Lars Jensen from Seaintelligence Consulting rifles through all the sudden raft of initial coin offerings.
Last year saw an explosion in the amount of money raised through so-called initial coin offerings (ICOs) and now that meteoric rise has arrived in the shipping industry as well, with a dozen ICOs launching and more to come.
First a brief, and clearly not comprehensive, explanation of what an ICO is for those who have not been following the vagaries of this new three-letter abbreviation. ICO stands for initial coin offering. In essence a company develops a new idea for a blockchain business solution. An integrated part of the solution is to design a ‘token’ or ‘coin’ which is to be used as part of the solution. These coins are being put up for sale in order to attract investment capital. The buyers of the coins invest on the assumption that the solution will be successful, and hence the value of their coins will increase. The company selling the coin gets investment capital without giving away any ownership control. Most commonly, the companies performing an ICO publish a whitepaper describing their concept, but do not have a minimum viable product launched or even developed.
ICOs took off rapidly in 2017. According to FabricVentures and TokenData, January 2017 saw $2m raised through ICOs. In December this had grown 600-fold to $1.2bn. In total $5.6bn was raised through ICOs in 2017. 2018 continues the trend with more than $1bn raised through ICOs thus far.
Enter the shipping industry. Digitisation has been gathering pace in recent years in an otherwise traditional industry, with scores of new digital companies having entered the scene. However, all of these companies have been through the usual pain of attracting venture capital followed by the inevitable challenges of trading capital for influence at the owner and board level. The ICOs are now seen as an opportunity to change the game.
A review of the current landscape – which is not complete as some ICOs might have been overlooked, and some ICOs are known to become public in a matter of weeks but are so far staying out of the public eye – shows several handfuls of companies each launching their own tokens through ICOs.
The most visible recent ICO must be the one by CargoX who managed to raise $7m in a matter of just seven minutes. CargoX is focused on bills of lading, but everything in shipping is becoming addressed through ICOs in Q1 2018. Additional concepts include Track and Trace by Shipchain, ship ownership and chartering by both BitNautic and Shipowner, freight payments by Prime Shipping Foundation, OpenPort and Morpheus Network, booking platform by Oceanus Foundation, enforceable contracts by 300Cubits, cost reductions by Quasa and exchange traded funds by ShipBloc. Each of these companies are sure to have their own spin on how their business model is to be described.
All of these ICOs are either currently open, have just been completed or are about to open up for investments within weeks. The rush to get to market with an ICO also led to the interesting effect that we are already seeing two different coins named SHIP about to be launched by two different companies.
Will these companies be successful? That is far too early to judge. Clearly some have more solid business cases outlined in the whitepapers than others, but given the white-hot state of the ICO market, it is highly likely that the majority of these will be successful in attracting substantial amounts of capital, and hence have an opportunity to develop an actual product.
This article first appeared in the just published latest issue of Maritime CEO magazine. Splash readers can access the full magazine for free by clicking here.