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29 cool slides about ICO and ITO

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29 cool slides about ICO and ITO

  1. 1. Structuring ICO Wild West
  2. 2. Blockchain and ICO industries overview
  3. 3. Despite the buzz in the industry, Blockchain market is underfinanced and accounts to 2,3% of FinTech market There is a decreasing tendency towards launching new blockchain companies 2015 and 2016 showed a very slow growth in the block- chain investments: 33% and 18% respectively While Blockchain industry has an enormous potential, it was invested only 0.5B USD in comparison with 23B USD invested into Fintech industry, meaning that the Blockchain industry is underfinanced Several companies were already acquired by bigger ones due to lack of funding 2016 542 2015 458 2014 344 2013 83 2012 3 119 99 54 31 12 Investments in blockchain Key market observations # of rounds amount of capital, $M Major Acquisitions in 2016+314% +33% +18%
  4. 4. 1 Circle 2013 Late $110M 6/16 $60M US Remittance 2 Ripple 2012 B $90.5M 9/16 $55M US Remittance 3 Blockstream 2014 A $76M 2/16 $55M Canada Bitcoin 4 Bitfury 2012 Late $110M 1/17 $30M US Security 5 Bitflyer 2014 C $32M 4/16 $27M Japan Exchange 6 Quoine 2014 A $22M 6/16 $20M Singapore Finance 7 Coibase 2012 Late $117M 7/16 $10.5M US Info, bitcoin 8 Gem 2014 A $10.4M 1/16 $7.1M US Developers 9 Simplex 2014 A $8.4M 2/16 $7M Israel Payments 10 Symbiont 2015 A $8.3M 1/16 $7M US Software 11 Tech Bureau 2014 A $6.5M 5/16 $6.5M Japan Developers 12 Zaif 2015 A $6.7M 5/16 $6.2M Japan Finance 13 Lisk 2016 PreA $5.7M 3/16 $5.7M Germany Developers 14 BlockStack 2014 A $5M 10/16 $5M Philippines Banking 15 Elliptic 2013 A $7M 3/16 $5M UK Bitcoin 16 Bitt 2013 A $5.5M 4/16 $4M NZ Payments 17 Chronicled 2014 PreA $3.4M 3/16 $3.4M US Hardware 18 Equibit 2015 PreA $3M 2/16 $3M Canada Finance 19 OB1 2015 A $3M 12/16 $3M US E-commerce 20 OpenBazar 2014 A $4M 12/16 $3M US Consumers The Blockchain industry is obviously underfinanced: the difference between the 1st and 20th largest investment deals in 2013-2016 is 2750% (or $57M) – sign of green industry
  5. 5. Need for new crypto investment instruments became a trigger for ICO growth Raise of blockchain assets Raise of models of cryptocurrency applications Raise of cryptocurrency investment instruments 2009 2013 2017 The market of Blockchain assets, including crypto curren- cies was very limited to “but/sell” only. Investments in blockchain were also limited by risks and early stage of an industry New ICO options emerged on a basis of crowdfunding and crowd investing in to a startups. The 1st ICO was held in 2013. New ICO options emerged on a basis of crowdfunding and crowd investing in to a startups. The 1st ICO was held in 2013.
  6. 6. What is ICO? Tokens are crowdfunding units, sold by projects in order to develop the product / support the expan- sions / accumulate tokens for other goals Tokens represent rights, which may be of different types: In many cases tokens give a right to get some service in future (eg. transactions) It can be an access to the platform In certain cases tokens represent rights for dividends or underlying assets (eg, commodities or shares) In the process of ICO tokens can be sold for fiat (USD, EUR) or more liquid tokens with mature eco- system and cryptocurrencies (bitcoins and ethers) ICO ITO Alternative and better naming for ICO: ICS TGE - Initial Coin Offering - Initial Coin Sale - Token Generation Event - Initial Token Offering From the business logic, ICO is much closer to crowdfunding than to investments ICO Crowdfunding
  7. 7. ICO - the new tool to address funding challenges of Blockchain industry ICO already surpassed VC funding for blockchain companies in 2017 222 145 121 Q2Q4Q3Q2Q1Q4Q3Q2Q1 Q1 20162015 2017 43 173 161 82 116 232 96 31 25 21 17 11 3 ICO token sales, $M # of deals early stages VC, $M ~$300M $1.6B+ Raised through ICOs 2014-2016 1H 2017 Initial Coin Offerings started to gain importance in 2016, with the potential to capture more interest Until 2017, all the token launches were less than 1% of global crowdfunding activity, suggesting opportunity 45135 23 148 121 794
  8. 8. Market dynamics & expectations 4513 235 148121 794 771 873 975 1077 650 520 Q2Q4Q3 Q4Q3Q2Q1Q4Q4 Q3Q2Q1 Q1 2016 2017 2018 Core observations: Currently – there were around 300 ICOs done up to date, the number grows at a quicker pace Huge amount of crypto capital is underused, new investment instruments are still on the rise Expectations are high enough, market shall correct itself in the near future, and become more stable The number of ICOs is growing faster than the volume of new money on the market Market saturates quickly, many low quality projects / risky ideas appear The industry sees an influx of high quality talents and smart capital Market observations: Large institutional investors get interested in tokenized economy Growth of new business / ownership models that come along with tokenized experiments ICOs brings an interest from governments, new regulation activi- ties shall boost the industry forward; ICO token sales, M $ ICO token sales forecast, M $ ICO market cooling down due to decrease of "hype" level Market renaissance due to entering of VC funds and institutional investors to ICO market
  9. 9. Money. Big Money! So, what is the reason for this craziness?
  10. 10. Why ICOs are so popular? Democratization of access Everyone can participate Not limited by geography Opportunity to invest accumulated cryptocurrency People still don’t have many ways how to spend cryptocurrency except conversion into fiat. This problem is especially acute for crypto ‘whales’, who don’t have a way to withdraw their tokens into fiat without losing much value Opportunity to trade tokens immediately Unlike in case with VC investments, new tokens can usually be traded almost immediately on an exchange Crypto-community inborn passion for modern technologies and applications They are trying to support any initiatives that are disrupting existing rules and standards
  11. 11. Today ICO is like a show, which is even bigger than match of the year “Floyd Mayweather Jr. vs. Conor McGregor” Money Fight 2017 $600М “SHOW” $1.6B “SHOW” VS “The Money Fight”
  12. 12. More and more companies are coming to ICO, creating big opportunities for any kind of investors Notable ICOs ($M) Tezos 208 EOS.IO 200 Bancor 153 Status 95 Tenx 80 MobileGo 53 Sonm 42 Basic A Token 35 Civic 33 Storj 30 Polybius 29 Aragon 25 Aeternity 22 OpenAnx 19 Cosmos Network 17 Qtum 16 GigaWatt 15 Mysterium 14 Nimiq 14 TokenCard 13 Dao Casino 12 Gnosis 12 IEX.EC 12 ABT coin 12 Blockchain Capital Fund 10 Taas 7.7 Zrcoin 7.1 Matchpool 5.6 Chronobank 5.4 Humaniq 5.2 Starta 5.1 Excudo 5 Dimcoin 4.7 Wetrust 4.6 Encryptel 4.5 Cryptotel 3.8 Dfinity 3.8 Lunyr 3.4 Trueflip 3.1 Melon 2.9 Quantum Resistant Ledger 2.8 Edgeless 2.7 Skincoin 2.5 Done, ongoing and pending ICOs 314 Total proceeds $1,27M Average Proceeds $23M Median Proceeds $5.5M
  13. 13. ICOs allow startups fundraise millions of USD within minutes/hours Project Country ICO volume Duration of ICO Tezos Switzerland $206.33M 14 days EOS Cayman Islands $200M 341 days Bancor Protocol Switzerland $153M 3 hours The DAO Stateless $152M n/a Status.Im Switzerland $95M 17.2 hours MobileGo USA $53M 1 month Basic Atention Token USA $35M 30 seconds Polybius Estonia $31.64M 6 weeks Aragon Estonia $25M 15 minutes æternity Liechtenstein $24.75M 3 weeks
  14. 14. Solidx Trust ETF Currently denied by Sec on up listing N/A N/A Size ICO status First VC funds are entering ICO market and fundraising through ICO, but it’s overall quantity and funding amount is still very low (3-5% of the whole ICO industry) Brings SEC and regulatory bodies’ certainty to industry Narrow focuses emerge: bitcoin trading, protocol investments New investment instruments are killing the fraud due to higher control New instruments owners are unexperienced Bitcoin and crypto assets are easy to purchase, no need for dedicated funds Inability to acquire other digital assets High risks, unnecessary fees, low quality DD analysis Pros Cons Taas Fund Hedge fund focused on trading cryptocurrencies $7.5M Done Size ICO status Blockchain Capital Tokenized Blockchain venture capital fund $10M Done Size ICO status Pantera Capital Hedge fund focused on trading cryptocurrencies $35M Done Size ICO status Starta Capital Acceleration program $5M Going Size ICO status BB Fund Venture capital fund focused on investments in Blockchain N/A Coming Size ICO status Finshi Capital Tokenized venture capital fund N/A Going Size ICO status Grayscale Trust ETF Currently trading OTCQX, seeking up-listing to BYSE N/A N/A Size ICO status
  15. 15. Tokenized Funds comparison Target or Raised (AUM) Registered/Based Structure & license Fees Profit share / dividends Own tech platform, audit and wallet Previous investment experience and relevant background Geo Focus Strategy focus and industry Investors TaaS $8M Singapore / No info LLC, No any legal information available Diverse ICOs, no focus - Non-accredited individuals, no KYC Unlimited # n Entry fee– 15% Success – 25% Tradable No Quarterly Yes No Finshi Capital n/a Singapore/Russia LLC Not licensed No strategy - Non-accredited individuals, no KYC Unlimited # Entry fee – 12.5% Success fee – 20% Tradable on exchange No After exits No No Blockchan Capital $50M Singapore/US FMC Licensed for accredited investors Blockchain startups Global Accredited with KYC Limited # Annual fee – 2.5% Success fee – 25% No private deal with CEO 1 year lock-up, private sale No 63 investments / 5 exits Mainstreet Capital $50M Singapore/US FMC, LP-GP Not licensed Manufacturing, Healthcare, Real estate Midwest US Non-accredited individuals, KYC Unlimited # Entry fee– 10% Success – 25% No, private deal with CEO After exits No No Monkey Capital $50M Singapore/Singapore LLC Not licensed Aerospace, Blockchain, Fintech, Real Estate USA, SE Asia, Europe Non-accredited ndividuals, KYC Unlimited # - Tradable on exchange No - No No Starta Capital $5M Singapore/US LLC Not licensed Seed stage tech startups, no focus Eastern Europe Non-accredited individuals, KYC Unlimited # Annual fee – 2.5% Success fee – 20% Tradable No No No Accelerator activities / no exits BB Fund $200M Singapore/Singapore FMC, LP-GP Licensed in Singapore Tokenized Fintech and Blockchain companies Asia, Europe, US Accredited with KYC Limited # Entry fee – 4% Annual fee – 2% Success fee – 20% Tradable Yes, semiannual redeem Semiannual Yes 23 investments / 7 exits Token liquidity, Exit possibility
  16. 16. We can say today that ICO became a stand-alone industry Protocols Protocols investing in other protocols Exchanges Financial & Legal Advisors HNWI traders Crypto hedge funds VCs with equity and tokens VCs with EquityMarket Makers Market data General Market research ICO Market research non-token transaction token transaction
  17. 17. Why it can be interesting for VC funds? Traditional VC Crypto investments Investment horizon 7-10 years 1-5 years Ownership model Privileged shares Crypto tokens, crypto currency Entry stage Angel, Seed, A/B rounds Pre-mine, Genesis, pre-ICO, ICO Exit options IPO, M&A IPO, M&A, placement on exchange Business model Product or service sell Closed loop – economy, based on crypto Legal structure Limited partnership No Jurisdiction for DAO registration Entry Sources Private investors, family, Crowdfunding, innovative funds institutional investors and private investors, future users Currencies Fiat ($, RUR, £) Fiat and cryptocurrency Criteria New or emerging business models New business models creation
  18. 18. Going to ICO – not easy, but still can be done quickly Pre-announcement PR-Campaign Start of sales in the ICOOffer 1-2 months Announcement of the project in the communities of crypto- currency investors Bitcointalk, Reddit, others; Purpose is to explain the essence to investors and receive the first feedback Proposal for conclusion of the transaction; Addressed to a particular person, a limited or unlimited #; Offer covers all the nuances of the project, specifies tokens; After signing the offer, the start date of the sale of tokens is announced Presentations and various conferences; Road show – meetings with prospective major investors and analysts; Target audience - participants of crowdfunding program, so-called ”business angels”; Collect a min amount of money, specified by the offer, and then release the tokens; Sell the tokens on the crypto- currency exchanges. It’s neces- sary to release it in advance; 2-5 weeks 1-3 months 1-12 months
  19. 19. ICO is good for every participant of the market? Efficient fundraising: fast, low-cost, convenient, less documentation etc Relevant Investors from the community (and first users/advocates) Branding and marketing due to community building “Skin in the game” with early adopters Share both the risks and the benefits of their efforts with the investors Angel/VC/CVC/corporate funding is much more intrusive on the founder’s vision Democratization and low entry barriers (almost everyone from everywhere can participate, at least whil it’s not regulated) High liquidity Divest from main cryptocurrencies into coins Some transparency (eg, with an escrow) Early access to a token which has the potential for capital growth ”Gaming” - the returns from investing in ICOs can be in the 1000% and also complete losses Diversification of assets (no link to macro economics, fiats, stock markets etc) Involvement - Investors can be part of a community and first users Just a new innovative and trendy way to deploy capital Internet revolution: new companies and their tokens/coins will help building a new decentralized web, independent from any central entity. Finance revolution: Blockchain is assumed to be at the cutting edge of fintech, the technology and business model being proposed will benefit the whole community. Education and Time to mature: more competition in the crypto space makes the competitors better and stronger, the Blockchain projects are getting mature and prepared for the real competition (tradition- al enterprises, banks and other incumbents) For Founders and Entrepreneurs For conventional “investors” /crowdfunders Cryptocurrency community
  20. 20. What value VC Funds bring to investors ICO market? Pre-ICO significant discounts VC funds are usually invited to participate at so-called “private presale” or “pre-ICO” Opportunity to get significant benefits and discounts: 10-40% off Access to closed offerings More mature and established startups prefer to offer their tokens to closed loop of professional investors, where the general crowd will not get an access Lower risks in fraud, scam The team of VC fund is able to execute proper due diligence Specialists in block- chain, lawyers and analysts are on board Better investment analysis Only professional knowledge of the market, demand, trends can help to make a right investment decision Usual players on a market have an under- standing of Product market fit Ability to create value of investment> Portfolio managers of VC Fund had experience on value management and provide strong support for investees (networking, interna- tional connections, business development, mentoring etc)
  21. 21. Lack of postinvestment support Misunderstanding of valuation metrics But ICO market has huge problems today: overvaluations, scams, fraud, speculations Existing problems of ICO market create a demand for professional investors, coming from VC industry Misunderstanding market and business Low quality diligence checks (tech, legal, fin) Regulatory risks and lack of legal investigation Lack of professional investors Source of ICO industry problems
  22. 22. Risks Regulatory and Legal ICO risks ICO Taxes Risk Risks related to Regulations. ICO documents do they have a legal basis? Connection between the token holders and holding company Intellectual property Investment/Contribution financial risks No real financial planning and economics behind No previous traction of metrics (usually only MVP or descriptions) Post-ICO slowdown (no real value creation, no media coverage) Business ICO risks Market demand and macroeconomics Traditional players offerings New competitors Technological shifts Regulatory challenges (licenses for business) Voting? Control? Participation? ICO founders risks Usually no real world business experience Motivation after big ICO? Control over funds? Salaries? Financial statements? Token risks Lost or stolen tokens Hacked wallets Challenge of smart contract
  23. 23. If we compare it with traditional fintech-backed startups: $392M 14 rounds in 10 years $440M 8 Rounds in 7 years $217M 5 rounds in 3 years $355M 13 rounds in 12 years VS 1-2 year No traction No recognition on the market Almost 0 money raised previously
  24. 24. Some ICO problems are already visible (after only few months of its boom), so what will be in the future? -$7M -$250K -$32M -$50M
  25. 25. ICO is just a new tool for making investments, not an all-in-one solution that can transform each person into sophisticated investor As well as in any other industry (like medicine), for success in investments you need: Education (math/finance/economics/research) Experience and expertise (VC/PE/IB, fintech, blockchain etc) Balanced supportive team (finance + analytics + tech + legal) Right skillset (communication, psychology) Network and connections
  26. 26. BB Fund executive overview BB Fund, launched by top-minds from Blockchain and Fintech industry and VC fund Life.SREDA, is a tokenized close-end fund, aimed to bring professional investment expertise to the growing ICO/ITO market. The Mission of BBFund is to make ICO market efficient, reliable and trustful for all participants (investment crowd, startups, regulators etc) BB Fund: from “Banking on Blockchain” to “Based on Blockchain” BB Fund initially started in 2016 as a Banking on Blockchain fund, specifically dedicated to FinTech ventures on the blockchain technology. Read on or VentureBeat In 2017 BB Fund team decided to expand its investment focus to all blockchain- related initiatives (including ICO/ITO) and the BB Fund was renamed to Based on Blockchain Fund and submitted its plans for fundraising through ITO Investment strategy Investment stages BB Fund value proposition and USP Experienced, prominent and trustful team of Blockchain and FIntech experts Backed by professional VC fund Life.SREDA (Singapore) with 5 years experience in the Fintech space Open and transparent investment process: information is available to all token-holders Blockchain Sectors ICO/ITO market opportunities and challenges ICO/ITO (initial Coin/Token Offering) is the new way of funding blockchain startups, which is getting more and more popular across FinTech and Block- chain crowd and already hit a record of $1B invested in 2017 only. However the market is very young and immature, which leads to a high inflow of unreliable companies, scams and fraud as well as other risks for investors: financial, legal, technical. The market needs the entrance of professional investment players who will bring trust and transparency to the ICO market. Team of professional VC investors Strong traction: 23 investments, 7 exits Supply chain E-wallets, Digital banks RegTech, KYC Payments Big Data, scoring BankTech Infrastructure, BAAS, BAAP Pre-sale and Pre-ICO stages ICO rounds and actual sales Secondary sales and new rounds GovTech Lending, p2p, Crowdfunding e-Commerce, marketplaces
  27. 27. Life.SREDA – professional VC fund on ICO market Team of professional VC investors Own Accelerators & R&D lab Strong traction: 23 investments, 7 exits annual venture research leading fintech news portal bringing Traditional Banking, Fintech and Blockchain together Innopolis, Russia Singapore London, UK
  28. 28. BB Fund is ready to take off with you on ICO Size of entry, minimum to efficient scale Order of entry Industry life cycle Degree of strategic innovation Complementary assets Relatedness to the market BB Fund’s partners are Fintech and blockchain frontiers Industry influencers, 23 Fintech investments Partners of a fund – ex-Barclays, ex-Lloyds, ex-Fidor Consulting, accelerators, R&D lab, own venture Deep industry knowledge, the leading Fintech fund Built an ecosystem of Fintech – Early stage of the industry life cycle Solid odds to succeed in the shakeout Not the first movers – early birds show the points BBF is a more experienced player – less risky BBF is entering with a significant own resources, which is more efficient and viable Predictor BB Fund’s PositionDegree Significant Significant Significant Early stage Early stage Significant
  29. 29. Industry knowledge and influential power Industry knowledge and influential power