When the (hard and soft) Cap fits

What should you set as your soft and hard cap for your token sale?

It’s a tricky question. If the soft cap is costed well and is the amount needed to get your project off the ground, then why isn’t that the hard cap with remaining tokens reserved for issuing in a secondary and tertiary coin offering tied to milestones? It is, after all, an Initial Coin Offering. The feeling that you only have one bite at the apple is the same as a token investor’s FOMO.

I often hear investors backing away from ICOs with what are considered high caps in general terms – “I only participate if the cap is below $25m” or the like is common. When you think about it even $25m is a considerable sum for most start ups. That said, this is a much too simplistic approach. For a start it is the overall token capitalisation that you need to look at. $25m for 20% of the issue is very different to $25m for 50% after all.

What is important is what amount is right for the project. Can you justify the need for raising the amount you are asking for. How much do you really need to get you to the next stage? How many stages is realistic to ask investors to cover? Do you need a pre-sale or even a pre-pre sale? (another blog coming there I think). What will you do with your stash before you need to spend them?

Some will buy tokens because they are interested in your product and see the benefit of future use most will be looking for a return on their investment -probably quickly. As they are not buying a stake in the business that return needs to come from an increase in the value of the tokens. In most cases this will be driven by the demand to use them (or in the short term the perceived future demand for them) to use your product.  In turn this will be affected by the number in circulation, which is why burning unissued tokens is popular amongst investors.

Both groups need convincing if your ICO is to be successful.

As I said earlier,  it is an ‘Initial’ coin offering, the implication being that you’ll be back for more – everyone seems to get that with IPOs, not so much ICOs – probably because you have to be a competent investor to take part in an IPO.

However, so many people are looking for the issued tokens to be finite and won’t want to see a flood of new tokens at a later date. Just my opinion but probably the best way is to announce the full amount that will ever be issued with only a percentage released in the ICO and keep the rest in the contract with the right to do further sales in tranches at certain dates or milestones.

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An ICO – Having your cake and eating it

Without doubt the ICO phenomenon has changed the course of funding for tech companies. A huge amount of money has been raised in what has seemed like the wild west of finance. In fact one of the key things about the tokens being offered is that they are for use in the service  – unregulated for the large part but that is changing very fast.

One of the key aspects of this has been that the money has been raised from large numbers of individual investors rather than through venture capital and angel funds. This has been called the “democratisation” of funding, but not only has the source of the funds changed, the process has also changed and what you are buying has too.

Under the traditional process to raise the kind of money that is now being raised by ICOs went from raising money from family and friends, probably a bank loan, through angel investors, onto venture capitalists and IPOs. Crowdfunding has changed this a bit and allowed individuals to invest directly rather than through funds, but there is still a lot of investor protection regulation in place.

That seems very long winded process compared to an ICO (have an idea; write a white paper; launch an ICO), but it had sound underpinning. Each step undertook a level of due diligence. Family and Friends must at least trust you to some extent. A bank will look at your business plan, accounts and history and probably ask for security, so testing your commitment to the business. The angel will really take a good look and get to know you. The venture capitalist will put you through the mill.

Also, the business has been developed throughout the process. By the time you get to the angel and venture capitalist there is usually a functioning business in existence. Compare this to a lot of companies who don’t even have a prototype available when they announce their ICO.

The other key difference about this process is that, apart from the bank loan, these people will actually own a part of the business. They will be shareholders and have some say in how the business is run.

One of the major things about the tokens being offered in ICOs is that they are for use in the service being proposed and NOT an investment in the company. This is what get’s them away from current investor protection legislation but one of the consequences is it also removes the provider of funds from any direct input on how the company is run. A lot of effort and convoluted thinking has gone into working out how a service can be tokenised whether it needs it or not, but that is for another article.

What you are buying is the right to use future services. For the value of your tokens to increase you are reliant on the company increasing the demand for its services. A strategy you have little control over.  The white paper is a sales document and what the company decides to release is not regulated (yet). For the investor the integrity of the team becomes paramount.

The position can be summarised by this chat (shortened and anonymised) in a Telegram channel for token holders:

token holder: Can you tell me …..
company: Well we are a private company so right now that is what we can share
token holder: Just want to make sure you have some accountability
company: yes but no one here is a shareholder
token holder: I said stakeholder on purpose.
company: this is a token, not a piece of the company…. 

So one of the advantages for the ICO issuer in that when you raise funds this way you don’t, on the whole, give away any of the equity. On the other hand an ICO is a sale, so could have unexpected tax consequences (Sales tax anyone?).

For the investor, just know what you are buying for your money and do lots of research.

The articles on this site are opinions and for information purposes only.  It is not intended to be investment advice.  Seek a duly licensed professional for investment advice.

© copyright 2017 Russell Weetch

How to “do” crypto – brotherly advice

My sister and nephew asked me about how to get hold of Bitcoin the other day, and this was followed by a few of my friends asking the same question so I thought I’d just publish the email I sent her here (spellings and grammar corrected) as others might find it useful. It’s surprising how hard it is to stop writing once you start!

If you want to buy some of this stuff you will need to open an account – but remember this is a really risky investment, it could go to the Moon or crash to the floor ( I obviously think the Moon ☺ ) so do NOT invest more than you are prepared to lose. It’s all highly exciting when it is climbing by 500% in a few months and as scary as hell when it falls 30% over a few days. You need a calm hand and probably best not look at the daily charts.

Now to get started. You will need to have something called a wallet. This doesn’t actually hold your Bitcoin, it’s more like a keyring that lets you prove the bitcoin are yours.

The easiest way is to open a CoinBase* account1. If you use this link then when you buy your first $100 (about £75) we both get a free $10 (about £7) worth of the currency. You can buy 3 types of coin here ( the main ones ) either by Credit Card or by Bank transfer (but that’s in € or $ not £ so it depends on how much your bank charges for that. Anyway, before you can buy you need to be approved and that can take a while. There are charges for by credit card so you have to weigh up that against the cost the bank will charge for transferring from £ to €. 

Once you have opened an account you have a wallet and you can start receiving Bitcoin (BTC), Ethereum (ETH) and LiteCoin (LTC).

You can start getting some free! Well you have to put up with adverts, but can be a bit of fun. This is not going to make your rich as we are talking pennies, if that, but you will start to gather some – mind you it won’t take long to realise it isn’t worth the time. Look at it this way, the two below pay out when you get to 30,000 satoshi (that’s  0.0003 BTC) about $1.16 (£0.87)1 – and it is a lot of work to build up to that!

Roll the dice at FreeBitcoin* : this is a bit of fun where you click a button and a number is generated which determines how much you win. You can play once an hour. Top prize is $200 worth of BTC, but the odds on that are miniscule.

Or claim some BTC at MoonBitcoin*. Lots and lots of adverts here – don’t click on any of them as most are scams (even Moon used to warn about them) or ICOs (I’ll tell you about them later). It often opens secondary browser window (what, is this the 1990s?).

Actually, bookmark this site BadBitcoin and if you are ever tempted by a site promising the Earth, then that’s a good place to start a sanity check.

Also, you can use some of your computer power to mine some coins. MinerGate* is not the most efficient but is probably the easiest to set up. Alternatively you could pay someone else to mine for you such as Genesis Mining* – enter in the code fl4R29 to get a 3% discount. I’ll send you another email on mining later, it is not the route to untold riches it sounds like and sometimes it is cheaper just to buy!  

Anyway, have a play with these will get you some experience with working with your wallet as you will need to enter a wallet address to get started. This is getting a bit long now, so I’ll drop you another email with how to do that once you have set up.

* This is an affiliate link.
1 Conversion rate as at September 21 2017

The articles on this site are opinions and for information purposes only.  It is not intended to be investment advice.  Seek a duly licensed professional for investment advice.

© copyright 2017 Russell Weetch

Cove Identity ICO

Update: Cove Identity have delayed their ICO, see: https://medium.com/coveidentity/we-are-delaying-our-ico-e85120997cdf

Cove Identity published it’s white paper this week and their token pre-sale kicks off on September 21st.

Cove Identity looks after your identity by providing a secure store for your digitised documents and a scheme to provide verification both of their integrity and validity.

What seems unusual about this project, in theses heady days of ICO pick and pack, is that the app, at least the MVP (minimum viable product), is already available for both Apple iOS and Android. You can install and start using it right now – it’s straightforward, I’ve tried it. At the moment it is just a store for you to store scans of your documents securely.

The team (founders and advisors) look strong with lots of tech startup experience on both the technical and business side (often missing).

The tokens utility is in their use for the verification processes of which there are several: Offline/Traditional; Peer-To-Peer; Digital; Video; Automated; agents and Business Partners and Document Issuers (the highest level of verification). The process allows for cross verification too.

The system offers a granular sharing system so you choose how much you share and allows tracked sharing and the ability to retract a shared document after it has be validated. Also the ability to sign up to services without sharing your data.

The Token Sale

Interesting that the split between development and marketing in use of funds is about the same (39%/33%) which shows a realistic outlook.

There will be 1 billion tokens (Shells). Up to 100m (soft cap 5m) will be available in the pre-sale with discounts of up to 40% and 410m available in the Crowdsale – no details yet, but terms won’t be as good as the pre-sale – and this may be limited and some held for a further crowd sale in 2018. Team and advisors get 200m (20%) with a 2 year lock in and phased release after that. There is 1% set aside for bounties.

The remaining 280m are set aside for the Eco Fund: “This fund can be used by Cove team for incentivising new participants and token holders, early participants, running developers hackathons, and other contests required for marketing purposes”.

The target they are looking at raising is $10-$15m in this sale, although the crowdsale hardcap is $41m, which maybe a little ambitious in the current climate. However, holding some back (or not selling all of them) and going for a further round in 2018 with a market related price, after the product has had more proving and some of the verification deals are in place, maybe a successful approach.

https://coveidentity.com/

The above references an opinion and is for information purposes only.  It is not intended to be investment advice.  Seek a duly licensed professional for investment advice.

Coins for good causes

The Blockchain is in the process of transforming how a lot of business and interaction is done and the advent of Initial Coin Offerings (ICOs) have fundamentally changed the way that new tech can raise money to fund development as sell as democratise (or is that personalise) early phase investment.

These two changes also provide a way for social and ecological enterprises to pursue their goals. So while you are making your ticket to the Moon, there is also a way to maybe put a little into some of these to help out.

Here are a few coins that look to do some good.

 Carbon Coin2 website link Twitter link Exchange
 Now this is an interesting one. It’s been around for a while now (Feb 2014) and aimed to fund the planting of millions of trees. But all is about to change! (another article on this coming soon). Traded on YoBit1
The Root Project2 website link Twitter link start time image
The Root Project aims to “Restructure Capitalism End Extreme Poverty”. It claims to be the World’s first effectively tax-subsidised cryptocurrency. It’s not traded yet, but the ICO starts September 5th 2017 ICO.
Humaniq website link Twitter link Exchange
Empowering 3.5 Billion People in the world economy. A simple and secure mobile app, delivering financial inclusion solutions to the 2.5 billion unbanked / 1 billion underbanked globally. Traded on YoBit1, Bittrex 
 Climate Coin website link Twitter link start time image
 With its ICO launching on October 23rd the aim is to provide a blockchain green eco system and used to invest in companies and projects that create real solutions to mitigate Climate change

1 links which contain affiliate codes    2 I hold coins in these