The coming age of ICOs? #03 GREEN FUNDING Takehiko Numata “ICOs break through the limits of crowdfunding and support diverse culture”

The coming age of ICOs? #03 GREEN FUNDING Takehiko Numata “ICOs break through the limits of crowdfunding and support diverse culture”

Having launched the crowdfunding site GREEN FUNDING, Takehiko Numata is a market pioneer. In this series entitled “The coming age of ICOs? Asking the experts,” we seek out a variety of perspectives on the ICO phenomenon. This time, we asked Mr. Numata, one of the first to use the internet to fundraise and a driver of the industry, about the potential and challenges of ICOs.

Crowdfunding has the potential to evolve into ICOs

Numata: I’ve been involved in crowdfunding since I founded my company in 2011, and GREEN FUNDING, which began in 2013, is growing steadily as the CCC (Tsutaya) Group’s crowdfunding site. Underpinning this growth is the rise of rewards crowdfunding.


There are different types of crowdfunding such as rewards crowdfunding, equity crowdfunding, and donation crowdfunding. In rewards crowdfunding, funders receive experiences or products in return for their support. Projects to develop products such as gadgets in particular can be called one variant of the build-to-order model, but they are popular because the merits of funding, such as being the first to get the product, receiving a discount, or getting a limited item, are easy to understand. Many are expensive but if the product is appealing, a lot of people will want it. Hence there is economic rationality.


The CCC (Tsutaya) Group’s vision is to be the world’s number-one project company, and it has designated GREEN FUNDING a “digital place for future projects to gather.” If aligned with this vision, I don’t think the question is whether GREEN FUNDING’s business should be rewards crowdfunding, investment, or evolution into ICOs. I think that crowdfunding and ICOs are extremely similar in terms of fundraising and investor mindset. Indiegogo, which started with rewards crowdfunding, is leading the way, but in the future it’s possible that some crowdfunding sites will become ICO platforms.

Limited scale in rewards crowdfunding

While rewards crowdfunding is doing well, there appears to be a limit. The market for the build-to-order model when launching new products has been established and is expanding, but adoption in fields originally expected to be ripe for crowdfunding, such as movie and animation production, art, and more, is still only partial. Amounts collected for content projects often range from 0.5 to 5 million yen [$4,500-45,000], and there is a limit to what can be realized on this scale. Full-scale production of movies, creation of huge art monuments, construction of parks and so on is difficult.

Takehiko Numata (CEO, One More Inc.)

The more famous the creator and the greater the sum likely to be collected, the less likely they are to use crowdfunding, instead obtaining money and creative opportunities from corporate sponsors, the government and other conventional channels. If adoption is limited, this will create the idea that crowdfunding is only for indie projects, producing a vicious circle. But if prominent creators that everyone knows start to use crowdfunding, the needs and supporters of indie projects will also multiply, increasing the scale. However, this is still unlikely.

Equity crowdfunding struggling to eliminate speculation

Then there is equity crowdfunding, which possesses the qualities of investment and funds. However, even this does not solve current challenges because laws and regulations are strict due to it being treated as a financial product.


One type of equity crowdfunding requires project due diligence by a certified public accountant to pass the FSA’s inspection. As a result, project teams are required to submit detailed business plans. If a musician, for example, tries to crowdfund a new album, they must explain why it will sell. Of course, from the perspective of protecting investors, it may not be possible to post projects that aren’t sure-fire hits. However, with this method, as with real estate, ultimately only robust projects can make use of it. The original significance of crowdfunding is lost.


Stock-based crowdfunding is also emerging. Although the mechanism uses regular and special stock options as returns, by bringing in the existing concept of stocks, it seems to be easy to understand but also difficult to monitor the project on an ongoing basis. And won’t many of the investors-cum-shareholders become speculative, expecting dividends like actual shares?

“Proper ICOs” break through the challenges and limits of crowdfunding

While current crowdfunding has its issues and limitations, ICOs have the potential to break through them. Currently ICOs are highly speculative. However, I think that “proper ICOs” should be designed that have lower speculation and liquidity. This requires devising mechanisms such as restricting immediate cash exchange when distributing digital tokens. But before anything, I think that we first need to formulate projects in which price increase is not the reason for purchasing, like a golf membership, in which there is the benefit of being able to use the golf course but also the status of possessing it. There’s also the sense of security in being able to cash it in at any time. Surely digital tokens obtained from proper ICOs can resemble this.


There are people who pay 100,000 yen [$900] in rewards crowdfunding for the privilege of sitting in the front row during stage greetings by actors, directors, etc. This means that getting close to one’s favorite actor is valued at around 100,000 yen. Likewise, suppose that those with 100,000-yen tokens are invited to fashion brand exhibitions not open to the general public. Uploading something like that to social media would garner lots of likes from friends. It’s little wonder that some find value exceeding 100,000 yen in such experiences. For them, choosing to pay 100,000 yen to obtain the right to have this experience is a rational judgment. I feel that such values and judgments are becoming universal as the internet society spreads.


If ICOs aim only to make money, they will be nothing more than an extension of speculation. But if people think, “I want to hold on to this right. It will be incredibly valuable to me in the future,” then more will participate in ICOs.

A world where online fundraising matches conventional methods

Although the world made possible by rewards crowdfunding is coming into view, there still remains an area where fundraising innovation is necessary. An arrangement in which a few people that have obtained massive capital hold the power and control the world is not healthy, so this framework in which the currently successful – as well as certain venture capitalists – continue to win needs to change quickly. When the scale of funds collected via the internet becomes equivalent to conventional financing methods such as loans and sponsoring, everyone will for the first time have equal opportunity.

Takehiko Numata (CEO, One More Inc.)

The average size of rewards crowdfunding is several million yen [tens of thousands of dollars]. If the product is a book, this is enough to publish on, but not enough to impact film companies or TV stations. However, if a movie production project led by five or six young people collects around 200 million yen [$1.8 million] through an ICO and becomes a big hit, would this not impact the entire industry? Similarly, venture capital was unmoved by rewards crowdfunding gathering tens of millions of yen [several hundred thousand dollars], but appears to see a threat in ICOs raising huge sums.


Now that crowdfunding has spread and users have grown accustomed to it, can proper ICOs be realized, stimulating the next phase of innovation? This is what I’m paying attention to. The current ICO and cryptocurrency sector is full of unknowns with an undeveloped legal system, making it a highly risky market. This is also making many hesitant to enter it. At the same time, however, as an entrepreneur, I’m excited and expectant that a new, great era is on its way, and I also hope to invest myself in it in the future.


Crowdfunding had its skeptics when it first appeared, but through the efforts of each company involved, stable operation became possible. In the same way, led by private companies that have gained the trust of the FSA, the ICO and cryptocurrency industry needs to explore the expertise and self-regulation necessary to achieve proper ICOs in actual business.

The token economy supports diversity of culture and values

I think the token economy constructed by ICOs and blockchains can produce diversity of culture and values, something that couldn’t be achieved by crowdfunding alone.


Money plays the role of a common language when discussing the value of things with others. Even if the country or culture differs, value can be recognized through expression by economic figures. As tastes and hobbies subdivide and values diversify, this takes on great significance.


For example, someone buying one million yen-worth [$9,000] of CDs of a celebrity they like is hard for someone who is not a fan to understand. However, if it is a token and the economic value increases by 100,000 yen [$900], even if they don’t understand it, they can see that it was a shrewd investment.


People who are passionate about their hobbies tend to get increasingly economically disadvantaged as their tastes become more expensive. Those who stand atop finance and capitalism thrive by devouring the worlds created by such hobbyists. That’s the current arrangement of the world.


But this arrangement will change if discovering a new one starts to have value. Today’s young people, influenced in part by their parents, value steady jobs such as civil servant, and most do not deviate significantly from this. The few exceptions include IT ventures and YouTubers, previously expected to have little value. But in the world of the token economy, expectations will rise for artists who draw, for instance.


Like the market capitalization of IT ventures or view counts on YouTube videos, if economic figures can be attached at an early stage, the expected value of the drawings and artists will be recognized and attract people and money. If something similar happens in other industries, this will encourage the diversification of occupations, values and cultures, which will in turn increase the number of options for young people in particular.


The weakness of capitalism is that it advances a monoculture. If the goal of capitalism is ultimate rationalization, a monoculture should be welcomed. However, I suspect that the human nature is instinctively attracted to diverse and even chaotic conditions. And is not diversity the way things should be? ICOs and token economies have the potential to make this a reality.


Interview date: June 15, 2018

Editor: Makoto Nakazato

Photographer: Ayano Tomozawa


Takehiko Numata
CEO, One More Inc.
After graduating from the University of Tokyo in 2004, Takehiko Numata joined Dentsu Inc. and engaged in sales mainly of Japan’s largest airline. He was responsible for a wide range of fields, from product creativity to radio, magazines, and online media. In 2011, he founded One More Inc. to operate the CCC (Tsutaya) Group’s crowdfunding site GREEN FUNDING. He is also the rewards crowdfunding secretary of the Japan Crowdfunding Council.