Israeli entrepreneur and investor Moshe Hogeg invested in messaging app Kik ahead of its $US125 million (£97 million) initial coin offering — despite thinking the messaging app is “not doing great today.”
Hogeg, best known as a cofounder of Yo! and a host of other startups, told Business Insider he took part in Kik’s $US50 million (£39 million) token presale, where investors were given a chance to buy the messaging app’s new digital currency “Kin” before the general public.
Kik is a Canadian messaging app targeted at teens. Its CEO Ted Livingstone admitted late last year that it had stopped growing in the face of competition from Facebook Messenger, Instagram, and Snapchat. In its ICO documents, Kik said it had 15 million active users — a fraction of its 300 million reported registered users.
Given Kik hasn’t raised venture money since 2015, what’s to say its ICO isn’t a last-ditch effort to raise funding from more ignorant investors?
Hogeg responded: “It’s a very good question. I invested in Kik now [as] part of the pre-ICO round and I asked myself the same question. And my answer was: Yes Kik is not doing great today … if I look at them and compare them to the competition, WhatsApp, Telegram, and others.”
But, he argued, Kik has millions of users and a “respectable product.” It’s also one of the better known firms to participate in a coin offering.
For the uninitiated, an initial coin offering (ICO) is an increasingly fashionable way for companies to circumvent traditional venture capital and raise funds. The company essentially invents a new digital currency or tradeable token and sells portions of that to investors in exchange for funds. Investors will be banking on the fact the new currency will eventually rise in value.
But sceptics say the mechanism is an unregulated way for struggling startups to raise money from investors who might not know any better.
For Hogeg, the investment is partly about stimulating the wider ecosystem around blockchain technology, which underpins cryptocurrencies like bitcoin and Ethereum. Kin, Kik’s currency, will be implemented on Ethereum’s blockchain.
“Maybe they are not so good in their arena today, but in blockchain, they are one of the biggest,” Hogeg said. “So I decided to invest. It kind of makes sense. It would have been nicer if [the ICO] had come from a company like Telegram that is actually successful, rather than a company that is […] not succeeding in this world.”
But, he added, success “should be judged at the end of the road.”
“Maybe Kik will become a huge company because of this move,” he said.