“Let’s do an ICO,” says my CTO and co-founder Andreas Curiger, at it again. He has been hopping around the office, trying to get everybody excited. It is early 2017, and our business is growing strong. But what is he talking about? What the heck is an ICO anyway? Does he want us to make our own Bitcoin? These are some of the questions that go through my mind. Moreover, we don’t really need money at this time since sales are going through the roof.

A few months later we meet with the founders of Modum, one of our neighbors at Technopark, the startup hub in Zurich. Sacha Uhlmann and Stefan Weber show us the concept of their company. They want to secure the supply chain on a blockchain. Shipments will be tracked by their module, which records temperature and also stores it on the blockchain. This actually makes sense. They need cryptography for their system, and Securosys is an obvious choice as a potential partner.

The cryptographic needs of these trackers are, however, minimal. A better version of a SIM card chip would do. While I really like their project, my thoughts shift to how difficult it will be for them to raise money. Getting just one million Swiss francs, the amount we raised for Securosys, will be nearly impossible for them. Swiss investors are very risk-averse, and Silicon Valley, where something like this would be funded, is too far away.

“Let’s do an ICO!” It’s fall of 2017, and Andreas is still at it. We had an exceptional first half of 2017 and are now starting to think about ways to expand our business. Our hardware security modules (HSMs) achieve more functionality every month, with each software release bringing new features. In fact, at this point, we are already working on multi-signature features for digital signatures and electronic identities. But it has also become clear that the Swiss market alone is too small for us. We want to expand internationally, and that means we need a significant amount of money to grow. Having previously raised many tens of millions of dollars during my career in Silicon Valley, I start planning a venture capital (VC) funding.

“Look, they’re doing an ICO!” exclaims Andreas. He is talking about our friends from Modum. A company that I thought had minimal chances of attaining VC funding is trying to raise twenty million dollars through an ICO. My first question is what I’d get if I would buy their coin. Having looked at many ICOs, the value of the coin is often hidden deep in the whitepaper, with the use of many utility tokens remaining vague. At Modum, however, it was clear that the coin holders would get dividend rights, since the shareholders had signed over all dividends to coin holders. Now that was actually something that makes sense to me.

Modum’s coin sale ended north of 10 million Swiss francs. With an ICO closer to home, my understanding of startup financing was completely overturned. This was not some crazy new platform that somehow ended up receiving tens to hundreds of millions based on some form of blockchain — the use of which I did not understand. No, this was a startup that makes real stuff and simply uses blockchain as a tool. Modum managed to finance itself outside the venture capital world. They did better than they’d ever been able if they had used VCs from the old world. Additionally, it also looks like they made enough money to bring their products to market.

With this it became clear to me that Andreas had smelled a good opportunity before the rest of us. We really need to look into ICOs and improve our understanding of them. ICOs are a real alternative to reach investors worldwide, and seem much easier and more cost-effective than VC funding. It turns out that I was right about the first part, but completely off on the other two!