Initial Coin Offerings (ICOs) have provided a fundraising middle ground between VC funding and non-equity crowdfunding, in which contributors may get a finished product, but have little to no say in project development.
Hacked reports that in 2017 alone, ICOs have raised more than $2.8 billion for Seed and Series A stages of startup funding. The funding garnered through ICOs this year has eclipsed funding received from other sources in the startup scene, most notably with far fewer total funding rounds.
Mainstream crowdfunding platform IndieGoGo recently announced that they will be launching an ICO platform for both security and non-security tokens. Some limitations include funding limits for non-accredited investors participating in security ICOs.
Limitations on non-accredited investments
Non-accredited investors can participate in security token ICOs due to a clause in the 2012 JOBS act which went live in 2016. The following conditions must be met to satisfy the clause, depending on the investors’ financial standing:
- Individuals who are not accredited cannot contribute more than 10% of their net worth (if that value is over $100,000)
- Individuals cannot contribute more than $2,000 or 5% of their net worth (if their net worth is less than $100,000)
- Projects cannot accept more than $1 million from non-accredited investors
IndieGoGo ICO resources
IndieGoGo offers projects access to a secure FINRA funding portal, registered broker-dealer access for conducting ICOs, investor accreditation, including AML and KYC compliance, investor visibility, and expert project/whitepaper review.
Projects also receive access to an investor network spanning more than 200 countries, which has contributed more than $1 billion over the last 10 years. MicroVentures partnered with IndieGoGo to provide broker dealing services.
How does this impact the ICO landscape?
ICOs are coming under increasingly intense scrutiny from regulators. Having a well-known fundraising brand in the space with legal and regulatory guidance offerings can greatly assist the next wave of ICOs to emerge in the startup sector.
Though a loose regulatory framework does exist in some countries, it is vital to remain up to date with regulation changes, legal tests, and keep flexibility within the various securities frameworks. IndieGoGo provides information about several securities frameworks, such as, CF, A+, and S.