Tell us in simple terms about ICO/ITO. What does an investor gets when tokens are purchased?
- It depends a lot on what type of investor does it. Technically, investor purchases a token for the crypto wallet of the blockchain that made offering. Then there are different strategies, but the most common one today is to wait until the token is listed on crypto exchange, which usually takes 2-3 months after ICO/ITO is complete, and sell the token if the rate is significantly higher than the entry price. Either to wait for the value that will suit you as a holder and sell when such a situation occurs.
The risk in this situation is that when token is listed on exchange, the demand for it, and as a consequence, its cost may be lower than the entry price. Since the market is not regulated there are many ways to manipulate the token rate by the ICO/ITO organizers and this carries additional risks.
What are the ways of manipulation?
- Since there is no independent audit before and during the ICO process, as it is the case with IPOs and traditional markets, the organizers have the opportunity to deliberately or unintentionally mislead potential investors in terms of the project's readiness, its indicators and the size of the funds raised. There were several cases when projects announced that they raised several million dollars for pre-ICO, and in fact there were less than $100,000. Either the information written in white papers was not reliable, and so on.
When tokens are listed on a cryptocurrency exchange, the project's owner can go into a huddle with the exchange to place fake buy orders to increase their prices. Or you can buy out your own tokens at the right time, thus pumping their value, and later fix your profit by selling the whole volume, bringing down the token's exchange rate and reducing its liquidity.
What are the main mistakes made by companies that launch ICO/ITO? Why do some raise millions in an hour and others get peanuts for months?
- Here, as in any business, it is important to choose the right people of the A-class for project’s realization. Right people lead to the right decisions, and the right decisions lead you to the right results. It's not so simple: I chose only 2 from 100 offers to help carry out ICO/ITO.
Is it reasonable to make ICO/ITO for projects from the real sector of economy? If a company from the real sector raises funds through ICO/ITO, how can it dispose of them (in terms of accounting: how will these funds be credited to the balance sheet), whether it will need to pay taxes on the amount raised?
- That's a good question. And I do not have an answer that would suit everyone, since today not every state has the necessary legal basis. If we are talking about the real sector of economy, then if project has no blockchain components, I would not recommend doing it, the chances for success are not very high.
Is ICO/ITO a serious competitor to venture investments? will it be able to gain a large-scale popularity in the future and become a competitor to bank financing?
- I do not think so. It seems to me personally that different methods or, more accurately, sources of capital are needed in different situations and different projects. Let's not forget that money is a serious test not only when there are none, but also when there is more than you need. The beauty of venture investment for today is that it stimulates you to go from idea to IPO through checkpoints of development, triggers that allow you to close the next round and go up the stairs. In the case of ICO/ITO, we will see the quality of the conversion in the next 2-3 years, namely, how many projects out of those which received funding - implemented what they promised. You know better than me that for today the forecast for this conversion is very very conservative: 3-5% out of 100.
In which countries ICO should not be held (to avoid criminal responsibility)?
- If you have a strong team of lawyers, then there are no such countries. Another question is whether you need to do it. More than half of the projects, after analysis, were recommended not to go this way, just to save money and time, as the collected crypto resources will not exceed their costs for such an initiative.
We are very interested to know the details of ICO/ITO, where you are a mentor. What kind of consultations do you give to ICO/ITO organizers? Did you start ICO/ITO yourself? What are these projects? Do they have a chance to become a business?
- Of those projects that I support publicly, this is VIMANA.
VIMANA Ecosystem is next generation protocol for autonomous transportation of unattended aerial vehicles employed in daily passenger and cargo on-demand Urban Air Mobility. The Ecosystem is being blockchain-based and blockchain-regulated.
VIMANA propels the Ecosystem with contributing its proprietary technology - breakthrough Vertical TakeOff and Landing Autonomous Aerial Vehicles that can be efficiently deployed in urban infrastructure. VIMANA Ecosystem answers the main challenge of all global smart cities - safe and reliable switch of 2D mobility to 3D mobility. In VIMANA Ecosystem you don’t have to be a pilot so to instantly daily aerially commute between downtown and suburbs.
The potential volume of the Urban Air Mobility market by 2030 is estimated at $1 trillion. During the digitization and launch of this market, the VIMANA ecosystem combines its capabilities with previously created crypto protocols. Partnership protocols are CIVIC, BANCOR and several others are at the negotiation stage. The company is also in the negotiation process with Uber, Aitbus, Hyperloop, Nasa, Singapore CAAS.
In this project I'm an advisory board member. Its key focus is ITO + Capital markets. I help with the implementation of ITO and conduct key negotiations with investors of the project: $100 million. I did not launch ICO/ITO for my own projects, since I do not need it. I believe that this tool of attracting attention and capital is not suitable for all businesses. VIMANA has every chance of becoming the Top 10 ITO this year, raising $100 million and being one of the best projects in the field of Urban Air Mobility in the world.
You've been to a conference in Dubai. Was there something interesting and new? What did you represent?
- At the GITEX conference - this is the most significant event in the field of technology in the region, there were many presentations and interesting meetings. I negotiated with the government of Dubai, Abu Dhabi, Royal Saudi Arabia, Sharjah and Qatar on possible cooperation in the field of Urban air mobility - air taxi and the opportunity to make a public presentation and the first public test drive for VIMANA. We also managed to meet and get acquainted with the co-founder of Hyperloop - Bibop Gresta, discussed the development prospects of Hyperloop & Vimana in Dubai and Abu Dhabi.
Interviewed by Emilia Romagna
About Kirill Nikolaev: Founder of NICA Multi Family Office - Russian global citizen award in 2016 as best international family office, located in Geneva, Switzerland, Founder & CEO of BITCOIN VIP - powerful OTC international service built for HNWI, institutions and trading professionals located in Zug, Switzerland, VIMANA Advisory board member.