Long before the term ICO was coined (no pun intended), there were multiple markets for bitcoin securities dating back to 2012 - possibly earlier. I am referring to business ventures here, not clones of the bitcoin repo with a modified PoW mechanism or similar. There were many scams for every one legitimate venture. Many legitimate ventures eventually mutated into scams. Investors that started out as bitcoin maximalists were often crying to the SEC for help getting their bitcoin back. Some of those ventures run to this day.
The market was chump change back then. Tens of millions maybe. With ERC20 and ICO mania, we have front row seats for failure on a grand scale. The exuberance is terrifying to me given what I experienced years ago with bitcoin securities. For that reason I stopped making investments in May and started doing some real diversification. For many investors, ICOs will be their first taste of "a fool and his money are soon parted." For many projects who have conducted an offering, ICOs will be their first taste of what it's like when the SEC come knockin'.
I'm quite sure there will be some success stories a few years down the line, but they will be accompanied by a plethora of scams and all the media attention that comes with bad news. I think this form of funding is a vague peek into the future of project funding. Ethereum is not necessarily the specific answer, and the ICO framework will have to burn to the ground a few times before it evolves into something useful.