[koolba]

> The profit from the token sale goes into a foundation setup to oversee the project ... [truncated]

... that is controlled by the founders and could presumably be used for whatever they'd like. The usual approach is to create two companies. One a shell to own the ICO itself, and the second a tech services company that does development for the shell corp.

So it ends up something like:

"We definitely need the expertise of ICO founder Mr. X. Let's hire his consulting company to update the CSS on our web page at $1,000/hour..."

[sillysaurus3]

This is the main reason the traditional VC model works so well. You can't get rich unless the VC's make money.

[omarchowdhury]

You're kidding right? Founders/employees take "money off the table", even if the companies haven't generated a cent in profit.

[vkou]

Employees and founders typically can't sell shares (Except to the VCs, at a price the VCs set) until the company goes public, or is wildly successful.

They do get paid salaries, but undergo audits... To make sure that the 10 million dollar round didn't go straight to the CTO's Bahaman yaht fund. These audits are typically not done by the founders.

With an ICO, all bets are off. There's no reporting requirements, the founders hire their own bookkeepers, and the equity holders have no rights with respect to the governance of the firm.

[omarchowdhury]

You seem to be positing an absolute: that an ICO can't behave transparently by nature. Which isn't true. ICO and transparency aren't mutually exclusive.

[vkou]

No, but there's a huge difference in the amount of oversight token holders have on an ICO, and the amount of oversight that VCs have on a startup.

It's certainly possible to structure an ICO in such a way that token holders will get board seats, proper auditing, etc, but I've yet to see one that is.