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> They just require "adults in the room."

You mean like regulators and trusted intermediaries? Due diligence conducted by independent third parties? Like the real financial system has always had?

So basically, we went through this whole ICO bubble to realize that things are the way they are for a reason.

> we went through this whole ICO bubble to realize that things are the way they are for a reason

That may be overly reductive. My views on several rules changed as a result of observing the ICO phenomenon.

For example, I used to be skeptical about accredited investor requirments. Turns out, they're super necessary! On the other hand, I think Regulation D could be massively simplified--from a required paperwork perspective--to lower the cost of selling unregistered securities.

> For example, I used to be skeptical about accredited investor requirements.

I agree that we should probably have regulations in place to protect people from scams, but accredited investors are just people with > $1M or > $200k in income over the past 2 years. Basically a way to filter for 'wealthy' people that can afford to lose the money.

> a way to filter for 'wealthy' people that can afford to lose the money

The part I didn't appreciate is it's also a filter for people who can hire a lawyer/adviser to conduct basic diligence. Raising $1 million in $10,000 cheques guarantees virtually zero oversight. That, much more than anything legitimate, has been what ICOs have enabled.

Finally, we've discovered the true value of blockchain: Making people learn about fiduciary policy.

> For example, I used to be skeptical about accredited investor requirments. Turns out, they're super necessary!

This is one area I keep going back and forth on in my head. On one hand, obviously scams are bad, and the fact that people are throwing their life savings into some of these companies is awful.

That said, I am not sure it should be up to Governments to decide who can and can’t invest in early stage startups and how people should be allowed to spend their money. Much of the reason that crowdfunding (Kickstarter, Indiegogo, ICOs) has become popular is because of the lower barrier to entry for contributing to projects/startups. There are a number of companies I would love to invest in, but can’t because I am not a millionaire. I do not really find that fair.

Creating an open market around funding will teach people a lot of hard lessons about money. VCs know that 90% of startups are going to fail. I don’t think it is that crazy to believe that regular people can learn that as well. All it takes is one really bad investment to learn the lesson.

You have to beware of overreaction to the bad investment. Generally folks are not savvy investors. Just look at the large number of small investors in the stock markets. When greed takes hold or FOMO does and lots of people lose money it will lead to an overreaction against investors wanting to put money in companies. This will lead to VC/angel investment drying up which in turn will curb startups.

Remember we live in a country where a cafe has to put the following disclaimer on Hot coffee paper cups "Caution: The contents of this cup could be hot!!"

Very very true. A lot of people make extremely poor decisions with their money. Perhaps there could be a threshold then? Like you are allowed to invest x% of your income/savings? I don’t really know the answer.

I think the cup example may actually be more to prevent restaurants/cafes from lawsuits vs. to actually protect their customers from burns. I suppose it could be a combination of the two though.

The cup example was to show that people are dumb enough to sue a cafe because they got burned by hot coffee. It's an example of overreaction. Instead of thinking "I ordered a hot coffee, maybe this cup is going to be hot and I should be careful", people think "I ordered a hot coffee and because the cafe gave it to me in a cup I am going to assume it's the cafe's responsibility to make sure I don't get burnt" When people get burned they react by finding scapegoats.

Which is funnier: tech bros innovating their way to public transit, or bitcoin folks slowly reinventing financial regulation? -- Joseph Fink, Apr 2017

cryptocurrency seems to me like a group of computer scientists learning Econ 101 from first principles but vehemently denying the conclusions.

> for ICO's as a legit means to raise money these are all solvable

At which point you end up with an overcomplicated share certificate.

This reason is more important than either of the reasons you list:

VC/PE firms are, by and large, staffed with professionals. ICO investors are, by and large, amateurs (I settled on this word, after starting with several less nice ones).

Amateurs are much more likely to get scammed than professionals.

> So I've been doing alot of thinking lately about traditional VC and PE vs ICO's for work.

You are missing part of the story: before ICOs there is a presale phase where some projects finish before the ICO. This is where real competition with VCs happens since the top projects receive more money from non traditional investors using cryptoassets than the one promised by traditional VCs (except in very rare cases).

In this context: (1) Geography does not matter and (2) KYC/AML is enforced.

The advantage for real entrepreneurs is receiving a bigger investment in short time.

Disclosure: I work in this kind of syndicates.

Unless I'm misunderstanding you, you seem to agree with me, with the exception of you thinking geography doesn't matter.

I'd disagree with your idea that geography doesn't matter. I would have more confidence in an ICO in the US than I would in say China where it can be hard to sue someone and collect your damages if you win.

but if you really feel geography doesn't matter then please share your argument for this, I'm ready to learn!!

> Unless I'm misunderstanding you, you seem to agree with me

I am disagreeing and saying that it is VC/PE vs. Presales and ICO the whole story.

> but if you really feel geography doesn't matter then please share your argument for this, I'm ready to learn!!

It is not an argument, it is a fact. For example, you will see a really important investment to an Argentina based company (outside top geographies) in a few months.

> It is not an argument, it is a fact

All capital flows have a home-country bias. Even securities which are easily bought and sold internationally [1].

Proximity to investors matters even within countries. A start-up raising VC or person promoting an ICO in Silicon Valley will raise more money faster than someone in Montana. They, in turn, will outperform someone in Zanzibar. Doesn't mean it can't be done from Montana or Zanzibar. Just that it's more difficult.

[1] https://en.wikipedia.org/wiki/Equity_home_bias_puzzle

Beyond the obvious geography bias (in general, business networks are strongly connected within specific geographies) the crypto investments are notorious by crossing boundaries in a way not seen by the usual VCs. I mentioned one example before and I have more that will be disclosed to the public in the coming months.

Again, I am not negating the bias towards proximity but seeing there is a new distinguishable phenomenon happening. This phenomenon favors global entrepreneurs in a new way.

Indeed, ICOs offer a great alternative for entrepreneurs: the opportunity to be snubbing VC.

If I can raise money through an ICO without diluting, why would I waste my time with VCs and their beauty contests?

This is the new third way: bootstrap using your own money, they scale up with ICOs. I am not surprised the VC-funded startup world is so hostile to cryptocurrencies and ICOs: it is competition. It means a future where entrepreneurs can opt-out of VC and IPOs. That would be bad to the bottomline: no more preferred stocks with liquidation preferences!

ICOs are in their infancies, so there are a lot of scam, but the market will eventually evolve solutions like smart contracts (or just reputation!). If I was in VC, I would start worrying or lobbying for special treatment - like expending the "investor status" to cover IPOs.

Right, but at that point, what's the difference between an ICO and a security? If I was an investor, why would I want to go into an ICO vs traditional means?

A non-security ICO coin is not a share, it's a pre-order for a product that may or may not ever exist.

It's like a Kickstarter project[1], except most of the backers don't actually want the backed product, they want to resell their pre-order to someone who does.

At least, that's how it's supposed to work, in theory. In practice, it's a hotbed for scams. Most of the re-sales happen from one speculator to another, until some fool is left holding a bag of worthless pre-orders.

[1] Which is also incredibly constrained, because it needs to do something useful with a cryptocurrency, and all the overhead and complexity associated with that. [2]

[2] Building a file-hosting service is not good enough - you have to make it a file-hosting service with a crypto-coin bolted on to it for some weird reason.

> it's a pre-order for a product that may or may not ever exist

I'm not even sure it's this. Pre-orders come with rules. ICOs do not. (Or more accurately, they make them difficult and unrewarding to enforce.)

Do they? I was under the impression that I could sell as many pre-orders for my anti-gravity skateboards, and my marks would have very little recourse, as long as I had the right disclaimers, and I don't sell to Europeans. [1] [2] [3] [4]

[1] Product might not perform as advertised.

[2] Product might not be delivered in the promised timeline.

[3] Product might not be completed at all, due to unfortunate circumstances, such as exhaustion of funds, acts of God, or the laws of physics.

[4] All pre-orders are final, no refunds.

> I could sell as many pre-orders for my anti-gravity skateboards, and my marks would have very little recourse

If you had zero intent of making anti-gravity skateboards, they would have criminal recourse. If you had every intent but were marketing the impossible, they may have civil recourse. Not everything can be disclaimed away. Pre-orders, moreover, are regulated in many states.

Disclaimer: I am not a lawyer. This is not legal advice. Don't scam people.

I think that proving I had zero intent of building the product in question is about as difficult (Or easy) as proving that I had zero intent of building any useful features for my crap-coin.