Why Token Launches Could Redefine Startup Fundraising

The pace of new token launches has picked up, with blockchain ecosystems introducing fresh assets at an unprecedented rate. For many, the trend recalls the initial coin offering (ICO) frenzy nearly a decade ago, when speculation overshadowed fundamentals. Yet industry leaders argue that today’s environment rests on stronger ground.

Stephen Hess, Founder and Director of Metaplex, is among them. In an exclusive interview with BeInCrypto, he explained that modern launch frameworks aren’t simply fueled by hype — they are the product of years of infrastructure development, making them more responsible and scalable. Hess believes the shift is so significant that token-based fundraising is set to become the default path for startups.

The Rise and Fall of Initial Coin Offerings (ICOs)

For context, an ICO is a fundraising mechanism used by blockchain and cryptocurrency projects. It’s somewhat similar to an Initial Public Offering (IPO) in traditional finance, but instead of selling shares of a company, projects sell digital tokens. 

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In exchange for their investment, investors receive the new tokens, which they can use within the project or potentially sell later for profit.

In 2017, ICOs exploded in popularity and investors poured billions into crypto startups. According to data from Goat Finance, that year alone saw more than 800 ICOs launched, raising over $5.6 billion in total funding.

ICO Bench further revealed that coin offerings delivered 3.5 times more capital to blockchain startups than traditional venture capital (VC) rounds between 2017 and 2020. However, the ICO boom was marred by challenges. 

A study of 3,392 ICOs from 2016 to 2018 revealed a sharp decline in success rates, from nearly 90% in early 2017 to 30% by Q4 2018. Plummeting cryptocurrency prices, regulatory scrutiny, and high-profile scams eroded investor confidence. A Statis Group study found that over 80% of ICOs were identified as scams. 

But with so many new tokens hitting the market today, the question remains: has the industry learned its lessons, or is history destined to repeat itself?

Why Token Launches Look Different in 2025

Reflecting on the ICO era, Hess stressed that the process had serious flaws. 

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Nonetheless, the executive emphasized that today’s token launches are far more sustainable than the 2017 ICO frenzy, supported by stronger products for founders and more advanced tools for developers. Hess noted that modern token issuers now leverage sophisticated on-chain mechanisms to overcome the shortcomings of the past.

Fully on-chain auctions and launch pools, for example, enable real-time price discovery. They also ensure that all participants receive tokens at the same fair price, eliminating opportunities for manipulation. 

Beyond distribution, issuers are operating within a more mature ecosystem powered by proof-of-stake networks like Solana (SOL). It supports scalable, web-level applications and real revenue-generating businesses. 

This marks a fundamental shift from hype-driven speculation toward utility and adoption, avoiding the pitfalls of launching projects without proven traction or genuine community alignment.

Why More Crypto-Native Companies Are Choosing Tokens to Raise Funds

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Backed by strong infrastructure, crypto-native companies are now increasingly opting for token launches to raise capital over traditional VC funding. According to Hess, this trend is driven by the speed, flexibility, and community alignment offered by on-chain fundraising. 

The Metaplex founder elaborated that token launches expand access to capital beyond traditional institutional investors by opening participation to a global online market. Retail participants, as token holders, contribute liquidity and alignment, serving not only as backers but also as stakeholders who provide capital, feedback, and network effects. 

This dynamic democratizes fundraising and fosters startups that are more closely aligned with their communities. Despite this, Hess added that token launches still carry risks, including regulatory uncertainty, market volatility, and potential manipulation. 

Onchain Fundraising Pushes Venture Capital to Adapt, Not Disappear 

So, does the rise of token-backed fundraising mean the end of traditional VC funding? Not quite. Hess told BeInCrypto that this shift doesn’t eliminate venture capitalists — it brings them on-chain.

Hess highlighted that the rise of on-chain fundraising is pushing venture capital firms to adapt. The funding space is becoming increasingly democratized, allowing startups to raise capital on-chain much earlier in their development. 

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In addition, Hess said that token-based fundraising doesn’t operate in isolation — it coexists with traditional financing. Networks and protocols can issue utility tokens that generate value through adoption, governance, and utility, while still driving returns for equity holders who helped build them.

The Future of Startup Fundraising 

Finally, Hess predicted that the model pioneered by crypto-native companies will expand to a broader range of startups. It signals a future where direct, community-driven capital becomes the standard.

He added that in parallel, much of the economy will shift toward decentralization, powered by tokenized protocols and peer-to-peer networks.

Thus, the resurgence of token launches reflects a maturing industry that has learned from the excesses of 2017. By prioritizing transparency, utility, and community alignment, today’s token launches aim to avoid the pitfalls of the ICO era. 

While risks remain, the evolution of on-chain infrastructure and the integration of traditional and decentralized financing models signal a promising future for startup capital raising—one that balances innovation with responsibility.