CoinList, a platform designed to facilitate legally compliant initial coin offerings, will be hosting a token sale next month to finance a firm that has spent more than three years developing a new blockchain network.
The upcoming sale by Blockstack, which CoinList announced this week, demonstrates the appetite that exists among hedge funds, VCs and other technology investors for a way to vet blockchain projects properly and ensure their token sales won't run afoul of securities law.
As more startups turn to ICOs to raise capital, financial institutions and other companies that may want to partner with this next generation of fintechs will likely seek reassurance that their partners meet legal and regulatory muster.
Every week brings new ICOs, whether for so-called utility tokens or for securities. Many token sales are open to all comers, from the smallest retail investor to the biggest "whale" — a feature that enthusiasts say democratizes finance and allows everyone to share in a piece of the future.
But many outside observers, and even some blockchain insiders, are now finding it difficult to discern the good projects from the bad.
As exciting as the ICO funding model is — with its promise to disrupt or make obsolete the old models of venture capital and private equity — it runs the risk of being abused by unproven entrepreneurs and outright scammers. The landscape is littered with mismanaged projects and tokens that will likely prove worthless in time.
CoinList wants to change that. Launched earlier this year as an initiative of AngelList, the crowdfunding platform that matches investors with early-stage startups, CoinList has built a framework to vet projects for investors and see that they comply with know your customer and anti-money-laundering requirements.
CoinList, which operates independently, previously managed the Filecoin ICO, which proved to be one of the largest ever, raising $205 million despite being open only to accredited investors.
Andy Bromberg, CoinList's CEO, said the ICO funding model is necessary in order to attempt projects on the scale of Blockstack's.
"Most private companies today simply don't have access to the capital required to build a protocol at the level of complexity that Blockstack is pioneering," Bromberg stated in a Monday news release. "Historically, only governments and institutions have access to the funding necessary to build an internet or network of this size or scale. Fortunately, CoinList has built a platform to make this possible, giving companies like Blockstack the opportunity to compete."
Blockstack previously raised $5 million to build its core technology from Y Combinator, Union Square Ventures, Digital Currency Group and other investors, including Naval Ravikant, the CEO of AngelList. Its components include decentralized systems for identity and domain names.
The Blockstack community now boasts more than 8,000 developers worldwide, according to CoinList's website.
"Blockstack's focus on building not just impressive technology but what is ultimately a grassroots movement and community of developers sets them apart," Paul Menchov, CoinList's chief technology officer, said in the release. "They're an ideal partner."
The Blockstack token sale is set to kick off on Nov. 13.