Germany has a strong and vibrant Crypto Community and Berlin has become the German Blockchain Capital. We will have a closer look on the German ICO market and how ICOs are changing startup financing and startup investing. The initial hype will soon be over and give way to a more realistic view: The sale of utility tokens will only work for business models for which decentralization means a real competitive advantage whereas the rise of security/equity tokens could change startup financing and venture capital forever.

1. The German ICO/Blockchain Market –
an Angel Investor’s Point of View
KPMG ICO Festival| April 11th, 2018 | Munich
Florian Huber
POWERED BY

2. Two camps of people when it comes to Blockchain/ICOs...
www.chain.de
The Crypto Critics The Crypto Enthusiasts
This is just a hype
This is all fraud & scam
There‘s no intrinsic value
A huge bubble
All tokens are wothless
When lambo? When moon?
This is the New Internet!
Everything will be decentralized
Everything will be tokenized
There‘ll be a huge token economy

3. www.chain.de
Founder/Entrepreneuer

4. www.chain.de
Angel Investments

5. www.chain.de
www.chain.de – a directory of all German Blockchain Startups

6. The German
ICO/Blockchain Market
www.chain.de | as of April 2018

7. All German Blockchain Startups (105)
www.chain.de | as of April 2018

8. Top 3 Locations of Blockchain Startups
www.chain.de | as of April 2018
Berlin is the
Blockchain Capital
of Germany!
Berlin – 58 startups
Munich – 10 startups
Frankfurt a.M – 8 startups
Other locations – 29 startups
58
8
10

9. Munich Blockchain Startups (10)
www.chain.de | as of April 2018
Munich – 10 startups

10. www.chain.de | as of April 2018
Industry Focus of German Blockchain Startups
Finance (22)
Public Chain
Infrastructure
(11)
Digital
Identity
(6)
Intellectual
Property
(6)
Enterprise
Infrastructure
(5)
IoT
(5)
Real
Estate
(5) All
Others
(45)

11. Blockchain Founders (male/female)
www.chain.de | as of April 2018
95%
5%

12. ICOs
Initial Coin Offerings
www.chain.de | as of April 2018

13. Not all Blockchain Startups are ICO Startups,
but all ICO Startups are Blockchain Startups.*
* this will change with the rise of security tokens

14. All German ICO Startups (54 out of 105)
www.chain.de | as of March 2018

15. All German ICO Startups
www.chain.de | as of March 2018
Past ICOs (18) Current ICOs (15) Upcoming ICOs (25) + stealth

16. Successfull German ICOs (examples)
www.chain.de | as of April 2018
Envion
$ 100M
Savedroid
$ 49M
Raiden
$ 32M
Copytrack
$ 10M
realisto
$ 1,7M

17. Legal structure of a token
www.chain.de | as of April 2018
Utility Tokens
Description: It’s best to think of a
Utility Token as a pre-paid voucher for a
non-existing services
Characteristics:
• Closely tied to the functionality of
the issuing network or application
• Internal network/app currency but
not necessarily attempting to be a
currency
• Grants owners the right to actively
contribute to the system vs. passive
investor role
• Avoids security-like features
Security Tokens Cryptocurrencies
Description: A token that behaves like a
security (“Wertpapier”)
Characteristics:
• Showcases security-like features,
e.g. voting on decisions regarding
the issuing entity, dividends, or
profit shares
• Holders are regarded as owners
• Little or insufficient utility
Description: A token that is a pure
cryptocurrency
Characteristics:
• Acts as a store of value and medium
of exchange
• Not emitted by a central authority
against which owners have claims
• Examples: Bitcoin, Litcoin, Cardano
Source: Untitled INC

18. Token Models (utility, security, currencies)
www.chain.de | as of April 2018
•99% of all ICO startups are selling
Utility Tokens
• ... to avoid regulatory issues of being qualified as a security (=“Wertpapier”)
• ... based on the ERC20 token standard (Ethereum Blockchain)

19. Utility Tokens: Startup’s point of view
www.chain.de | as of April 2018
• Utility tokens can be traded on a secondary market (early liquidity)
• chance of quick wins by token flipping (momentum trading)
• raise capital without giving away equity
• raise capital without giving away control
• raise capital without vesting schemes and lock-up periods
• build up a community even before the launch of the product
• regulatory issues, changing regulatory landscape
• preparing an ICO can be expansive (legal fees, marketing expenses)

20. Utility Tokens: Investor‘s point of view
www.chain.de | as of April 2018
• utility tokens can be traded on a secondary market (early liquidity)
• chance of quick wins by token flipping (momentum trading)
• no shareholder rights in the startup
• no exit and no dividend participation
• no pro-rata rights, no liquidation preferences
• no control and no information rights (“black box”)
• no real due diligence possible
• no valuation guidelines (you are probably paying too much!)

21. Two big issues with utility tokens
www.chain.de | as of April 2018
Utility tokens only make sense for:
• business models based on decentralized protocols or networks
• and business models for which decentralization gives you a real
competitive advantage to existing centralized market players
Misalignment of investors interests’ and founders’ interests as
utility tokens don‘t grant any shareholder rights in the startup.
So, the value of the utility token is decoupled from the success of the
startup (and ultimately the performance of the founders).
1
2

22. We are entering the 2nd wave of ICOs
www.chain.de | as of April 2018
1st Wave: Utility Tokens
Tokens get their value
from their utility
2nd Wave: Security Tokens
Tokens represent
ownership of assets
100X market potential

23. What happens when Venture Capital meets the Blockchain
www.chain.de | as of April 2018
Venture Capital brings:
• deal sourcing, selection, structuring
• comprehensive due diligence
• proven legal framework for balancing
investors’ and founders’ interests
• active portfolio management
The Blockchain brings:
• transparency, security, scalability
• fast and easy transactions of shares
• increased liquidity as security tokens
can be traded on exchanges
• more inclusivity (i.e. an opening to
new investor groups).

24. 5 Predictions
www.chain.de | as of April 2018
• The number of blockchain startups in Germany will go from 100 to 1.000 within
2 to 3 years
• The current wave of utility tokens ICOs will be over by end of 2018
• The value of most (not all!) utility tokens will go to ZERO
• The 2nd wave of ICOs will be the sale of security tokens
• In the long run Blockchain and Venture Capital will reconcile and create a better
and more efficient way of Startup Financing

25. THANK YOU!
@florianhuber
www.chain.de