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Are ICO’s the death of Angels?

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Killing Angels. Are Initial Coin Offerings (ICO’s) the death of early stage investing?

Imagine a startup that aims to build a decentralised cloud storage network, essentially disrupting platforms such as Dropbox and Box. The startup, not having a working product or any traction yet, decides to raise funding.  It does this very successfully raising $257 million. In the past year, this and stories like it have dominated the funding discussions thanks to Initial Coin Offerings (ICOs). Yet most traditional Venture Capitalists (VC’s) and Angels missed out on these ‘opportunities’ and have started questioning where their role sits moving forward.

At the annual World Business Angel Forum coming up in February, you can be sure that amongst the normal topics of macro trends, impact investing and philanthropy, that ICO’s are going to be the amongst the hottest conversations both at the conference and in the hallways and bars afterwards.

With ICO’s overtaking early stage Venture Capital it is a topic that everyone is keen to understand

As opposed to equity/debt financing, ICOs are events where a startup raises funding through issuing tokens to the public. These tokens do not represent a stake in the company; rather, it primarily serves either as a securities or utility token. Securities tokens attempt to provide investors with returns for holding them while utility tokens act as “gas” for using the system the startup builds. Either way, investors aim to profit off these tokens on the various crypto exchanges. According to data from ICObench, ICO proceeds increased 141-fold, from $9.7million in Feb 2017 to $1.3billion in Dec 2017.

With more than 180 new ICOs scheduled to launch in 2018  it is easy to see why it is dominating conversations.

Of course, it is not just just early stage investors that are watching this space closely,  governments too are beginning to notice. Late last year, South Korea joined China in banning all forms of ICOs.

But for every South Korea and China, there is Switzerland or Estonia, the former known as Crypto Valley for its political stability and support for ICOs , the latter recently announcing to launch est-coin in its bid to be the global ICO hub.

The question for investors and for governments is whether this is another unsustainable bubble or whether it is some much needed innovation in a sector screaming out to get more funding into the hands of those creating value.  The lack of regulation certainly presents potential investors with another risk factor.

For those looking for a safer way to get involved, one option might be funds such as Polychain Capital and Fenbushi Capital. They specialise in blockchain vertical only portfolios. These funds also do invest in pre-sales, enjoying discounts on token prices and occupying an advisory seat on a startup’s board. This in turn provides the startup with more credibility, boosting demand and eventually prices of the tokens. It doesn’t hurt to diversify into blockchain startups if it falls within an angel’s or a fund’s thesis.

Proper Governance Models; Angels and VCs may look to invest in startups before they raise ICOs once milestones are met or come in at a later stage post-ICO when traction is gained. Alternatively, funds may be locked up in a cold wallet and voted to be released as milestones are reached. This model has not been explored yet but it could offer stability and trust.  However, looking beyond the core business and seeing who is on the Board, or what partnerships are already in place is also very important.

Either way this is a fascinating time to be involved in the scene.  If you want to be involved in the conversation then it is well worth heading to Istanbul to join the World Business Angel Forum 2018

Where:  Istanbul, Turkey
When:  18 – 20th February 2018
How:  Tickets at http://wbaf2018.istanbul/

World Business Angel Forum is an official partner of AsianEntrepreneur and supports Entrepreneurs around the world.

This article is part of the World Business Angel Forum media partnership with AsianEntrepreneur.org

If you would like more information about WBAF, please contact Callum Laing WBAF High Commissioner for Singapore. [email protected]

Investors

Victor Tan

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Victor Tan enjoys working in the start-up sector. His passion is to help SMEs and start-ups grow.

What’s your story?
I was born in Singapore. I moved to Australia for the majority of my life and I have now been back in Singapore for the past 6 years. Currently I am the CFO of Unity Group, which is a boutique merger and acquisition advisory firm. I have been in the big corporate world for the about two thirds of my career and for the past 5 years I have been involved in the start up and SME space.

What is your involvement with Investment?
My biggest investment is my time and positioning my career to focus on the start-up and SME sectors.

How did that come about?
A couple of reasons:

  1. I loved the big corporate world and the skills I Iearnt in that world. However I felt that I was wanting more and I wanted to really contribute and impact on the success of a business. In the SME space, every staff member is important and every contribution impacts the business in many ways. In the corporate world, sometimes you just feel like one of the many cogs in the wheel.
  2. SMEs are typically the forgotten businesses in the world. Everything is up against them even though SMEs contribute the highest % of their profits in taxes in all developed countries in the world. However, they are undervalued, lack the ability to grow and raise funds.

What are some of the key things you have learnt about Investing?
Establish your strategy and stick to it.

What mistakes do you see less experienced investors making?
Speculative trading or getting rich quick. There are no quick wins. It all comes down to believing in your objective or strategy, working hard, sticking with it and being adaptable to change.

What mistakes do you see Entrepreneurs making?
Surrounding themselves with advisors that are “yes“ people who do not add value. Typically entrepreneurs are full of passion and sometimes that passion and emotion clouds their ability to make good decisions. Advisors around entrepreneurs, whether they are the GM, CFO or legal counsel, need to assist the founder of the business to stay on the same path but at the same time give the founder room to breathe and be creative.

What’s the best piece of advice you ever received?
You have to work hard and smart.

What advice would you give to those seeking funding?
Product and data, data, data! Product or goals need to be defined, broken down and measured from the outset. That’s the only way of defining success (whether its based on revenue, profit, number of customers, etc) and it sets a performance-driven culture. The qualitative component of the product or goal is equally critical to ensure business performance and correct culture. Once these are defined and measured, it demonstrates your ability to define and measure the performance. This directly applies to seeking funding for your business. Without any quality data, investors are unable to assess the progress or viability of the product and also the future potential growth of your company.

Who inspires you?
My dad. His ability to rise to the top of his profession and give it all up for us kids.

What have you just learnt recently that blew you away?
A quote from Malcolm X, “There is nothing better than adversity. Every defeat, every heartbreak, every loss contains its own seed and its own lesson on how to improve your performance the next time.”

What business book do you recommend the most?
Unfortunately I don’t read books.

Shameless plug for your business/organisation:
The team at Unity really believes in supporting the SME sector and changing the landscape for small businesses around the world to enable small businesses to compete with the big boys, win bigger contracts and reward those that are creating the most value in the world.

How can people connect with you?
LinkedIn: http://linkedin.com/in/victor-tan-22880535

This article is part of the World Business Angel Forum media partnership with AsianEntrepreneur.org

If you would like more information about WBAF, please contact Callum Laing WBAF High Commissioner for Singapore. [email protected]

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Investors

John Sharp

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John Sharp gets a buzz from bring something new into the world!

What’s your story?
I started my professional career as an orchestral arranger and composer in Adelaide, Australia. Software rendered my chosen profession obsolete within a few years and pushed me down the path of networking and software. I built a Chinese language TV network, ran the Asian market for the world’s biggest ever startup, US-based WorldSpace, (where we raised 1.8 billion in our seed round) and then I built and sold a US-based cybersecurity company, when Google was telling you it’s scanning your email for viruses. We built that! In 2010, I moved back to Singapore from Florida, which is just like Singapore, with less cobras and more alligators!

What is your involvement with Investment?
I co-founded Hatcher along with seven other investors in 2013. Since then me and my fellow investors have made 21 investments in 13 companies – one of which I now work for, Hatcher+. Hatcher+ is a new AI and machine based learning platform for venture investment that has plans to make 2,000 investments over the next 3 years.

How did that come about?
I have been building and selling companies all my life. My first investment was an Asian digital sample library that returned 50 times, and my second investment was a satellite TV channel that returned 5 times. My third investment was a failure. Once you have the startup investment bug, it becomes impossible to get off the train. Nothing else is as exciting or rewarding as bringing something new into the world. It’s addictive!

What are some of the key things you have learnt about Investing?
The most important thing about investing is the valuation you come in at. Our research at Hatcher+ uncovered an interesting fact recently; most angels accept valuations that are far too high. So with this in mind, angel investing is like buying and selling a house, you need to focus on buying at the right price. The second key thing is you need to invest in honest, hardworking, intelligent, positive people. You can always put up more money, but you cannot inject optimism that is not already there.

What mistakes do you see less experienced investors making?
Experienced investors, including myself, all make the same mistake; we invest in one or two companies, or small, non-diversified portfolios, in the belief that we can grow unicorns in hamster cages. However, sometimes this is possible. Our first investment company had a TYPI of 0.40 within 3 years, which currently puts it in the top 10% of funds worldwide. However, this kind of result requires a lot of luck and hard work.

What mistakes do you see Entrepreneurs making?
Entrepreneurs need to share the good and the bad with investors. Investors are great at helping with both. One time, when I was a much younger entrepreneur and CEO of a startup that had just raised $22USD million, I was in a board meeting, waving my arms around, painting a bright picture of the future and one of my new investors put his hand up and said “Stop! You have our money. You can take off the cheerleader skirt now. What problems are you facing with the business?” I’ve never forgotten that moment. You need to be real with your investors, and tell them what is going on. Don’t wait until it’s too late to ask for their help.

What’s the best piece of advice you ever received?
The best piece of advice I ever received was from an investor from Malaysia. At my very first board meeting he asked me if I knew what CEO meant? I said, “of course I do, I’m not that naive. It stands for Chief Executive Officer. He smiled and then shook his head. “You’re wrong,” he said. “CEO stands for Customers, Employees, Owners, in that order of importance.” His point being, if you look after your customers, and treat your employees well, the owners will benefit automatically. Great advice.

What advice would you give to those seeking funding?
When you seek funding, you need to be aware that investors care mostly about three things: How much, how long do you need it for and how much will I get back?

Who inspires you?
My wife inspires me. She is the most balanced, level-headed person I’ve ever met. She’s an amazing mother, a no-bullshit friend, and has a great outlook on life. I wish I could be more like her.

What have you just learnt recently that blew you away?
I recently learnt, first-hand, from my partner at Hatcher+, Dan Hoogterp (possibly the smartest man I’ve ever met), how unbelievably powerful AI can really be. It’s one thing to read about the capabilities, it’s another thing to input data and watch a machine output smart decisions that are hundreds of times more powerful and informed than human-based decisions. What I learnt is that AI is far more powerful than 99% of us know and, it’s growing in power exponentially.

What business book do you recommend the most?
The best business book for entrepreneurs to read is the Innovator’s Dilemma. It explains with great clarity, how to succeed as a small fish in an ocean full of predators. It is one of the very few books that fundamentally changed my outlook on being an entrepreneur and made me believe that a small company is capable of any level of success it aspires to.

Shameless plug for your business/organisation:
Hatcher+ is on a mission to revolutionize venture investing. We believe AI and machine learning, used in partnership with leading accelerators, can revolutionize deal sourcing and selection, and we believe that adopting portfolio theory through the use of massively scalable portfolios is the future. Finally, we think that 15 year venture funds are done. The future will consist of ETF-like venture funds traded on blockchain enabled exchanges. That’s what Hatcher+ is enabling.

How can people connect with you?
People are welcome to connect with me via Hatcher.com or LinkedIn.

Social Media profiles?
Twitter: https://twitter.com/gohatcher
Linkedin: https://linkedin.com/company/hatcher
Blog: https://hq.hatcher.com/blog.php

This article is part of the World Business Angel Forum media partnership with AsianEntrepreneur.org

If you would like more information about WBAF, please contact Callum Laing WBAF High Commissioner for Singapore. [email protected]

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