>> In Silicon Valley, venture capitalist traditionally have controlled the destinies of tech start ups as they are virtually the only source of funding but the burgeoning digital currency market is flipping the venture capital model on its head, as new tech companies are minting their own money with so called initial coin offerings.
Reuters' correspondent Gertrude Chavez explains.>> Initial coin offerings have been a big trend for the last year and a half in the Blockchain space. Blockchain is the underlying technology for BitCoin, the original digital currency. And now, these companies in the Blockchain space have been raising cash through creating their own tokens or coins and selling it to the public like an initial public offering.
And they're raising tons of cash, about $1.1 billion in 2017. So it's more than 10 times for the whole of 2016.>> Now, BC Firms are going to the startups instead of the other way around, hoping to get in on a piece of the action. And since the shoe was on the other foot, some issuers are limiting the size of pre sale deals making the venture capitalists scramble like everyone else for the highly sought after public offers, which can often lead to big returns.
>> What we've gotten from our research is that the average return for a token that goes from ICO to trading is about 20 times the initial sale price.>> But ICOs are not without risks.>> It is very risky because there's no regulation, the founders can walk away with your money, and also there's a possibility of being hot, and that's it, you have no recourse as an investor.
>> Digital currency investment still account for only a fraction of the roughly $19 billion BC Firms have invested in tech related companies so far this year, but double digit annual returns even if only digital is something venture capital investors don't want to pass up.