Filecoin’s Record $257 Million ICO Demonstrates Demand for Compliant Token Sales

Filecoin’s Record $257 Million ICO Demonstrates Demand for Compliant Token Sales

Sep 18, 2017

Blockchain data storage project Filecoin concluded its month-long initial coin offering (ICO) last week, raising a record-setting $257 million from accredited investors.

Blockchain data storage project Filecoin concluded its month-long initial coin offering (ICO) last week, raising a record-setting $257 million from accredited investors.

The San Francisco-based startup aims to disrupt the cloud storage industry by providing a cheaper alternative that cuts costs by harnessing unused data center and computer hard drive storage space to build a decentralized, blockchain-based storage network. Customers will purchase hard drive space using Filecoin tokens, and users will earn tokens–which can be traded for other cryptocurrencies such as bitcoin and ether–by contributing their unused hard drive space to the network.

To fund development, Protocol Labs–the company behind Filecoin–held an ICO, whereby they sold 10% of the total amount of Filecoin tokens to investors. ICOs are made possible by smart contracts, which are applications that run on another cryptocurrency’s blockchain–most often Ethereum.

Filecoin raised $52 million during a private presale that attracted venture capital firms including Sequoia Capital, Andreessen Horowitz, and Union Square Ventures. Presale participants purchased tokens at a significant discount in exchange for extended vesting periods.

The public Filecoin ICO began on August 10 and, diverging from many other token sales, was restricted to accredited investors. Before they could participate, investors had to register with CoinList, an ICO investment platform built to help startups comply with SEC regulations governing securities. CoinList partnered with securities lawyers to create a Simple Agreement for Future Tokens (SAFT)–a contract that stipulates investors will receive their tokens once the Filecoin network launches. Although the SEC has not issued definitive guidance on ICOs, experts believe these steps satisfy compliance requirements.

The public token sale raised more than $205 million, but the vast majority of those contributions took place during the sale’s first few hours. The reason for this was that the token price increased with every subsequent investment, meaning that latecomers had to pay a premium.

When combined with the presale, Filecoin raised more than $257 million, breaking the $232 million record Tezos set in July. That the Filecoin ICO shattered the Tezos mark by such a wide margin–while also prohibiting contributions from non-accredited investors–demonstrates that there is investor demand for SEC-compliant token sales and should encourage other startups to pursue a similar ICO model.

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