Increased investor awareness regarding ICOs

The Initial Coin Offering (ICO) has created quite the buzz. We are seeing companies raise spectacular amounts of capital in days or even hours, some without more than a White Paper to back their case. This environment, however, is changing. Investors are becoming more wary and increasingly tend to dismiss ICOs that are not supported by strong teams and robust strategies as superbly outlined by Brendan Bernstein, TetrasCapital Founding Partner, in his article ‘Structuring Optimal Token Sales Amidst 2017’s ICO Mania‘.

That token strategies can be unsustainable, volatile and illiquid is a thing of the past – that does not fly anymore. While raising capital through an ICO is quite efficient, investors face multiple risks, some that are directly related to the business, other that have nothing to do with it. To break that down:

  • An investment of $300,000 is made to get a future ICO off the ground in six months. The objective is to promote an ICO to sell a million tokens for $10 a pop in a month. If successful, the company will – if it aims to sell all available tokens during that period – have $10 million in its coffers. Not a bad return if the investor has a 10% share and even 5% of the tokens (worth $500,000).
  • Capital is only tied up for six months and the immediate return is 67% or 134% p.a. Plus equity. How can this not be a good investment?

July 5 2017, Primalbase raised $7.5 million through the Waves platform in 24 hours. The concept was to invest in office workspaces worldwide. There are even more extreme examples like Bancor which raised $150 million USD in 3 hours. Why would investors not be all over this space? Actually, they are but their advisors are – or should be – looking into the sustainability, volatility and liquidity of the token strategies.

The problem is the disconnect from the financial system, including markets and the trading tools available there that have been developing for centuries if not millennia.

In order for an ICO to take place, it has to be pegged to a cryptocurrency. Buyers must acquire the crypto in order to invest. Typically, ICO tokens continue to be pegged against the root crypto which increases investor risk for four reasons:

  1. The business may fail to deliver which collapses token value.
  2. The blockchain protocol used can be faulty and subject to hacking or other means of siphoning funds elsewhere.
  3. The root crypto can be hacked or simply taken offline, giving token-holders no way to convert the value into actual (fiat) currencies.
  4. The crypto exchange can simply go offline, leaving everyone in the cold.

These reasons are why we have remained on the sideline of the ICO environment; it just didn’t seem sufficiently stable. While the gains are considerable, the risks are equally as significant. Still, the ICO is here to stay and it is rapidly replacing traditional financing as Stan Schroeder demonstrated in the Mashable article ‘$797 million in 3 months: Blockchain’s newest industry is going crazy‘:

ICO token strategies must be anchored and soon or the ICO will experience the DOT.com collapse. We are seeing the same signs right now. After that collapse, however, we got Google, Facebook, Twitter, LinkedIn, Amazon and Netflix that today are digital leaders and part of our lives. The same will happen with future ICOs. What we are experiencing now is the birth of an entirely new business structure and one that will eventually force governments to alter their legislative and regulative environments.

The first government that makes the move toward stabilizing this environment and supporting what is emerging as a new economic environment is likely to be the dominant and most influential player in the near future.

Advertisements

Easyforsure – a retail tourism platform ICO Q3 2018

In 2016, Dutch software development company Savana Solutions launched a platform aimed toward helping leisure and business travelers maintain their regular lifestyle when abroad. This platform, Easyforsure, has grown rapidly and today has over 60 vendors in The Hague including restaurants, beauty and fitness centers and various professional services.

‘It all began with our Facebook group Expats in The Hague‘ says Prashant Shukla who worked as business intelligence specialist for iQor and Altran before establishing Savana Solutions with sustainable energy consultant Richard Bevelander. ‘The group was established to help expats establish themselves in the Hague and has grown to over 30,000 members. It was the perfect springboard for Easyforsure which caters more to professional and leisure tourists that visit the city. Anyone lookin for  beauty, health or fitness providers can find them and book a slot without having to worry about long-term contracts right within the platform itself.’

Easyforsure has extended into Rotterdam with Amsterdam soon to follow. The company intends to spin the platform off into a separate and independent entity and began looking for investor participation in August 2017. The company reached out to Gage-Cannon Ltd. who determined that the platform was a good fit for its token strategy which provides tokens with much needed stability and liquidity.

‘Feedback and insights from private banks, wealth management and venture capital firms, investment agencies and regulators has proven invaluable in identifying where token strategies fail and how illiquidity and volatility can possibly be overcome,’ says chairman Snorri H. Gudmundsson, who has been involved with retail and online banking for two decades and has up until now been skeptical about the ICO environment. ‘We are seeing too many ICOs secure funding through token issue without much of a long-term strategy or even a working prototype in place and that has to change. Easyforsure already has their platform up an running, an active user-base and are expanding. We want to accelerate that expansion and the ICO is a good way to do so for both company and investors.’

Easyforsure is aiming for an Initial Coin Offering (ICO) third quarter 2018. For material pertaining to the ICO or inquiries, please contact Gage-Cannon directly.