this funding model evolves so will the quality of the startups.
Later he continues to justify that ICOs a superior fundraising model in comparison to traditional VCs by saying: “Most ICOs are new startup projects, and have a high rate of failure, just like in traditional startups. This is nothing new. Most ICO investors already know this. ICO investors are early adopters (and learners).”
Zhao has his own personal reasons for calling ICOs to be attractive. He states that ICOs provide a technical whitepaper to a diverse number of investors around the world who believe in the project and the technology. On the other hand, traditional VC fundraising process involves only a few investors.
In fact, Zhao says that most of the VCs have already started investing in ICOs and claims that in the long-run ICOs will prove to be much more beneficial over traditional VC investments. This blog post from the Binance CEO comes just days after Sequoia Capital blamed Zhao for violating an exclusivity agreement for entertaining an offer from another VC after discussions between Binance and Sequoia broke down.
While firing cross-shots at Sequoia and denying the allegations pointed at him, Zhao tweeted saying “We may soon require all projects applying to list on Binance to disclose if they have any direct or indirect relationships with Sequoia. The hard working entrepreneurs are no longer weak, thanks to crypto!”
After experience a bear market since the end of January, it appears that ICOs are gaining momentum. Last week, South Korea legislators pushed a bill to legalize the operations of ICOs in the country. Note that South Korea had initially placed a blanket ban on ICOs in 2017 due to several fraudulent ICOs being reported to the monetary authority.