Virtual currency offerings may hit a new peak with Telegram coin
It took Facebook seven years to raise $1 billion from investors. Uber did it in five.
The messaging company Telegram has been around since 2013, but never tried to raise significant money until late last year. Now, thanks to an initial coin offering, or ICO, Telegram is on track to pull in a billion dollars in just four months—long before the product the company is raising money for is even built.
When programmers or entrepreneurs launch an ICO, what they are really doing is selling their own virtual currencies in order to raise money for software they say they are building. In return for real money, investors receive digital tokens, similar to Bitcoin.
Regulators worry this novel fund-raising method is allowing people to fl out the rules that are supposed to protect investors. Financial authorities around the world have been promising to crack down on coin offerings, which rose out of nowhere last year to become a popular way for start-ups to raise tens of millions of dollars, sometimes in minutes.
In recent months, the Securities and Exchange Commission has been sending out subpoenas, asking for information about coin offerings that may have violated the law— although how existing laws may apply remains unclear. Nonetheless, companies like Telegram are still proceeding with their offering sand hoping they can stay out of trouble.
Telegram’ s super charged fund-raising has become the most visible and perhaps most lucrative example of a nICO. The company has taken in $850 million over the past two months from some of the biggest venture capital firms in Silicon Valley, an di tis now aiming to raise another $850 million over the next month or so. A third $850 million round is in the works after that, according to documents associated with the deal.