Kik turns to initial coin offering to raise US$120mil

TORONTO: Canadian messaging startup Kik Interactive is about to get its biggest cash infusion yet – but this time much of it will come from regular people instead of venture capitalists.

The Waterloo, Ontario-based firm expects to raise US$125mil from an initial coin offering, a process by which it sells tokens that can be used to buy services on its platform.

The idea is that as more people use Kik, the value of those tokens, called Kin, will rise.

Kik has already raised US$50mil from blockchain-focused investment firms, and will release another US$75mil worth of tokens Sept 12 to the general public.

Initial coin offerings, or ICOs, have spread in the past year, raising more than US$1.3bil for dozens of startups.

Securities regulators around the world have voiced concerns and even the founders of the cryptocurrency software many ICOs are built on have called them a “ticking timebomb.” Yet people are lining up to throw their money into them.

If Kik is successful in raising the US$125mil, it will more than double all the venture funding the company has received to date, which includes a US$50mil investment in 2015 from Tencent Holdings Ltd that pushed its valuation to US$1bil.

“With millions of users, Kik hopes to drive mainstream consumer adoption of Kin, potentially making it the most adopted and used cryptocurrency in the world,” the company said in a statement.

The funding will inject capital into a company that has been struggling to compete in the world of messaging, which is dominated by tech titan Facebook Inc in most parts of the world. Kik revealed earlier this year that of the 300 million people who have registered for the app over the years, only around 15 million still use it on a monthly basis.

The company has also been criticised for creating a space in which child exploitation and harassment can flourish, because users can participate on the app without linking their true identity through a phone number.