ICOs may have frizzled but SA startups are closer to meeting targeted raises

With the steady fall in the price of Bitcoin and Ethereum since the beginning of this year fewer local startups may be opting to run an initial coin offering (ICO).

Yet it seems SA startups are getting more successful at running ICOs — at least if reaching their targeted raise is anything to go by.

While startups last year struggled to raise more than four percent of the capital they sought to raise through ICOs, SA startup Gron Digital claims to have already allocated 84% or over 50.4 million of its 60 million GRO tokens.

The startup aims to — through its blockchain platform — become an industry standard in making the gambling sector more transparent.

In March the startup launched the first of four rounds of ICOs it planned to run. Gron Digital COO Dimitri Oberzhitzky told Ventureburn at the time that the startup aimed to raise a total of $8.5-million through the four ICO rounds. It means that the startup has raised over $7.1-million.

Oberzhitzky was not available immediately to comment on the performance of the ICO.

SA startups are getting more successful at running ICOs – at least if reaching their targeted raise is anything to go by

This, while SA investment startup Wealth Migrate was able to raise 11.3% or over $3.3-million of the $30-million the company sought to raise through its WealthE ICO which closed on 21 May. The ICO offering plans to allow investors to invest in global property portfolios.

In addition, The Sun Exchange has so far raised over $750 000 or three percent of the $25-million it aims to raise in an ICO that kicked off in April and that ends in January next year. The ICO will allow investors to earn an income off small solar projects.

Just four percent raised

Last year for example, in an ICO that closed in December, fintech startup Wala was able to raise just four percent of the $30-million it sought, or $1.2-million for a crowdfunding token sale of Dala, a new financial services utility token built on the Ethereum blockchain.

In an ICO that closed in the same month, SA blockchain consultancy Ekasi Bucks was able to raise just one percent — or R500 000 of the R50-million it sought in an ICO to fund a Blockchain-based rewards programme for township residents.

And SA fintech startup Prosperiprop (since renamed Dream Block) raised “just over $200 000” or also about one percent of its target, through an ICO that also closed in December last year. The ICO aimed to raise $20-million to develop software that will help financial institutions to offer property investment products via the Blockchain.

Despite this, DreamBlock co-founder Llew Morkel told Ventureburn in an email earlier this month that the Dream Block had secured its first client and is setting up their legal structures to “fraction a nice little portfolio of commercial properties”. “The platform is nearing completion and we are preparing to roll out private blockchain nodes,” he added.

‘Lack of liquidity in ICO market’

Yet despite the higher targets being hit, Bitcoin Foundation executive director Llew Claasen said the current lack of liquidity in the cryptocurrency market — with the price of Bitcoin and Ethereum having dropped 50% to 60% since January — means it is harder for tech startups to raise funding via ICOs from investors.

“The industry more broadly is restructuring. The money that is going into token sales is going into a smaller market,” said Claasen. He added that the public market appears to have dried up — which he added is a good thing because it will likely mean less speculative retail investment.

In addition, as only a small amount of local capital is invested in this asset class, a large number of ICOs don’t appear in local media.

It may be why Johannesburg based startup Sports Podium — which counts Paralympic SA swimming star Natalie du Toit as one of its shareholders — opted to cancel the ICO it had planned to run earlier this year.

In an email to Ventureburn last week, the startup’s founder and CEO Jaco Rossouw — without giving specific reasons — said the startup decided to fund the project itself.

But he said despite this the startup is in a “very exciting position”, having just launched the first version of its software focusing on the sport of golf.

Things may not be going all that swimmingly in the cryptocurrency market, but SA startups are getting better at running an ICO.

Editor’s note: (29 January 2019): At the time we incorrectly calculated that The Sun Exchange had by July 2018 raised over $2.3-million – when in fact the raise had stood at just under or around $750 000 at the time (the calculation was based on the Sunex coins allocated at that time). We regret the error.

In a blog post on 18 January 2019 following the conclusion of the ICO, Sun Exchange said it had raised $1 068 205 and had allocated 28 485 478 Sunex Tokens (see this story).

Read more: The Sun Exchange in $25m ICO to allow investors to earn income off solar projects
Read more: Wealth Migrate delays real estate ICO ‘to ensure all ducks are in a row’
Read more: Gron Digital raises $1.2m in pre-sale, launches first of four ICO rounds
Read more:  SA swimmer Natalie du Toit connected to new ICO to target amateur sports sector
Read more: Wala ICO nets just 4% of $30m target, but Newtown Partners praises result
Read more: SA’s Ekasi Bucks ICO falls short of R50m target, nets just R500 000
Read more: Fintech Prosperiprop nets over $200 000 in ICO to develop property software