This was said by Kris Senanu, Managing Director Enterprise at Telkom Kenya and Venture Capitalist, during the just concluded After Office Hours session held at our Nairobi Garage Kilimani Office Space.
“ICO has a greater chance to help companies scale-up to the next level. ICO is the cryptocurrency space’s rough equivalent to an IPO in the mainstream investment world. Currently I am looking at the use of ICO as opposed to the use of IPO. We have not had a major disruption on ICO, but with the great uptake of blockchain and cryptocurrency technologies, ICO will be a great option and opportunity for funding companies,” said Mr. Senanu.
But then what exactly is an ICO? An ICO or an Initial Coin Offering as explained by Bitcoin Magazine is a fundraising mechanism in which new projects sell their underlying crypto tokens in exchange for bitcoin and ether. It’s somewhat like an Initial Public Offering (IPO) in which investors purchase shares of a company.
ICOs are a relatively new phenomenon but have quickly become a dominant topic of discussion within the blockchain community. However, ICOs are highly risky even under the best of circumstances and have a high potential for scams and many view ICO projects as unregulated securities that allow founders to raise an unjustified amount of capital, while others argue it is an innovation in the traditional venture-funding model.
And how do ICOs work? ICOs act as fundraisers of sorts; a company looking to create a new coin, app, or service launches an ICO. Next, interested investors buy in to the offering, either with fiat currency or with preexisting digital tokens like ether. In exchange for their support, investors receive a new cryptocurrency token specific to the ICO.
Investors hope that the token will perform exceptionally well into the future, providing them with a stellar return on investment. The company holding the ICO uses the investor funds as a means of furthering its goals, launching its product, or starting its digital currency. ICOs are used by startups to bypass the rigorous and regulated capital-raising process required by venture capitalists or banks.
Why is there a greater opportunity for ICOs though? Coindesk, a platform that tracks ICO data puts the total of ICO at about $3.8 billion as of 2017, but already so far this year, companies have raised in excess of $12.4 billion through ICOs. The total volume stake in comparison to overall venture funding, was approximately $41 billion last year and has hit highs of as much as $60 billion this year which is quite low. This has then seen some analysts suggest that total ICO volume is now higher than angel and seed financing.
Enough of the ICOs though, during the same session Mr. Senanu also looked at Blockchain as a technology underlying cryptocurrencies, where he explained on the big opportunities that the technology will have on companies that choose to innovate around the technology, citing great examples on how even the Government was investing in the technology.
“Unlike any other technology, Blockchain is giving us a great opportunity of unearthing multiple truths, to an extend that we cannot argue on what is the truth anymore,” said Mr. Senanu. “As an investor, I see a great opportunity in Blockchain aa much as I am not an expert in matters blockchain, this technology will grow, to be something that we do not have to talk about because it will be the back end of businesses and will help facilitate businesses through transparency and accountability. It is just a matter of how we get to utilize it best.”
During the same session, Mr. Senanu also shared his experiences, highs and lows of his career journey as a business leader, an entrepreneur and a venture capitalist. He also shared his vision and mission as an investor, where he hopes that he will be able to create one million jobs across Africa.
The event was attended by different entrepreneurs who run and own companies at different business levels that are at different levels.
After Office Hours is a monthly event, where members of Nairobi Garage, business owners and professionals from around Nairobi, learn from and engage with, speakers who are exceptional in their areas of business. Learn more about our events here!