Encrypted-messaging startup Telegram Messenger LLC has raised a breathtaking $850 million in a pre-initial coin offering this weekend, but not everyone is impressed with the news.

The ICO, first reported in January, is intended to allow Telegram to develop a messaging and commerce platform on a new blockchain called TON. The GRAM tokens sold in the ICO are planned to be used in an internal payments platform.

The pre-ICO — that is, a sale of tokens prior to a public ICO — is scheduled for March. It’s targeting venture capital firms and accredited investors with discounted tokens to allow the company to have a war chest of funds prior to the main event, which will seek to raise $1.15 billion more to bring the fundraising to a total of $2 billion.

Analyst Jason Bloomberg on Forbes called the ICO a “scam among cryptocurrency scams,” arguing that the fundraising by Telegram is nothing more than an attempt by a company with zero revenue to continue trading. “Telegram has no viable business model, as it makes no money – on purpose,” before adding that founder Pavel Durov currently “covers all of its expenses out of his own pocket.”

“It really felt like it was one of these startups that’s burning through cash and needs a way to bring money in to keep funding their operations,” Travis Scher, vice president of investments at Digital Currency Group, told Bloomberg. Over at CNBC, Scher added that “you could see how people would say this one checks all the boxes — amazing team, a market set up for them and a good product,” but “the numbers are totally out of whack.”

Charles Noyes, a quantitative trader Pantera Capital, wrote in a post titled “$600 Million TONs of Crap” that the Telegram ICO is an “opportunistic ploy.” The project’s technical whitepaper, he added, is “essentially a wishlist of things they want to have, and how it will work assuming that their wishlist doesn’t crash and burn.”

Spencer Bogart, a partner at Blockchain Capital, also questioned the valuation on the raise, telling CNBC that Telegram has “an absurd valuation for something that’s effectively field stage,” and that the ICO “is the biggest airball in venture history.”

Cryptocurrency blogger Josh Paiva suggested that Telegram’s blockchain is a solution looking for a problem. “You have to ask yourself what is the actual pain that Telegram is addressing and can they can that pain go away?” he said. “What’s wrong with Telegram? Why do they actually need this blockchain and ICO?”

JP Buntix at NewsBTC questioned whether the ICO is even an ICO at all, pointing out that the pre-IPO sale, which Recode previously reported included Sequoia Capital, Benchmark and Kleiner Perkins Caufield & Byers, is really nothing more than a traditional venture capital raise pretending to be an ICO.

“By targeting venture capital firms and accredited investors, the Telegram ICO is not all that different from traditional VC funding,” Buntix wrote. “Instead of receiving company stock, investors now received a Gram token.”

Image: Telegram