After raising more then $1.7 billion from private investors, people close to the deal thought Telegram didn’t need to reach regular mom-and-pop investors to fund their huge cryptocurrency project anymore.
According to reports by the Wall Street Journal, the popular messaging company is now officialy scrapping the “public” part of the Telegram ICO. While it’s not surprising, it is quite a turnaround for a company that has expressed plans to raise millions of dollars through a public initial coin offering (ICO) meant to change the way blockchain projects are funded.
Here’s why the scrapping of its public ICO makes sense:
- Telegram doesn’t need the money and most likely does not want to invite the scrutiny that comes with it. Pavel Durov, Telegram CEO, was able to secure an initial amount of $850 million from a global base of investors in early 2018. Afterwards, Telegram was able to collect a second tranche of another $850 million in what is considered the quickest ICO fundraising event. Telegram doesn’t need more than what it has now to build and market its Telegram Open Network. The company only plans to spend $400 million in the next couple of years, as stated in its whitepaper.
- Telegram does not want to risk even more regulatory scrutiny by opening the ICO to the public. While we’re not sure how the SEC will regulate ICOs, Telegram investors believe that a public sale will encourage more oversight especially now that it is not just the big venture capitalists who could suffer huge losses if the token sale goes wrong.
BUT, there’s also big reason why this move by Telegram does not make sense at all:
- Like most social messaging companies, Telegram claims it is on a mission to connect people together from all over the world. And initial coin offerings, theoretically, give more chances for ordinary individuals to profit off a good idea. Unfortunately, by moving to a private ICO, only people qualified as “accredited investors” are eligible to buy into the Telegram ICO.