So after some conversations with a few friends, and due to the apparent explosion of interest in ICOs in the past few months, I thought: “Hey, why don’t I give this ICO thing a shot?”
There wasn’t any long-term plan here — I just wanted to move quickly and run an experiment to see if it’s really as easy to raise millions of dollars as the media made it out to be. The project itself didn’t matter — to quote Miley Cyrus: “it’s the climb”.
I knew I’d be sharing the experience later on, so I used Notion for planning and documenting everything. It works great — think Google Docs, with nested pages.
This is what it looked like:
I ported everything over here, so you can just read right along. I’m sharing all the details here, so this’ll take a while — grab a cup of coffee and kick it back.
The Action Plan
- Understand the Basics
- Find an Idea
- [15 July] Pre-announce the ICO
- [16 July] Draft the White Paper
- [17 July] Draft copy for the Website
- [19 July] Launch the website
- [20 July] Recruit prominent advisors
- [21 July] Create a basic Smart Contract
- [22 July] Reach out to ICO lists
- [23 July] Publicity
- [25 July] Launch ICO
I figured if I could get everything done in about 10 days, it’d be great — even if the ICO doesn’t end up raising anything. It’s an experiment after all… and the worst case scenario means I learn a ton about Ethereum and ICOs in the process.
The Basics 🍼
At the start, I knew very little about cryptocurrencies and blockchain so some reading was in order. After a lot of wasted time reading vague, regurgitated garbage, I eventually found a few resources that provided the most bang for word.
With the basics covered, we can proceed to learn more on Ethereum. Go through the last few links before reading along.
You can skip this section ⏬ if you’re not technical.
A few of these concepts are crucial to grasp if you’re looking to understand how Ethereum differs from Bitcoin.
For me, these were:
An Ethereum account contains four fields:
- The nonce , a counter used to make sure each transaction can only be processed once
- The account’s current ether balance
- The account’s contract code , if present
- The account’s storage (empty by default)
In general, there are two types of accounts: externally owned accounts , controlled by private keys, and contract accounts , controlled by their contract code.
An externally owned account has no code , and one can send messages from an externally owned account by creating and signing a transaction. In a contract account, every time the contract account receives a message its code activates , allowing it to read and write to internal storage and send other messages or create contracts in turn.
Note that “contracts” in Ethereum should not be seen as something that should be “fulfilled” or “complied with”; rather, they are more like “autonomous agents” that live inside of the Ethereum execution environment, always executing a specific piece of code when “poked” by a message or transaction , and having direct control over their own ether balance and their own key/value store to keep track of persistent variables.
The term “transaction” is used in Ethereum to refer to the signed data package that stores a message to be sent from an externally owned account. Transactions contain:
- the recipient of the message;
- a signature identifying the sender;
- the amount of ether to transfer from the sender to the recipient;
- an optional data field;
STARTGASvalue, representing the maximum number of computational steps the transaction execution is allowed to take; and
GASPRICEvalue, representing the fee the sender pays per computational step.
Contracts have the ability to send “messages” to other contracts. Messages are virtual objects that are never serialized and exist only in the Ethereum execution environment. A message contains:
- the sender of the message (implicit);
- the recipient of the message;
- the amount of ether to transfer alongside the message;
- an optional data field; and
Essentially, a message is like a transaction , except it is produced by a contract and not an external actor . A message is produced when a contract currently executing code executes the
CALL opcode, which produces and executes a message. Like a transaction, a message leads to the recipient account running its code.
Ethereum Code Execution
The operations have access to three types of space in which to store data:
- The stack, a last-in-first-out container to which values can be pushed and popped
- Memory, an infinitely expandable byte array
- The contract’s long-term storage, a key/value store. Unlike stack and memory, which reset after computation ends, storage persists for the long term.
The code can also access the
data of the incoming message, as well as block
header data, and the code can also return a byte array of data as an output.
Blockchain & Mining
The main difference between Ethereum and Bitcoin with regard to the blockchain architecture is that, unlike Bitcoin, Ethereum blocks contain a copy of both the transaction list and the most recent state . Aside from that, two other values, the block number and the difficulty, are also stored in the block.
Questions I had that were later clarified:
Finding an Idea 🤔
Armed with a better understanding of the blockchain, Bitcoin and more importantly Ethereum … we’ll need an idea to execute on.
According to this, we should find an idea that can benefit from Network Effects (i.e. the more users that use it, the better it gets).
Examples of successful ICOs
- Storj.io : Storj is a system for decentralized file storage. Like Bitcoin or Ethereum, there is no central operator of the network. The project raised $30m through a crowdfund of their token, Storjcoin, on the blockchain.
- Steem : a decentralized Reddit where people are paid to contribute news and content.
You’ll notice one other thing about these “projects” or “apps”: they are really decentralized software protocols. A protocol is a fancy technical term that means: a standard language that lets a bunch of people on the internet work together on a specific problem. — Source
Found an Idea
Simple. Build a VC firm, based on the blockchain. Not complicated technically, but also solves an apparently existing problem (only available to ultra-high net worth individuals and institutions). Admittedly, I didn’t think too much about this — I just wanted to get the experiment started.
I could’ve gone with something more exotic (and that actually benefits from the distributed nature of the blockchain), but it’s unlikely I would’be been able to make much progress in just 10 days on anything more than the simplest concept.
For the name, I had a number of choices of available domain names:
- unit.fund ← ended up using this
Day 1: Pre-announcement of the ICO 🔔
Pre-announcement is the announcement of the future project in the communities of cryptocurrency investors, such as Bitcoin Talk, Reddit and others. You write up an executive summary - a small presentation to investors, in which you explain the essence and purpose of the ICO project. After the executive summary, you get the first feedback, which you can use to gauge investor interest in the project, and questions to fill up your website FAQ section with.
You can pre-announce here:
Things to include in the pre-announcement:
- Summary of the offering Unit.Fund is an Ethereum based closed-ended fund that allows anyone to invest in the world’s best startups. No minimum investment amounts, and no minimum annual income means that anyone can now invest in the VC fund of the future — and realize the kind of gains only the rich could get access to.
- Social media links:
I posted the following pre-announcements:
Reddit fared alot better than BitcoinTalk. The overwhelming feedback from BitcoinTalk was to post with an account that’s got more than just “Newbie” status (they didn’t put it quite as nicely though).
Day 2: Draft the White Paper 📝
Ah yes, time to polish up those writing skillz. I decided to start with an outline, which I’ll use to organize my thoughts. I’d then expand on that, add some fancy technical terms and references, and then make it look official.
- We’re the “Y Combinator” of online startups
- Today you’re putting money in ICOs and don’t know what you are getting. We solve that problem by pooling the money and vetting our investments ourselves with strict criteria. Oh, and we also have the best VCs as advisors to help guide us.
- Flipping the investor model on it’s head. Instead of having a small group of Limited Partners invest all the money (and receive the lion’s share of the return), we’re going to raise the fund from a large group of small investors — sometimes investing as little as $1. We’re democratizing the investment firm.
- Run by startup entrepreneurs, with veteran advisors: the best of the venture capital industry
- Instant Diversification. One investment gets you exposure to hundreds of investments.
- Vetted and Verified.
- Like an Index Fund. Get exposure across multiple sectors, stages and geographies.
- The last ICO you’ll ever need to invest in!
How it Works
- All contributing investors are treated as a single “investor”
- Legal entity which commits the capital will be setup in a tax-free, startup friendly jurisdiction (e.g. British Virgin Islands)
- Investors can act as early adopters for the portfolio companies (a regular newsletter will got out with deal details to investors, so that they can
- How do funds select deals? Funds are designed to give broad market exposure, either to the early-stage market generally or to a specific sector (depending on the fund in which you invest). There is a multi-stage selection process that includes, among other things, evaluating co-investors, conflicts, concentration in any one syndicate and non-arms length transactions. We may not apply the same process to every deal.
- What reporting will funds do? Funds will disclose fund investments after they are finalized, and may provide qualitative updates to investors when available. Funds will not post audited financial statements. Funds will not mark valuations to market each year given the extreme difficulty of doing that in an accurate manner for early stage investments.
- Who can invest? Anyone over the age of 18 can invest. There are no net worth or income minimums, but U.S. law does limit how much you can invest. You do not need to be a U.S. citizen to invest.
- Do you accept US investors? No. The US has very strict rules on marketing to or receiving investment from US persons. Therefore, we do not allow US persons — defined as persons with single or dual US nationality, persons residing in the US, or whose primary bank account is in the US — to invest through Eureeca.
- Investors can be private individuals as well as institutions. What they will all have in common is an interest in investing in high-yield potential private businesses.
- What due diligence checks are done? The due diligence check ensures that businesses applying to raise funds on Eureeca are legitimate and exist. Eureeca works with third-party compliance firms to assess if the company is incorporated, the duration of operations and that all necessary corporate and legal documents are in place. Additionally, background checks will be done on the team and founders to ensure that there is no history of fraud or other relevant criminal activity.
- Did you know that investing in early stage investments can generate an annual return of 27%? Bearing that in mind, how much do you think you would allocate to investing in SMEs per year?
- What is verified? The agency’s evaluation spans technical features of the platform in question, the business model and market niche, the team and business experience in the blockchain industry and development, strengths and weaknesses of the decentralized infrastructure, and other factors like technical background (e.g. quality of the prototype or source code), and analysis of community feedback.
- ICORating conducts the research of all aspects of the project, which stand for specific cryptocurrency financial instrument. The company analyzes the investment risks of the project entering ICO, in the following areas:
- business model (its relevance, strong and weak points);
- market niche (prospects and dynamics of the selected market niches for building business);
- team (business experience in the traditional market segment, in blockchain industry, blockchain-development experience);
- competition (competitive pressure level on the part of companies with similar business models of the traditional market segment and blockchain-economy);
- technical background (availability and quality of the prototype or source code);
- analysis of the feedback from the community;
Relevant White Papers
Notes on becoming a good angel investor (by PG)
- To be a good angel investor, you have to be a good judge of potential.
- If you can recognize good startup founders by empathizing with them—if you both resonate at the same frequency—then you may already be a better startup picker than the median professional VC
- What makes a good founder ? Good founders have a healthy respect for reality. But they are relentlessly resourceful. That’s the closest I can get to the opposite of hapless. You want to fund people who are relentlessly resourceful. — PG
- Bet on people .
- The problem is not finding startups, exactly, but finding a stream of reasonably high quality ones.
- If you want to invest seriously, the way to get started is to bootstrap yourself off your existing connections, be a good investor in the startups you meet that way, and eventually you’ll start a chain reaction.
- To be good, be decisive. There’s a hack for being decisive when you’re inexperienced: ratchet down the size of your investment till it’s an amount you wouldn’t care too much about losing.
The White Paper
You’ll find the final version of the paper below:
I had to think through a few things, and the white paper provided a good avenue to do so. I included things liked minimum raise amount, maximum raise, investment strategy, etc. It’s light on details, but again — I could always figure those out later.
Day 3: Draft copy for the Website 🌐
In order to effectively write up some copy for the website, I had to think through some things. Here’s how I did that:
What is the goal?
Get people to invest in the Unit Fund ICO
Why would people invest in the ICO?
- Opportunity to make high returns (2.5x in 7 years)
- Greater trust for the fund than trust for individual ICOs
What objections stand between them and investing?
- Trust . Why the heck should I give you my money (instead of invest it myself?)
How do you establish trust?
- Links from reputable sources
- Explain the “how” in detail — show that you have a plan.
- Demonstrate knowledge in the VC industry
- White Paper
- Blog posts
- Don’t pretend it’s guaranteed profit. Everyone knows it is not. Be upfront about the risks and highlight them before allowing anyone to invest
- Terms and Conditions
- Contact Us page: address, phone
- Clear profiles/bios of the people behind the project
- Showcase figures of authority
- Herd mentality — show that others have committed capital already
- Explain value proposition
- Herd mentality — show that others have committed capital already
- Feature list
- The problem it addresses
- How the solution works
- Plan / Roadmap
- White Paper
- Return-prediction tool
- Tackle Objections
- Put terms and conditions, with confirmation modal before investing
- Place disclaimer — no guarantees, no investors from the US
- Links from reputable sources
- Clear profiles/bios of the people behind the project
- How to Contribute
- Contact Us page: address, phone
Since we’re after trust, Blue is the appropriate base color to choose.
Here’s a link to the draft website copy that I prepared.
Day 4: Launch the website 🎂
- Great design is crucial . It’s a common thread among all of the most successful companies
- Have a track record that you can boast. Show off your accomplishments
- Find industry experts and add them to your “board” to build trust. They better be wearing suits.
- Check out previous successful crowdsale companies. You may need to use the Wayback Machine to see what the website looked like at the time of the respective ICOs for each one (since they’ve probably changed).
- Check out https://99bitcoins.com/bitcoin-scam-test/ for guidelines of what to do/not do
- Hire a copywriter to spruce it up (Skipped)
- Hire a front-end designer to make it look like a million bucks (Skipped, used a template)
- Translate to Chinese (Skipped)
- Compress images
- Consolidate all scripts / styles into a single file (to reduce HTTP calls)
- Include proposal update samples (Skipped)
I wasn’t able to get all these done (the items marked “Skipped” were skipped). I had a day to put everything together, so time was of the essence.
If I’d had more time, I definitely would’ve spent more time on building trust. This includes equal parts design & PR. I spoke to the agency that built District0x gorgeous website and they would be able to get something similar done for about $15k (I managed to negotiate that down to $10k pre, and $10k after raising the $1m minimum).
They’d take about 2 months to put everything together. Waiting that long and fronting all that dough would be overkill for this simple experiment; so I passed.
Check out the live site here
Day 6: Recruit advisors 👔
Ideally, we’ll need advisors in the Investing + Legal space.
I started with people in my direct network. These folks were likely to say Yes, since I knew them all personally (thanks Hasan, Ramzy and Antonio!):
- Hasan Haidar [500, Partner]
- Ramzy Ismail [Techstars, Director]
- Antonio Sosa [REOF Capital, MD]
There were also people that I hoped I’d be able to get onboard. If I closed any of these folks, there’s a much higher chance that this project would succeed (because of their reputation).
This list included:
- Dave McClure [ex500]
- Paul Graham [exYC]
- Chris Sacca
- Mark Cuban
- Justin Kan [exYC]
- Jack Dorsey
- Kevin O Leary
- Jessica Alba
- Robert Herjavec
- Kevin Systrom
I put it together based on my knowledge of the investment space (and from my experience watching Shark Tank episodes). Many of the people on this list are ex-VCs/Accelerators (since those currently working at VCs/accelerators may face a conflict of interest).
Before reaching out, I needed to have some sort of strategy for approaching them:
- Prepare a dedicated 60 second video to each one, explaining exactly what you want and what’s in it for them.
- Prepare an image, showing all of the other folks that you plan to close, showing the recipient’s name as “Pending” (in a sea of prominent names)
As for how best to reach these folks, I would:
- Reach through mutual connections on LinkedIn (i.e. 2nd degree connections)
- Use the LinkedIn hack™
- Cold-email (if all else fails)
1. The civilized LinkedIn mutual connections strategy
This strategy proved utterly useless. For someone else that’s well connected in the valley, it probably would’ve worked just fine. However, I only had a first/second degree connection with one person (Dave McClure) and I didn’t really know him all that well — we’d met once in Bahrain, and he probably didn’t remember.
I messaged him and - surprise, surprise - heard nothing back.
All other connections were 3rd degree; fat chance that’ll work.
2. The LinkedIn hack
I’d recommend reading through the original post for details on the mechanics of this method. My approach matched that to the dot. I would have to setup a campaign for each of the 10 people on the list, record a video and post it on a specially designed landing page. Alot of work, but hopefully it’ll pay off.
This will cost about $10/person x 10 people = $100 max.
The script I used for the ad was pretty simple:
Clicking it will take you to a page similar to the one used in the hack article. It has a 60 second video - no fancy editing or anything. It also includes my contact bits:
… and here’s a sample video that I made:
There are slight variations in the messages. For example, for Mr.Wonderful (Kevin o Leary), I mentioned the 2% returns first because y’know, the man likes his dollars.
One thing I found that’s very different from Jack’s experience is that the minimum size of the target audience is no longer 7. It’s about 400. That means we can’t just target a handful of folks that know each target individual — nope, we have to target their companies (and if they’ve worked in a few places, then we’ll target those too).
Now that I think about it, an alternative may have been to create 399 fake LinkedIn accounts that you know won’t see the ad; its not something I tried personally though :)
Day 7: Create a Basic Smart Contract 💻
While I did get pretty familiar with Solidity early on, I couldn’t risk all those potential $’s by building a smart contract myself (having just completed the ‘Hello World’ Ethereum tutorial). Instead, I hired Andrew Zubko from UpWork to get the job done on a tight deadline — he delivered, and the project cost me $1,000 in total (including deployment to the Ethereum blockchain).
You’ll find the code for the contract here.
Day 8: Reach out to ICO lists 🛎
Here, I did not have luck on my side. All of the lists I found had some sort of priority paid option — committing the capital sin of not paying these lists will result in your ICO languishing in wait for days, if not weeks.
Here’s the list of places I reached out to (inspired by this list):
Day 9: Publicity 🗞
I also reached out to various news outlets. Here, they request payment for “Press Releases”, often ~$1k each next to a free “tips” option (which I opted for):
If you’re willing to spend ~$20k on Marketing, you could probably get listed on all of these places. I had no intention of paying that sort of money, so I passed.
I drafted a Press Release and posted it on every site that had a form:
A VC fund from the future A very different type of VC fund has just launched; it’s similar to traditional VCs in many aspects, but a crucial one: it doesn’t depend on wealthy investors.
The UnitFund has launched the first-ever crowd-funded Venture Capital fund, democratizing access to what was once exclusively available to institutions and to the ultra-wealthy. Yazin Alirhayim, General Partner at UnitFund, explains: “Traditional VC funds, they’re very good at what they do. The top quarter of all funds see a healthy 20%+ annual return on capital invested. They’ll typically double your money in under 5 years. The problem is, normal folks don’t have access to VC funds: these firms only deal with exclusive “Limited Partners” – institutions investors and ultra-high net worth individuals – for raising capital. We’re changing that.”
In order to raise capital for their first ever fund, the UnitFund has resorted to an Intial Coin Offering (ICO), allowing early investors to purchase Unit Fund Tokens in exchange for Ethereum tokens (currently valued at about $175/ETH). They’ve capped the fund at $50M. “This is a closed-ended fund – once the Tokensale (ICO) is over, no one will be able to purchase additional tokens. The fund will be final.”, Alirhayim explained. “We may consider launching another fund sometime in the future”.
The past few months have seen a sharp increase in the number of ICOs, and it is becoming increasingly difficult for individual investors to perform the thorough due diligence required in order to make an informed investment decision. “We employ strict industry-standard due diligence on every single investment we make – we vet every deal, and meet with the partners involved before choosing to invest”. This allows the fund to avoid “scam” ICOs that are nothing more than just an idea with a website and white paper.
The UnitFund ICO starts tomorrow, July 26 at 9AM CET. It concludes on August 26. The first time such a fund was attempted, by Blockchain Capital in April 2017, they raised $10M in under 6 hours.
More details on the UnitFund website: https://unit.fund/
: VC fund returns in 2016, https://www.cbinsights.com/investor-mosaic
I originally planned to “launch” the ICO by July 25th but I pushed it out a day when I realized that publicity wasn’t going so well. I wasn’t able to get listed on any of the ICO lists (until after the ICO). I also didn’t have any advisors on LinkedIn yet.
You didn’t forget that this was an experiment did you? The results are the most important part of this post, so let’s dive right in.
At this point the ICO is almost over (it ends Aug 26, 9AM BST). I don’t suspect anything major is going to happen in the closing few hours, so these results are fresh as of Aug 23rd
This hack failed at the primary mission, which was to get an advisor onboard.
I initially ran a trial with Dave McClure, his results are here:
And here are the overall results for all the LinkedIn ads I ran:
I got a few cute emails saying “wow, nice way to grab attention” from some of the people that saw it, but no contact from any of the 10 advisor prospects.
However, there was an interesting side-effect.
(Almost) Final Score
Some people actually saw the ad, and invested. Specifically, it was 2 people that I do not know … who contributed a total of ~$10.5k:
And that’s the total amount raised as of this morning, with just about one day left.
Note: Once the ICO ends, I’ll be refunding all of the funds raised if the total remains below the $1M minimum I advertised.
In conclusion, not any random person with a website and a white paper will raise millions of dollars in an ICO. This experiment failed to raise the $1M minimum, despite all the effort I put into getting it out. If I were to try again, I’d focus more on PR & Design — ICOs are funded in crowds, or not at all.