Ran an ICO before? Share your stories (and read mine) here.

[stellatayvc]

Have heard many ICO investors in this forum asking for tips on which ICO to invests, what to look out for etc. Just wanted to share my story from inside the ICO world! Read on if you are interested...

I started working for a regular startup in late 2017. We were having problems getting sales in, our products were about 50%-70% ready, and funding was running out quickly; We had only about 2 months of runway left.

One day, a random connection approached my CEO and proposed for him to ran an ICO as it is the "fastest and easiest way to get funding". My boss was sold on the idea and everyone was roped in for the ICO project. As someone with zero crypto experience and tasked to put the whitepaper together, I had to learn everything about ICO from scratch, inspecting other ICO sites and copying the whitepaper structure from others.

The most surprising thing for me was that our ICO advisor said that our first draft of whitepaper which 3 of us put together in just two weeks was "Perfect", and "Better than most ICOs out there". All in all, it took us about 6 weeks to launch the ICO. [Note: that's how quickly and how easily someone can put together a whitepaper and ICO, so don't trust what you read out there so quickly]

Fast forward 6 months, we only raised 300K and most of the funds were spent back into marketing and market making (yes, you saw it right). Long story short, we kind of ended up where we started and now have a whitepaper to fulfil...

It was a great learning experience for me, but not so great for the company. I've since left the startup because I don't agree with some of the tactics used during the ICO (borderline lying and scheming if you ask me) by my CEO. I can't reveal which ICO I was involved in due to confidentiality issues, but I do hope that those involved get out before it's too late!

Just to be clear, I am all in on the idea of blockchain technology disrupting the future; just not so much for ICO. For those who are investing in ICO, be careful and only put in money you are prepared to lose!

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[r1s2g3]

Just wondering, if you are implicitly saying that money raised in ICO and money required for running the ICO was almost same?
or it was mismanagement that they lost all chunk of money raised in marketing (other than ICO marketing)?

[pawel7777]

...
Fast forward 6 months, we only raised 300K and most of the funds were spent back into marketing and market making (yes, you saw it right). Long story short, we kind of ended up where we started and now have a whitepaper to fulfil...
...

Are we talking by utility tokens or security tokens here? Was ICO opened for US residents? Did you have to comply with KYC/AML regulations?

You say that you only managed to break even - have you not issued any tokens to yourselves, so you could dump later with potentially bigger gain? Have you not assigned small portion for 'bounties' (essentially free marketing)?

Have you verified any previous projects of that 'advisor'? Was he legit? I have my doubts.

[stellatayvc]

Just wondering, if you are implicitly saying that money raised in ICO and money required for running the ICO was almost same?
or it was mismanagement that they lost all chunk of money raised in marketing (other than ICO marketing)?

Not really. We took whatever little money we had left from the company operation and invested into making the ICO. Monies raised from the private sale (before ICO) was also directed to fund all the marketing activities.

After the ICO, we managed to take back about 300K from the investors. But a big chunk of it was directed for Market Making to maintain the price of the token. We didn't end up with much...

[stellatayvc]

...
Fast forward 6 months, we only raised 300K and most of the funds were spent back into marketing and market making (yes, you saw it right). Long story short, we kind of ended up where we started and now have a whitepaper to fulfil...
...

Are we talking by utility tokens or security tokens here? Was ICO opened for US residents? Did you have to comply with KYC/AML regulations?

You say that you only managed to break even - have you not issued any tokens to yourselves, so you could dump later with potentially bigger gain? Have you not assigned small portion for 'bounties' (essentially free marketing)?

Have you verified any previous projects of that 'advisor'? Was he legit? I have my doubts.

1) Utility token.
2) Not open to US and China residents. We are based in Singapore so yes we did take into account KYC regulations in anticipation of Monetary Authority of Singapore (MAS) regulations.
3) The token has close of zero value at the moment. Many of the team members still hold a chunk of the token allocated to us, but no point selling so everyone is just parking it in their wallets now. Until the blockchain product is developed and the token has actual usage value, the token will stay at this price I think.
4) Yes, bounties were used. The bounty space was extremely crowded. We did get a lot of social media activities and such from the program, but all 'fake' interest.
5) Yea that's one of my biggest concern then as well. To be honest, anyone can call themselves an advisor and I think he is one of those. Again it was a desperate move, there wasn't much time to find or pay for a better ICO advisor.

[pawel7777]

Thanks for answering and sharing insider's experience.

...
3) The token has close of zero value at the moment. Many of the team members still hold a chunk of the token allocated to us, but no point selling so everyone is just parking it in their wallets now. Until the blockchain product is developed and the token has actual usage value, the token will stay at this price I think.
...

That's a tough spot to be in for the startup. There's still a chance to hype it up (it's easier if the company and its product are legit), otherwise you didn't even break-even. You've already spent that 300k and now (possibly) have liability to token holders to provide service/products in exchange for worthless tokens. That's unless you use/redeem tokens according to their $ value.

Two more Qs:

How did the whole ICO thing affect the bookkeeping side of the business? I reckon it created a whole lot of extra work for the accountant(s).

Did you secure yourself by adding a clause in Terms & Conditions ie that the 'tokens program' can be discontinued and buy-back can be offered (or something in similar manner), or are you stuck with this form forever?

[stellatayvc]

Thanks for answering and sharing insider's experience.

...
3) The token has close of zero value at the moment. Many of the team members still hold a chunk of the token allocated to us, but no point selling so everyone is just parking it in their wallets now. Until the blockchain product is developed and the token has actual usage value, the token will stay at this price I think.
...

That's a tough spot to be in for the startup. There's still a chance to hype it up (it's easier if the company and its product are legit), otherwise you didn't even break-even. You've already spent that 300k and now (possibly) have liability to token holders to provide service/products in exchange for worthless tokens. That's unless you use/redeem tokens according to their $ value.

Two more Qs:

How did the whole ICO thing affect the bookkeeping side of the business? I reckon it created a whole lot of extra work for the accountant(s).

Did you secure yourself by adding a clause in Terms & Conditions ie that the 'tokens program' can be discontinued and buy-back can be offered (or something in similar manner), or are you stuck with this form forever?

1) To be honest, I'm not sure how bookkeeping will be done, it will only be due at the end of the year and I'm sure it is going to be tricky. The accounting and auditing landscape here is not very defined when it comes to crypto investments. Because ICOs are so new, no one really knows how that will be managed.

If someone has the answer about how that's done in SG, or in your country I would like to hear them! Also, do crypto investors typically need to pay 'tax' for their gains? And how do they track that?

2) Unfortunately, beyond the typical one-page legal disclaimer at the start of the document that says 'participate at your own risk', there is really nothing much to protect the investors from. For our case there is no buy-back scheme offered in the whitepaper - is it common for other ICOs to do that though?