This week at our editorial meeting we sat down and said, “alright team, we need to figure out a concrete strategy for covering ICOs”.

Over the past six months, the funding strategy has exploded from a cute idea that we could cover ever now and again into a full-blown industry that would completely overwhelm most editorial staffs.

But, the interesting part of ICOs has nothing to do with resources; they have presented tech media with one of the most interesting ethical dilemmas in awhile.

One one side, the fundraising strategy is here to stay, led by smart companies developing interesting products. ICOs will be part of the startup fabric for the next few years and reporters will need to approach it with legitimacy.

That is fairly obvious. The interesting part is the relationship between the media and the startups raising the cash. ICOs put a lot of power in the hands of the media. It is a tool used to drum up excitement and said interest can significantly alter how much money a company makes.

For example, over the past few weeks I have received, on average, one ICO announcement per day. The thing is, not a single one of them came into my inbox after the token release. What’s the point right?

This fact does not apply to VC funding.

In the typical VC world, an article on e27 has very little impact on how much money a company raises. It may be useful in piquing some interest or converting some sales, but beyond that, if e27 can impact a company’s success or failure then there are more serious problems within that company.

If an investor gives a startup US$10 million instead of US$5 million because of something I wrote, then those Founders need to seriously rethink their relationship with the VC. An article may help a company get a foot in the door, but any investment is based on statistics, numbers and projections that almost never get seen by the public.

ICOs are different, and so far most companies are following the model laid out by Initial Public Offerings:

  1. Explain the product
  2. Go on a media blitz to raise awareness and legitimise the product
  3. Recruit whales that become the most important factor in the success or failure of an IPO

The difference is that for public companies, they are legally required to release their public filings. If Snap Inc. tours the US claiming they have 1 billion users, at a certain point they are legally required to release data that says they are in the 300 million range. So, obviously, it requires CEOs to be fairly straightforward from the beginning.

This is why people get concerned about large startups like Uber or Palantir. Sure, we think we have an idea of how these startups are doing, but they are under no obligation to tell us. In all likelihood, the public gets to see the best numbers, while the potholes get swept under the rug.

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IPOs are a big deal because it forces CEOs to reveal the potholes, after which the public can decide if they are still willing to put some money into the product.

Not only are  ICO companies private, many of them are early stage companies who are using the fundraising strategy to build their flagship product. A lot of these companies wish they had potholes because, at the point they raise money, they don’t even have a road.

So this begs the question, when covering ICOs, should journalists demand a public disclosure of information most startups would never give a reporter? If companies are going to ask the public for financing, shouldn’t they be obligated to reveal their numbers?

And shouldn’t the startup community as a whole embrace this idea? It would allow the legitimate companies to rise while the pump-and-dump schemes would die before they even had a chance.

A tidal wave of ICOs

Part of the problem is the barrier to entry for an ICO is insanely low and if a media company were to cover ICOs like they do IPOs it would require an immense amount of resources. A tweet from Token Data explains it well:

With 57 ICOs launching this week, it becomes practically impossible for the average newsroom (which, trust me, does not look like the movies), to distinguish between the legitimate and the fraudulent.

The result is a natural reaction is just to not write anything at all.

What if I write a glowing pre-ICO article about a company that raises US$5 million — and then six months later collapses, leaving its investors penniless? Am I culpable? My article may have persuaded somebody to take the leap and invest.

And yet, I think my biggest “miss” this year was Omise. I gave it a pass a few months ago and now I feel like an idiot.

Furthermore, ICOs are polarising, and too many pundits (who, frankly, only think about ICOs on a surface level) are delegitimising the funding strategy as fraudulent.

But, their error is believing they have any control over whether or not ICOs continue to exist over the next few years.

To them, I would say this,

“We are in the middle of a hype cycle, which is problematic but should go away. By mid-2018, will there be 57 ICOs in a week? I do not think so and I certainly hope not. That being said, ICOs are not about to completely disappear.”

They provide an alternative to fickle VCs or institutional investors and, frankly, it may become so disruptive to the industry that it forces VCs into necessary adjustments.

If a VC tells a startup, “we don’t see a product market fit here”, the startup can fire back, “we literally have 5,000 people willing to give us US$10 million to build a product that doesn’t exist”.

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Right now, I am approaching ICOs as a lead-in to interesting companies. The blockchain requirement has resulted in the fact that ICO companies are often being more interesting than investor-backed startups (albeit they can be a bit fringe).

Is this the correct approach? Doubtful, as I myself am brainstorming how to do this better. There is no clear answer to “how to cover ICOs” and hopefully the media will improve over the next year.

But I am grateful for ICOs; the answer is opaque, but at least the question is interesting.

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