It’s an extraordinary accomplishment for a project’s initial coin offering (ICO) to raise in the billions of dollars. At the time of press only two companies, Telegram and EOS, have managed this achievement using the crowdfunding platform.
Telegram, recently making headlines, has broken ICO records by doubling their initial $850 million USD and are currently sitting on $1,7 billion USD of raised funds. This mammoth amount is raising investor’s eyebrows both out of wonder and also out of concern.
In the continued pursuit for more funding, the Russian company is stirring the pot of controversy as Pavel Durov, the messaging application’s founder, might be aiming to reach a total of $2,25 billion USD for the project. This is a shocking $1,5 billion USD more than the initial target and some investors are not impressed with the ambitious move.
Some of those invested in the project are concerned that accumulating all this capital might be weakening the value of the token.
The head of venture capital firm Placeholder, Chris Burniske, has publically expressed numerous reasons for staying away from the project. In a thread of tweets, Burniske outlined his trepidation, saying that he thinks that Telegram has “raised an unnecessarily large amount of money, which may ultimately hurt more than it helps.” The cryptocurrency buff continued that he thinks “The Open Network” will also be an interesting test of whether *thin functionality, fat value* is directionally right, as @telegram has clearly decided to target *fat functionality, fat value.”
— Chris Burniske (@cburniske) March 30, 2018
Venture investors at CRV Justine and Olivia Moore also are wary of the ICO, warning investors to “Proceed with Caution.” They offer insight into both sides of the coin, with the sheer size of the fundraise frontrunning the negative aspects. They say that critics “have questioned whether the size of this raise is necessary” and comparing the growth rate to that of Facebook and Uber, the two are more alarmed than impressed.
Even after outlining their opinion of the equal pros to the project’s cons, they “aren’t convinced that Telegram will deliver significant upside beyond the ICO valuation.”
Previously, Jason Bloomberg – writing for Forbes – outlined his view that Telegram’s ICO could be little more than an avenue for an ailing company to raise funds in a desperate bid to sustain its business; something that the service’s founder, Pavel Durov, has typically provided.
Travis Scher, Vice President of Investments at Digital Currency Group, elaborated that “It (Telegram) really felt like it was one of these start-ups that’s burning through cash and needs a way to bring money in to keep funding their operations”.
Similarly, Gregory Klumov, CEO and Founder of STASIS, added that Durov may well have “opted for an ICO as a mechanism to raise funds without getting outside investors into Telegram’s shareholder capital.”
It seems that although Telegram has a great deal of capital on their plate, this comes with a generous helping of criticism. Without a lot of experience in cryptocurrency, they’ll need to bring a team of talent in blockchain to the table to make this project a success.