Ted Livingston, CEO of messaging app Kik, spoke on stage at TechCrunch’s event in Shenzhen, China on Tuesday. Moderator Jon Russell asked him about why the company is doing an initial coin offering (ICO), a newly popularized method of fundraising.
It’s “a way to raise funding” and “a way to get money into the company,” he said about the ICO, which was first announced by the Canada-based company in May. But beyond that, Kik is hoping that it can kickstart a new kind of approach for working with developers who build apps and services on top of its chat app, which is popular among teens and young people in North America.
“What’s exciting about cryptocurrency is for us it’s been very hard to monetize in the western world,” Livingston added, explaining that he sees cryptocurrencies as an alternative to the advertising-based model which has become the norm for the social networks of today.
Instead of ads, Kik wants a community that can earn money for creating apps and services that get user attention and create value. To do that, the ICO will see Kik create “Kin,” a bitcoin-like currency that will serve Kik’s developer community. He said that the introduction of Kin payments into the community will “turn Kik into an economy” for its “millions and millions of monthly active users.”
Livingston said that Kik plans to sell 10 percent of the overall float of Kin in the ICO. A further 60 percent will be controlled by the Kin Foundation, a not-for-profit company that will operate Kin, with the remainder held by Kik. That latter pool, the Kik CEO said, will be used to pay developers and finance the Kik business.
For now, Kik isn’t saying how many Kin it will sell as part of its ICO — in recent weeks, lesser-known companies have raised over $100 million from their own token sales — but Livingston did reiterate that a timeframe for the sale is the summer.
Kik CEO Ted Livingston
But while many startups have been going the ICO route in recent weeks, what’s unusual about Kik is that it previously raised significant venture capital and it has a sizable consumer presence. When asked if the unicorn-valued startup had trouble raising additional funding, he demurred but claimed that the ICO is an alternative form of exit.
He believes that the ICO will provide an adequate return for the existing investors, which would take pressure off a possible acquisition or an IPO.
“We didn’t really like the idea of having to sell Kik one day,” said Livingston. As for an IPO, “I hope it’s not required,” he said.
While some people have made significant money off of bitcoin, others are skeptical as to whether volatile cryptocurrencies are a good investment. Livingston can see it going either way.
“The way I think about ICOs is it’s very similar to the dot-com era. There was a bunch of excitement, people made a bunch of money, people lost a bunch of money but Amazon and Google came out of it.”