How Blocks Ventures Venture Debt works

venture debtBlocks Ventures does venture debt for ICO’s.

The terms of the venture debt:

  1. Has interest
  2. Requires a small piece of equity
  3. Requires tokens at the ICO

Investment decision making process

We go through the following process around our investment decisions:

  1. Screening deals (prefer companies with substantial traction and clear utility token)
  2. Do due diligence (team, financials, vision, culture etc.)
  3. Check with our investors for preico investment appetite
  4. Check with our listing partners for their interest in listing the token
  5. Make offer
  6. Negotiate terms and close
  7. Send cash and introduce advisors etc.

The whole process can take a couple of weeks however as we are small in size and can only do 3-4 deals a year our filters have to be high due to the opportunity costs.

Investment size

Our ticket size is $500k to $1m for the venture debt. We believe that it should take around 4-6 months to launch a successful ICO and the barriers to entry are becoming higher with the number of ICO’s exploding which means that good ICO’s need time and money to develop themselves.

PreICO investments

We don’t invest in preico investments as this is not our thesis and prefer to help businesses with doing their ICO’s and coming in earlier than traditional investors.

ico investment

If you would like to have your business considered for investment please send us a message through our contact form.

 

When you launching a your whitepaper

ICO whitepaperThere are two schools of thought around when should you launch your white paper, which is either to launch early or launch late with your white paper.

Launch white paper early approach

Traditionally ICO projects would launch their white papers months in advance. The idea is to give the community time to scrutinise the paper and provide feedback. The white paper often will be changed over the course of time and has versioning. Often white papers are very technical and can take time perfect hence the more time that the community has to review the better.

In addition to the white paper the token code can be made open for review.

Launch white paper late approach

A new school of thought is to launch a few weeks before the ICO and to try to get attention and funding while token buyers have given the white paper a look over.

It is often said that only a small number of buyers in fact read the white paper. This makes sense as most buyers only buy small number of tokens and often will buy less than $200 of token value. With this in mind the incentive to spend to much time on reading a typical white paper that is over 20 pages makes sense.

Under this approach the ICO marketing will be very aggressive and be dominated by paid marketing and fear of missing out (FOMO) tactics.

Conclusion

Based on the marketing approach the timing of the release of the white paper can be figured out. The preico demand can also play a big part of the timing as if you have a high percentage of the ICO already filled out +50% then the white paper release becomes less important.

 

Singapore ICO Community

singapore-ico

The Singapore ICO community is one of the most vibrant and interesting parts of the ico world atm.

For example Vitalik Buterin (founder of Ethereum) has made his base in Singapore. Previously he was in the other ICO powerhouse of Zug Switzerland.

As an economy Singapore is a hub of international travel, people can setup companies easily, there are many skilled staff, a community of minded individuals in the crypto currency space and a safe pleasant lifestyle in one of the worlds most developed cities.

The Singapore government is very progressive around fintech and has actively tried to foster innovation in this space. MAS chief Ravi Menon has also said that it will not regulated crypto currencies at this point in time.

They did warn about ICO that promises a dividend or economic benefits then it could be considered a security and would fall under Singapores Securities and Futures Act. If a token was considered to be a security this would limit their trading ability and also subject the tokens to more scrutiny. This is similar to the US securities and utilities arguments that we wrote about before.

Singapore has many tech events and gatherings and is a great place to meet people who are interested in this market and also build up your broker and high net worth connections that you may need for your PreICO round.

Some notable ICO’s in the past out of Singapore are www.Tenx.tech which raised around $80m in their ICO.

In general Singapore based teams raise lower amounts for their ICO’s. This market is however vibrant and has many events every week to find people in an offline world which can make all the difference in helping you make friends.

 

How to do PreICO sales

High NetworthThe PreICO sales of any ICO is really important. It is also a lot more like traditional equity investing sales with 1 on 1 interaction with buyers and traditional pitch decks. Many people tend to want to overlook this part of an ICO and believe if they can create enough PR hype then investors will come to them. This unfortunately does not happen in most cases.

Many tech people are not comfortable doing direct sales, which is largely about story telling and networking to find interested buyers. In most cases tech people are not charismatic or extroverted and prefer to work diligently on their code vs presentation skills and therefore struggle with the PreICO sales process.

Building an all round team makes a lot of sense over just because you plan to do a token sale does not make it okay to overlook the extroverts and sales guys.

Finding the large token buyers

Finding larger token buyers can usually be done by going through brokers, however if you have a good network of friends they can also make introductions to high net worth individuals.

Traditional venture investors could also invest in token offerings as seen in Filecoin or Omisego but this is unusual and not often seen in most ICO’s. Usually your ICO will only get this kind of funding if it has already received venture investment and will be supported by existing community of traditional venture investors.

All investing requires a lot of consensus building and this is why the seed round of investing even before the PreICO can be really important in getting the money for the PreICO.

The idea that large investors will come knocking on your door when you announce your ICO. This is unlikely to happen as investors want personal time and have their questions and any issues addressed.

 

ICO Advisors who do you need?

ICO advisors

One of the things that is fairly unique to ICO’s is the need to have advisors for your ICO.

The reason that advisors are so important is that there is a lack of knowledge in the community around ICO’s and blockchain technology.

Advisors generally fall into two categories, tech advisors and business advisors which are published in the website and white paper. There is also a third group of advisors that work in the background and usually focus on fund raising and preparing the ICO.

The technical advisors are highly prized for tech projects that are still planning to build their projects. These are some of the biggest ICO’s as they often deal with core blockchain problems and are seen as core to the ecosystem.

The business advisors are traditionally used to bring credibility to the project and also help with pre-ico fund raising for their connections to buyers of ICO’s.

The fund raising advisors are more like traditional brokers, they often bring marketing support and investment banking expertise with them.  They often also advise the business on legal structures, white papers, media buying and community building.

Fees around advisors vary widely based on experience, project type and other fees like cash disbursements.

It is traditionally advisable to have at least 1 or 2 technical advisors on your team and some business help around the Pre-ICO fund raising.

How ICO’s raise money

We read about ICO’s raising huge amount of money and wonder where the money comes from.

Lets have a look at some of the prominent big ICO raises:

Money Raised Number of Token Holders Average Investment
FILECOIN $257,000,000 2100 $122,381
EOS $185,000,000 89,306 $2,072
BANCOR $153,000,000 12,832 $11,923
STATUS $90,000,000 41,264 $2,181
TENX $80,000,000 36,242 $2,207

The Filecoin ICO seems like a bit of an anomaly with the average investment being much higher than other ICO’s. Much of this was due to the fact that it had backing from large venture capital investors like, Sequoia Capital, Union Square, Andreessen Horowitz and Winklevoss Capital.

However most ICO’s don’t get support from traditional venture capital and therefore rely on smaller buyers for their funding.

Even though this could lead us to believe that ICO’s could be funded by small buyers, the reality is that ICO’s need to build momentum in their ETH wallets when they open their ICO sales. This is why Pre-ICO sales are so important as a way to build momentum for the  token sales.

The next thing to look at is what an average buyer would actually purchase. In our experience the average buyer is around $200 therefore the $2000 average is really pulled up by “whales” (large buyers) that buy much larger amounts of tokens.

So if you wish to do a successful ICO you need to not overlook Pre-ICO sales and make sure you build momentum going into the public sale.

Why we started Blocks Ventures

Having been serial entrepreneurs we realised that the advent of initial token offerings otherwise known as “initial coin offerings” (ICO) have the ability to shift the way startups raise capital.

There are huge benefits for investors and entrepreneurs in this new funding option.

Investors Benefits:

  • Access to liquidity with tokens vs traditional equity investments
  • Smart token contracts that make tracking business performance transparent
  • Initial token valuations are not as important due to the fact that these are tokens and not equity

Entrepreneurs Benefits:

  • Not having to give away control in order to get capital
  • Raising money without having to worry about valuations

We want to help entrepreneurs with funding, information, networks and our experience in this new and every growing field. In our opinion there is not enough information, experience or guidance in the crypto currency world. We believe that many people are naive about the legal implications around this as well and don’t spend enough time looking at the legal structures, token offerings and legal documentation that is required to do an ICO properly.

Apart from this help we believe that there is significant cost to doing an ICO properly and many businesses have not adequately funded themselves for the costs involved. This is why we would like to provide financing for this and help entrepreneurs get the best results for their ICO’s.

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