Recently we’ve seen more of the top-tier ICOs filling their hard caps during private sales, which begs the question..is this a healthy direction for the crypto ecosystem?

One of the most promising ICOs of 2018, Open Platform, has just announced that it is going to reach its hard cap in their private sale and wont be doing a crowd sale. Given strength of the project and how evolved they are on their roadmap (developer API recently launched), it is not overly surprising that they were inundated with investors during their presale round.

To understand the drivers behind this trend, we need to look at the rapid evolution of ICOs…

The early ICO’s, like Ethereum, there was a heavy reliance on the masses to provide the funds. At this time, blockchain projects mostly created foundations to raise the capital needed to build the technology and make it open source and decentralized. The amount they raised reflected their needs at the time.

Enter the stampede…

With the crypto bull run of mid 2017 and inordinately high returns from some famed ICO’s, a stampede of investors flocked to ICO crowdsales. Raising large amounts became easy, and some ICO’s took advantage

With companies like Storj, raising $30million for their decentralized cloud storage platform; Brave who raised a staggering ~$34mill in roughly 30 seconds; Aragon who raised ~$25 million in about 20minutes; and Gnosis, the originator of the Reverse Dutch Auction, who raised $12million in about 12 minutes. That doesn’t even include Tezos who raised over $230million and Bancor who raised $140million. The amount raised was no longer reflective of what was ‘needed’ but instead it was simply an amount that the market demanded within the proposed timeline. As Vitalik mentioned in his ICO 2.0 whitepaper, there was a need to get rid of the stampede mentality, which was outstripping rational buying behavior.

It didn’t take long before institutional investors took notice and moved in for the kill. Soon enough we started to see large allocations of ICO tokens being sold off to institutional investors in early presale rounds at heavy discounts. The ICO issuers became content with taking the guaranteed early funding rather than solely rely on the crowd sale, and after hearing about Pantera Capital’s 25,000% ROI, more Hedge Funds and VC’s flooded the market with funding. Think Blockport, Legolas, Storecoin or Polymath.

A Case Study: Open Platform

The Open Platform product has received a lot of attention, and consequentially the money has flowed in their direction. When your ICO is oversubscribed by “numerous times over” you have the luxury of being able to choose who your money comes from, and what those investors can offer the company beyond just finance.

By accepting investment only from people who can offer strategic value, Open Platform is able to take a heady step in the direction of ensuring its future viability.

To an average investor like myself, this comes as sad news because I would love to be an early investor in such a strong project that I truly believe in and feel would give me a good return on investment.

But that is a selfish thought…

If we look at this from a less selfish point of view and think about the long term viability of the crypto ecosystem, this is a a promising transition.

Strategic investors bring value to the ecosystem, whether it be consultation, exchange listings, business connections, legal advice etc.. This strengthens the long term viability and adoption of Open Platform, and the ecosystem on the whole, getting us one step closer a decentralized world.

Additionally, crowd sales are time intensive and expensive. Removing the distraction of a crowd sale from the equation means that the team can focus on the product, whilst saving huge amounts in marketing expenses.

While cutting out the crowds from the ICOs may sound less egalitarian, it can strengthen the ecosystem so that these same ‘crowds’ can enjoy the future application of projects like Open Platform. The crowd wins in the long term by being able to use the products that strategic investors help bring to life.