Ask HN: What are the downsides of ICO fund raising?

This article gets into a couple of points. I pulled the higlights: https://blockgeeks.com/guides/initial-coin-offering/

Legality - The legal state of ICO is mostly undefined. Ideally, the token is sold not as a financial asset but as a digital good like many other things.

Profit and Loss - Many ICO has been a lucky choice for investors. ETH, for example, was sold at 0.0005 Bitcoin and is worth today 0,05 BTC. On the other side, many ICO ends with losses. Cryptocurrencies like Lisk, IOTA-token or Omni did not hold the value in Bitcoin the token has been assessed at the ICO (or struggle to keep it).

Another article: The Declining Middle Tier of ICO Fundraising https://medium.com/tokenreport/the-declining-middle-tier-of-...

The median fundraise in initial coin offerings (ICOs) has been on a steady march downward since its peak in the heady days of the second quarter. In the fourth quarter, even the high-profile Science Blockchain (12.2 million USD) failed to come near its hard cap. Chatter at cryptocurrency conferences points to a more cautious investor base. But the truth is, crypto is starting to resemble the world wage economy: tokens that can command large fundraises are rolling in on bigger and bigger waves of money, while the bottom tier bounces along and the middle tier gets squeezed.

Kik's coin the 'Kin' has been a fairly study decline since it's high in January (then $0.0031 and now $0.0001.)

https://coinmarketcap.com/currencies/kin/

Questionable legality? Dealing with scammers and people interested in get rich quick schemes? The biggest downside is probably negative signaling. The ICO market is so scam-ridden that any company doing an ICO can easily be labeled a scam.

You might get so much money it makes more sense to exit scam than actually build anything?

it puts incentives in the wrong place. I recommend reading this: https://blog.sia.tech/the-ico-paradox-and-how-to-fix-it-3bfc...