Takeaways from the 2017 Token Summit in New York

Olga Feldmeier
Tuesday, June 6, 2017

It’s an idea whose time has come—an inaugural conference that focuses on initial cryptocurrency offerings, blockchain-based token ecosystem, the future of venture capital, and new business models that can be supported by cryptographic tokens. It’s the first-ever Token Summit , organized by blockchain entrepreneur and guru William Mougayar and Nick Tomaino , the author behind the blog The Control and an investor at early stage venture fund Runa Capital .

The summit comes at a time when cryptocurrencies and ICOs are fast trailblazing the financial and investment landscape. So far, $380 million has already been poured into ICOs, despite the concerns of some in the industry that it is too early to know which projects will survive or even actually take off. “This is not about the price of tokens and the price of cryptocurrency. This is a conference about the business models behind the cryptocurrencies and tokens. That is what we’re here to explore,” said Mougayar, in his opening remarks . Tomaino said: “The price of these tokens is the most interesting thing for people outside of this ecosystem to talk about, but the long-term success of this ecosystem is really about what the entrepreneurs and investors are building right now.”

What are the key takeaways from the summit?

It is early days for blockchain-based businesses

Many people believe the industry of cryptocurrency is entering a bubble phase and the industry opens a lot of exciting, dynamic opportunities for venture capitalists. While its current growth is admittedly exciting, some ICOs supported by lots of money may meet their doom in the end.

But it is always best to keep your mind clear and stay in the industry for the long haul. Do not borrow money just to invest during the bubble stage, because if you do, you may face an extremely fragile and volatile industry.

At This Stage

After all, at this stage, many voices in the industry say that this still an early experimental phasefor most of ICOs and blockchain-oriented business models, similar to the early days of the Internet at the beginning of 1990s. “I think, near term, a lot of it’s gonna be around building infrastructure. Look at what Bitcoin has done. It’s basically enabled a massive compute infrastructure that it had built up around, hashing transactions,” venture capitalist Fred Wilson during the summit. “So if you think about where we are today, blockchain-based architecture, it’s kinda like where the Internet was in the early 90s. We need to build a lot of infrastructure. We have to build a lot of bandwidth.”

Wilson knows what he is talking about. Currently a managing partner at the New York-based venture capital firm Union Square Ventures and the founder of Flatiron Partners, Wilson is a venture capitalist since 1987. Union Square Ventures has already raised $166.8 million, based on a regulatory filing.

He further noted: “Really, it took almost a decade for people to truly understand the native internet applications…. It’s probably be a long time before people can truly understand what a native blockchain application is.” Indeed the understanding and creation of the “facebooks” of blockchain industry is quite far away in the future with Gartner Hype Cycle putting it in 5-10 years perspective.

The venture capital industry at the doorsteps of its own disruption

One of the most disruptive things that ever happened to VC industry might well just have happened earlier this year. Blockchain Capital, a Silicon Valley based VC with Bitcoin/Blockchain focus, raised 50% of its third round of funding through token sale to retail investors. It was the first time VC company conducted an ICO itself and the regulatory challenge of doing it in a compliant way cannot be underestimated.

At the sidelines of the summit, I had an interesting conversation with Brock Pierce, CEO of the Blockchain capital, and this is what he has to say: “The VC industry itself… was very resistant to change. In the last 30 years, nothing changed in the way how it operates. It is just now that there is a real shake up coming in.”

Legal Cost

He also noted that going this way as the first mover was connected to a significant legal cost. The issuance was placed through Singapore entity while being SEC registered security offering in US. Here in Switzerland I was actively involved in helping companies get established and prepare for token placement, which in most cases explicitly exempts US citizens from participation. But this rather brave approach can clearly be considered as a best practice example available today and something we hear in Switzerland need to have a closer look at very soon. During the panel discussion Brock noted: “VC in 5 years’ time will be very different from what it is today. We just have been the first to go in this new way of raising capital through ICO”.

Also Wilson agreed that from several functions of VC companies today many, such as merely managing people’s money, will fall away. VC companies will be pushed even more to concentrate on creating add value for startups, which is a good thing.

The future looks tough but promising

With all the hype surrounding cryptocurrencies and the scams here and there, the industry indeed looks very challenging for venture capital investors. It is a brave, new world out there, and anyone in his right mind would be understandably confused on how to deal with the terrain—and succeed in the end.

But do not fret. It seems despite the challenges and drawbacks of this new digital frontier, the prospects for cyptocurrencies and ICOs seem brighter than ever. To quoted ARK Invest CEO Catherine Wood: “The ICOs are highly unstable, but … you have a few of these projects showing the network effect, where I can imagine the utility value. It’s going to be boom-bust-boom-bust, I think. It’s going to be unstable but very exciting. I was there at the beginning of the internet, and this is more exciting than that.”

Excitement in The Air

Indeed the excitement was felt in the air: on the stage, outside the conference room and even at the bar in the evening – on every corner you could hear passionate speeches about the new business models and tokens. The hype was for real: the black market entry ticket to the conference was rumoured to be selling for multiple seven. To continue the discussion of this exciting topic and attract more attention to the compliant solution at our home-base in Switzerland, we decided to stage a straight forwardly named ICO SUMMIT in Zurich this September. Until now the major part of serious ICOs were conducted in Switzerland which made this country so far the ICO capital of the world. Soon financial regulator FINMA will take a closer look , which is why we need to carefully craft the right way forward. It is important to call the topic of best practice and compliant way for ICO into a broader public attention.

Further details of ICO Summit will be announced later this month. We are looking forward to welcoming all the people and organization interested in this exciting new field of crypto finance in Zurich soon!