The rise of ICOs surprised many in the tech industry, helping blockchain companies raise close to $4 billion in 2017, and that’s all set to continue with a twist in 2018. Beyond continued momentum for ICOs, also known as token sales, leading ICO companies themselves are set to start investing.
TechCrunch understands that at least half a dozen companies who raised money via ICOs and each have $500 million or more in total coin market cap — i.e. the total value of all of their crypto coins — have plans to invest in other blockchain projects via seed- or early-stage style deals.
According to sources, the first ICO-powered funds will come online in the first quarter of this year. The trend looks likely to spread beyond the early movers and capture the attention of others for a number of reasons.
Many of the highest capitalized ICO companies are building ambitious platforms which, by the nature of being a platform, require other companies to build on, or with, their product. As is the case with VC-backed companies, investing in up-and-coming startups that complement your platform is one strategy to create an ecosystem.
It’s a move that has been used by major tech companies including Slack, which has its own fund. That investment vehicle is used to create relationships with startups which can add new features, integrations and other aspects to the Slack service.
In the same way, most ICO companies are building platforms focused on verticals that include payments, distributed computing, social media and logistics, where capital could be deployed strategically to develop an ecosystem that brings the platform to life. Many of these ICO projects remain under development but they are likely to emerge this year with a focus on bringing partners aboard.
Finally, the last critical component is money itself.
With crypto prices surging there’s plenty of capital that could be put to work in this way.
More than 20 coins that were formed via ICOs now have a market cap in excess of $1 billion, according to Coinmarketcap.com, thanks to significant appreciation in the cryptocurrency space in general. Indeed, Ethereum, the platform behind the Ether cryptocurrency that is used as a base for tokens sold in ICOs, recently hit a record high of $1,000 up from less than $500 at the end of November. That gives companies that stashed coins for product development the potential to do much more than they had originally planned.
The only question for these funds, when they arrive, is how they will invest. Whether it will be as a backer of an ICO or, in the case of post-ICO companies, by purchasing coins, another kind of crypto-based investment or simply equity-based deals.
Disclosure: The author owns a small amount of cryptocurrency. Enough to gain an understanding, not enough to change a life.