Venture capitalists are in a pickle. Companies have raised more than $1.7 billion through initial coin offerings, or ICOs, this year by selling their own customized virtual currencies. For the companies, the trend is a godsend. They can raise the money and use it to fuel new projects without having to give away a piece of their company to venture capitalists. Meanwhile, both accredited and non-accredited investors are buying the tokens on the assumption that once these these projects are completed, their tokens will balloon in value.

Given ICOs’ momentum, it’s no wonder that a growing number of startups are contemplating them. Equally unsurprising is that some VCs, including Andreessen Horowitz and Union Square Ventures, have been looking to capitalize on the trend, in some cases, by participating in what are called pre-sales of companies’ ICOs, wherein they’re purchasing tokens at a discount in exchange for diving in early.

Still plenty of other investors are nervous, and for good reason, starting with the SEC, which hasn’t offered much guidance to date relating to ICOs. Though the agency said in July that it thinks some virtual currencies should be considered securities and therefore made subject to federal securities laws, it’s currently making determinations on a case-by-case basis, depending on “facts and circumstances.”

That kind of wait-and-see stance largely explains why general partner Jules Maltz of Institutional Venture Partners says he’s “actually pretty scared” of ICOs. Speaking at a StrictlyVC event hosted earlier this week by this editor, he told the crowd, “A few of our companies have asked us about them and my conservative feedback to them has been, ‘I don’t want to go to jail as a board member.’ Seriously,” he added. “If you’re issuing something that could be deemed a security, and then everything goes to pieces, and the board wasn’t legally on top of it, I think the companies and the CEO [will be liable].”

Speaking alongside Maltz at the event, Megan Quinn, a general partner at Spark Capital, said her firm is also “treading pretty carefully” when it comes to ICOs, on the assumption that it’s a “matter of when, not if, the SEC becomes much more involved.” Indeed, after she noted that Spark is a venture investor in the popular chat app Kik, which this week closed its high-profile ICO with $100 million, Maltz asked Quinn if Spark has a board seat with the company. Quinn quickly noted that they are “board observers,” to chuckles from the crowd.

Yet the SEC may not even be the biggest complication right now, said two other speakers who’d come to address the crowd of largely VCs and founders, and who spend their days and nights focused on cryptocurrency issues.

Stan Miroshnik, an L.A.-based banker whose outfit, Element Group, is exclusively focused on the digital token capital markets, said that simply figuring out how to appraise a venture-backed company that has also raised money through an ICO is proving a minefield.

Asked specifically how VCs are calculating tokens on their balance sheets and whether these might impact valuations, Miroshnik said he’d “had thissameconversation with [global accounting firm] Deloitte this week, and the answer was something like, ‘We have no idea.’ ”

The crowd laughed, but Miroshnik, who wasn’t joking, continued on, saying, “There’s no rubric for it, so these are questions that, when I’m talking to folks in the boardroom, they’re struggling with how to balance those interests.

“You have a management team that’s been focused on building equity value, and now they have all these thousands of constituents [the people who’ve bought tokens] who are customers and who are incentivized and who are now evangelizing for that company.”

For them, the question begged is: “How do you dictate care of them, and is that ultimately in the interest of the equity holders?” he said.

Marco Santori, a New York-based attorney who leads the fintech practice of Cooley — and who says the law firm now has one attorney dedicated full-time to amending the limited partner agreements of venture firms that want to invest potentially in ICOs — identified a separate pain point that he suggested is even thornier.

While “the securities issues are certainly big and important” and “tax issues are a big concern, too,” the “real impediment,” Santori said, is “where do I put these things?”

While VCs are jumping into pre-sales of ICOs, as happened recently with a decentralized storage marketplace called Filecoin, whose ICO raised a record $257 million, they’re aren’t just counting on their tokens turning into valuable holdings, says Santori. They’re counting on custodians that can manage their various crypto holdings, and not a lot of great options exist currently, he said.

“So I’m going to get the next token. It’s going to [soar] 500x in a week. Everyone’s going to pat me on the back and give me some attaboys,” he said. “But where do I put the thing? How do I keep it?” Though he noted there are “three” qualified custodians right now for crypto, when it comes to storing “institutional” crypto and how VCs do it, “the answer today is, well, you can’t all that well.”

Santori said that he “knows for a fact” that some of Cooley’s venture clients are “right now buying these tokens in advance [via pre-sale offerings] . . . and that once they actually get the tokens, they are banking on having somewhere to put them.”

He added that some solution had better materialize soon, “because right now, they don’t.”

For more about how ICOs work, along with how to stage one, check out some of our earlier coverage here.

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