Kik, the Canadian messaging app operator, raised a total of $125 million by way of an initial coin offering that took place on September 12. Prior to this, the company had raised $50 million from earlier investors, and was looking for an additional $75 million to meet their goal. The company was founded in 2009, and is currently used by more than 15 million monthly users, 40% of which are teens.
ICOs have proven themselves to be an excellent way to raise funds, with more than $1.8 billion raised this year. They have made it possible for some companies to bypass the traditional methods of raising funds (venture capital, via capital markets, etc.), while allowing for millions of dollars to be brought in within mere seconds. In order to raise funds via an ICO, a company needs to release a new digital currency which can be spent directly on its own services or products, or used to drive a portion of the business.
The new Kik ICO involved the creation of a new cryptocurrency which will be named Kin. Kin can be used to make purchases within the app. The company has already raised approximately $50 million in presale of the cryptocurrency, and had previously raised around $120 million through venture capital. The public sale for the remainder of $75 million was completed as an ICO for the Kin tokens. A total of 10% of the total Kin supply was sold during the ICO, with 60% being held by the Kin Foundation to be released via a rewards-based system.
The Kik ICO was one of only a few that has been open to US investors. Earlier this year, the US the Securities and Exchange Commission stated that in some cases, ICOs can be viewed as securities, which would mean that they are subject to certain laws and regulations. In an effort to avoid dealing with strict regulations, most ICOs have not allowed participation on the part of US investors. Sales were not allowed in the company’s home country of Canada, with Kik CEO Ted Livingston stating that
This decision comes after weak guidance from the Ontario Securities Commission.
Despite restrictions, 17,000 prospective token purchasers from 139 countries took part in the token purchase. Each has submitted the required identification to show that they do qualify to be white listed and as such, be allowed to purchase a portion of the available $75 million tokens that were slated for public sale. Registered users had one day to purchase the maximum amout of Kin (15.20 ETH, $4,393). The limit was established by dividing the total cap by the number of users that successfully registered to purchase.
Post ICO Growth Plans
The funds raised will provide a boost to a company that has struggled to be competitive within the messaging realm. An arena within which Facebook dominates throughout most areas of the world. Kik had previously stated that although 300 million people have registered to use their app over the past few years, their monthly number of active users is only around 15 million. Kik has been criticized in the past for allowing users to participate without revealing their actual identity, leaving the door open for possible child exploitation and harassment.
However, Kik has become a well-known company and is viewed as being well-established, which means that it does offer a level of strength with regards to ICOs. To date, Kik is the largest firm to enter into the cryptocurrency marketplace. The token sale has drawn interest far and wide, extended well beyond the limited number of registered purchasers. Given that this was one of the first ICOs for a messaging app, it is sure to be studied by other companies, especially tech companies who look to integrate token usage and the blockchain.