Why we should be careful about Private Sales

[tropyc]

Today, most of them have started to onboard blockchain startups into their portfolio and even launch token sales; look at YCombinator's LiveEdu or Union Square Venture's investment in Filecoin.

Institutional investors prefer to enter the cap table at an early stage - before a public sale occurs. As such, this practice gives bargaining power to institutional investors and reduces their risks drastically.

1. Lack of transparency repels smart investors.
The practice of not disclosing private sale valuations introduces a series of structural problems:
Will the valuation drastically increase between the private and public sale? Are private sale investors looking to have a short-term exit? Has the private sale been engineered to guarantee fast and profitable exit?

2. Different valuation but same stage of development?
Private sales often occur weeks before the public one. Since most of initial coin offerings involve product-less start-ups (and therefore pre-product market fit startups), there is no significant difference regarding the stage of product development between a private and a public sale.

3. Against the blockchain ideology.
In the event of an opaque private sale valuation, smart investors would never chip in, as the risk of a significant valuation delta is considerable. Public sale investors are reluctant to significant changes in valuations and most importantly, to be the last ICO investor.

4. Benefits of Private sales.
First, it gives credibility to a blockchain start-up. Secondly, private sale investors can provide non-financial investment to the project. Finally, Initial Coin Offerings are resource-draining financial instruments that have high capital and operations expenditures, especially with marketing and promotion. Kickstarting an ICO is therefore costly, and private sale investors can fill the liquidity gap.

https://www.tropyc.co/pages/news/private-sales-limitations

Do you think private sales add value to an ICO?
private sale < public sale?

[Dutchyyy]

Your points are valid... But if you are after fast and big profits, Private Sales on pre-ICO stage are one of the ways with lowest risk.

Yet, you may be scammed very ugly.

[kewlc3s]

What was with LiveEdu?
They scammed someone? Heard about this project, also was performing some tasks for them. BTW, bounty reward still not payed. 
But on main steps I agree with you. I prefer to join preICO sale, for project that I am interested in.

[magle]

It does not seem fair when they do private sales just weeks before the public sale start. Unless it is simply a way for them to raise funds for holding the public sale (marketing etc.)
But generally I am not a fan of it and I think it is cheating the little guy, at least when it does not change the state of the project or happens right before public sale.

[emoji00]

It is very true, the lack of transparency is one of the key factor in my investments. You can never be sure about how much and to who, but for me is like competing with whale in the water with my hands tied.

[jonloner011]

You are right on your points. Totally agree. Private sells are always confusing. Transparency is always an issue in Crypto market. Individual sells are never ideal for greater glory.

[ramini]

Today, most of them have started to onboard blockchain startups into their portfolio and even launch token sales; look at YCombinator's LiveEdu or Union Square Venture's investment in Filecoin.

Institutional investors prefer to enter the cap table at an early stage - before a public sale occurs. As such, this practice gives bargaining power to institutional investors and reduces their risks drastically.

1. Lack of transparency repels smart investors.
The practice of not disclosing private sale valuations introduces a series of structural problems:
Will the valuation drastically increase between the private and public sale? Are private sale investors looking to have a short-term exit? Has the private sale been engineered to guarantee fast and profitable exit?

2. Different valuation but same stage of development?
Private sales often occur weeks before the public one. Since most of initial coin offerings involve product-less start-ups (and therefore pre-product market fit startups), there is no significant difference regarding the stage of product development between a private and a public sale.

3. Against the blockchain ideology.
In the event of an opaque private sale valuation, smart investors would never chip in, as the risk of a significant valuation delta is considerable. Public sale investors are reluctant to significant changes in valuations and most importantly, to be the last ICO investor.

4. Benefits of Private sales.
First, it gives credibility to a blockchain start-up. Secondly, private sale investors can provide non-financial investment to the project. Finally, Initial Coin Offerings are resource-draining financial instruments that have high capital and operations expenditures, especially with marketing and promotion. Kickstarting an ICO is therefore costly, and private sale investors can fill the liquidity gap.

https://www.tropyc.co/pages/news/private-sales-limitations

Do you think private sales add value to an ICO?
private sale < public sale?

I see, thanks for this points and it's a great reminder that not all private sales are of worth our investments because it does have to many risks other than investing volatile cryptocurrency.
Investors should bump on this thread so that they will also learn this key points before investing their own favorite altcoins in the crypto market today.

[Leona Lewis]

Today, most of them have started to onboard blockchain startups into their portfolio and even launch token sales; look at YCombinator's LiveEdu or Union Square Venture's investment in Filecoin.

Institutional investors prefer to enter the cap table at an early stage - before a public sale occurs. As such, this practice gives bargaining power to institutional investors and reduces their risks drastically.

1. Lack of transparency repels smart investors.
The practice of not disclosing private sale valuations introduces a series of structural problems:
Will the valuation drastically increase between the private and public sale? Are private sale investors looking to have a short-term exit? Has the private sale been engineered to guarantee fast and profitable exit?

2. Different valuation but same stage of development?
Private sales often occur weeks before the public one. Since most of initial coin offerings involve product-less start-ups (and therefore pre-product market fit startups), there is no significant difference regarding the stage of product development between a private and a public sale.

3. Against the blockchain ideology.
In the event of an opaque private sale valuation, smart investors would never chip in, as the risk of a significant valuation delta is considerable. Public sale investors are reluctant to significant changes in valuations and most importantly, to be the last ICO investor.

4. Benefits of Private sales.
First, it gives credibility to a blockchain start-up. Secondly, private sale investors can provide non-financial investment to the project. Finally, Initial Coin Offerings are resource-draining financial instruments that have high capital and operations expenditures, especially with marketing and promotion. Kickstarting an ICO is therefore costly, and private sale investors can fill the liquidity gap.

https://www.tropyc.co/pages/news/private-sales-limitations

Do you think private sales add value to an ICO?
private sale < public sale?

Agree with each point. Thank you for sharing these points. It's foully to make ICO things against the blockchain ideology.

[klepikolse]

I should agree that private sales are sometimes masking lack of investment. There is usually no proof for these investments, and the investor is getting benefit just for knowing the team.
The main benefit is that there might really be a good investor who wants to invest in a good project and control a big stake in it, but let's be honest, have you seen one?

[Infinitypresale]

Presales might contradict the ideology behind blockchain and crypto as a whole, but let's face it: Deals behind closed doors won't change at all as long as individual or institutional investors with big pockets can earn a fortune that way. Unless traditional markets, people in crypto seem to believe that they can take in very early stages of a project, which is true in most cases, but there are tons of other ways, to fool people.

Since there is no approach to standardise the understanding of ICO Investors, there will always be room for scams.

The only way you can minimize the risk is to dyor and to use several ico reviewers to get diversified opinions on the whole project. Being scared of private sales, isn't useful if you want to make money in this market.

You can use this free spreadsheet to search for ICO ratings by influencers and websites: https://docs.google.com/spreadsheets/d/1Ja83ZCDDOgNXNYatD5w-2grA8IENuSwGjtSHWOG247E

[kamvang12]

yes for personal exchange we have to be careful, because many thieves in the crypto world.

[campica]

Agree with you , I never joined on private sales because I'm really scare for being scammed. I think that isn't fair for other investors who start investing when public sale open, because private sale "investors" probably get more cheaper or bigger bonus then people who buy on public sale. I think that we all should have same conditions.