The ‘ICO Advisor’ Problem

I founded Clairety in January of 2017. In the first few months, working mostly alone from AI technology I had designed while in the program trading world, I built a prototype for it, patented it, and set about trying to raise funds to build the company. I enlisted a partner, and together we built a business model, a pitch deck and by August we were about ¾ of the way through raising a seed round from VC’s when my longtime friend Max Smettanikov suggested I think about raising money through an ICO.

I had 25 year’s experience managing money at the top levels of the hedge fund world so I felt very comfortable in the VC space. But ICO’s were something completely new to me. I knew how crypto-currency worked, but that was about my limit. But when offered the option of potentially raising money without giving up equity, it seemed an appealing prospect if it was real, so we set about trying to form a plan. It took a little time but by the end of September we had a basic token design, most of a whitepaper, and had begun the process of going forward with an ICO.

This was a big change that moved us into an area I knew I didn’t fully understand. But in the autumn of 2017 I didn’t know many people who did. Still, I had a good lawyer who knew the space, and I understood financial derivatives as well as anyone so I felt like I could stay on top of it. What I was weak on was the process of marketing and PR and the role that it played in the sales process. To facilitate this, I was told that I needed ‘ICO advisors’.

I knew what an advisory board for a company was, but I wasn’t sure what these ‘ICO advisors’ were supposed to do. Even now, I don’t think I’m completely clear on it. I haven’t met any who know more about the broader finance business than I do. Some, it seems, advise you on your token design but with my background in derivatives I already felt competent in that area. Others are supposed to provide marketing advice, sales help, or some level of specific technical support. That I knew I definitely did need. So with some introductions from others who better knew the crypto-currency space, I started expanding my network a little.

One of the first people Max introduced me to toward that end was Michael Kapilikov. I was told that Michael had an interest in serving as an advisor on ICO’s in order to increase his public profile, and would be happy to work with us. I looked him up on LinkedIn and he had a very respectable looking background. He and I connected, we arranged a meeting, and we got together for a chat.

We met face to face in late October of 2017. I explained to him and two of his developers who also attended, the why’s and wherefores of our token design and how that overlaid with our legal strategy. I explained that at that time, I was looking for someone to write the physical smart contract, and to also do a bit of additional development for it to be integrated into our product for the release of our Alpha ‘crypto trading data’. It was all a preliminary discussion, but it represented few technical challenges and he was open to all of it.

My recollection of the meeting was that we discussed the various issues for about 45 minutes including a rough outline of terms for his role as an advisor, and he tentatively agreed — all subject to later confirmation. I thanked him, and told him I’d follow up with our whitepaper and get back to him when we were ready to move forward. On December 15th we had a brief chat via Telegram about the state of progress, and he sent me his photo and bio for inclusion in our list of advisors.

What happened to the ICO world in the late autumn of 2017 is well known to everyone now, but for me, most of what it meant was delays. All the people I had hoped to work with had their calendars flooded with new requests. Every kid in every IT department in the whole world now had visions of raising money through an ICO and the ‘service providers’ I was trying to engage were mostly technical people rather than experienced business people, and had very little experience filtering good business ideas from bad ones. It took them a great deal of time to sort through the deluge of potential clients, and filter out the ones that were obviously not worth their time.

For me, the delays extended through November, and December, and then into January of 2018. It was February of 2018 before I was finally able to get a contract with a sales team who would provide a technical sales platform for integration into our website, sales and traffic support for our Telegram channels, and a myriad of other services for social media, and the crypto specific platforms.

By the end of February, I finally had a tentative schedule arranged for the ICO, and since I now had dates for the ICO, it was finally time to put all the verbal agreements down on paper for our advisors who we had been engaging in the interim.

Michael was on that list, so I drafted a contract for him that reflected my recollection of the terms we had discussed. According to our Telegram chat, he got back to me on February 2nd explaining that he hadn’t had an opportunity to perform the kind of due diligence on our project that he was hoping to and his calendar, like everyone else’s, was now totally booked up. He explained that he was getting an average of two invites a day for major projects and he was no longer sure he could make the time to work on ours.

This came as a surprise to me. I thought that since we had tentatively agreed the issue was settled and I had been incorporating that thinking into our plans. He had already sent me his photo and Bio after all. I explained this to him and sent him a copy of what at that time seemed to be our ‘final’ Whitepaper for his review, (it later came under some other small revision) and we agreed to speak again as soon as he was back from Madrid. That Telegram chat on February 2nd was our last direct interaction before May 10th.

In February we were just a few weeks away from launching our whitelist sales period so I was working roughly 20 hours day, seven days a week. Our sales partners were capable technically but not much on project planning, so I was dealing with Website integration, Social media platforms, BBcodes for bitcointalk, setting up Medium, Facebook, Twitter, and other platforms for the company. There were literally hundreds of moving parts, many of which like bitcointalk and reddit, that I was all but totally unfamiliar with. Each of them had their own rules, their own fraud protections, and their own service level agreements. We were dealing with finalization of offshoring issues, legal issues, banking issues, a slurry of contracts. I was back and forth to my local notary so often that we are now on a first name basis. Between my partner and I we were completely overwhelmed, so I had no choice but to delegate some responsibility.

I was speaking to Max often then, and since it was he who introduced me to Michael, after the conversation with Michael on Feb 2, I immediately reached out to him. I told him the that Michael was now saying the he wasn’t sure he could squeeze us into his calendar and since it was he who had the existing relationship with Michael, I asked him to speak to him to smooth things over and get him back on board. I never specifically mentioned to Max that he hadn’t signed the advisor agreement, but I thought that was clear. Max meanwhile had his own miles long laundry list of issues to address, but he agreed to speak to Michael none the less.

Max was under the impression that there was some personal friction that he was charged with smoothing over, and I was under the impression that ‘getting him back on board’ meant getting us on his calendar, and getting his signature on an Advisor contract which I knew Max had a copy of. We left Michael’s Bio and image on the website in anticipation of the issues being resolved, mainly because it would have taken more time to remove him only to put him back later.

At 10 PM on the 3rd of February, Max sent me a Telegram message saying that ‘Michael is back on’. Since I was at that moment trying to ‘drink from the fire hose’ with a thousand questions rolling in per minute and a thousand new issues to address, I assumed the issue was settled and a signed agreement would be forthcoming from Max. Max in turn, while trying to drink from his own fire hose, assumed that I would reengage with Michael and get contract signed.

Meanwhile, the agreement we made with our sales provider included all the work I had originally intended for Michael and his team. His actual technical contribution had become redundant. There was no specific deliverable we required for him to fulfill. But I liked Michael when I met him and had been told his desire was to increase his exposure. I was happy to have him on board for the project in any capacity, and I figured we’d work something out later. But without a specific ‘deliverable’ required from him, I set the relationship on the back burner and I moved more time critical issues to the front of the line.

I next heard from Michael on May 10th, when he contacted me on Telegram and expressed surprise that he was listed on our website as an advisor and wanted to know why. I explained to him that I was under the impression that he had agreed to be. He said that I knew full well that we didn’t have a signed agreement, and while that was clearly true, I explained that I was given the impression that he agreed verbally, and since we were making no specific demands on his time, I thought that would be sufficient.

Since his surprise made it clear to me that this wasn’t actually the case and there was at a minimum some major misunderstanding going on, I immediately apologized for it and told him that I’d be happy to remove him immediately if that’s what he wanted. I expected we’d have a conversation about it at that point and come to an agreement about how to best handle it.

He never responded to me. Instead he decided to create a post on LinkedIn calling a project I’ve worked on for over a year and invested a great deal of my own money in, a scam.

That doesn’t seem to me to be an accurate reflection of the events. There was no ‘fraud’ here. No ‘scam’. No intent to misrepresent. Everyone on our end was acting ethically, in good faith and with the best intentions. No one has been harmed or has benefited illegitimately. We have never had any intention to trade on the name of Michael Kapilikov, nor do we have any reason to believe this his mistaken inclusion in our list of advisors has effected anyone’s decision making. And as soon as our error was made known to us we immediately corrected it.

That’s a far cry from a ‘scam’. We’re a real company that solves a real and very serious problem for a very large number of people, and we believe we do it in the only way it can ever really be done. As CEO of the company I accept full responsibility for the mix-up. But that’s all it really was. A simple misunderstanding caused by a communications breakdown, nothing more.

Part of the problem clearly, is that even at this late stage in the ICO process, I’m still not completely sure what problem the ‘ICO Advisor’ is designed to solve. There is no corresponding equivalent in the fiat financial world. In the fiat financial world people are paid based predominantly on their expertise and their ability to execute. In the ICO world where things change so quickly that genuine expertise is much harder to come by, advisors seems to be mostly paid based on their ‘fame’ or their proximity to it. I think that might be part of the problem. In the fiat financial world, it’s often the people that the general public has never heard of who are best at execution. But your typical retail ICO investor doesn’t seem to be much concerned with that.

Since he didn’t respond to me I’m going on my own impressions here, but I think Michael is under the impression that we were trying to unfairly benefit in some way from his increasing notoriety in the crypto-currency space. This is and was, very much not the case. I don’t know if his notoriety has increased or not, but I’m confident that we’ve gained nothing from it. I can say this with some certainty because we haven’t invested any money or energy in selling our project to the retail ICO investor.

Our successful sales efforts have been focused exclusively on large individual investors and funds, all of whom have done deep ‘due diligence’ dives into our business, our projections for user adoption, our management of costs and our anticipated revenue. None of which involved any discussion of any contribution from Michael or any of our other ‘ICO advisors’. The successes we’ve had have all come from selling this business in the ‘fiat’ way, where the focus has been on our ability to execute not our ‘big name’ advisors. And they have all been sales to people with the knowledge and expertise to make that assessment on their own.

There has been no massive Ad campaign for our ICO, and no energy expended on trading on anyone’s ‘fame’. We’ve made practically no effort to engage in retail sales whatsoever. I know that isn’t how ICO’s are typically done, but it’s how we did it because speaking to those investors with a real knowledge of how business works is the way that our business is most clearly differentiated from all the others.

For them, we look like something VERY different. A team with patented and commercially proven tech in a huge market, led by experienced C-level managers with a prior 200-Million-dollar company sale in their background is not the same to them as some kid from the basement of the IT department with an algo and a dream. To experienced investors we look like a team that has executed well in the past and is therefore more likely to execute this plan well. The closer you look at the plan we’ve put together, the better it looks.

But for a retail investor who lacks the knowledge to tell a well thought through plan from a weak one, we’d probably look like just another name. So we put virtually all of our sales efforts into the area that we thought would benefit us most.

With regard to Michael, based on my impressions of him I think he’s smarter and probably more generally competent than most of the people I’ve met in the ICO world, and I wish him the best in making the most of his newfound notoriety. I think anyone who taps him for his knowledge and experience is probably getting much more for their money than they would from many others, and I would strongly encourage them to engage him. I regret that we’ve had this communications problem and I bear him no ill will in spite of this misunderstanding, or even his modest overreaction to it. Had he engaged in conversation with me at the time, I’d have happily made all this clear. Given what I’ve seen of how most ICO’s work, in truth I can understand how he feels.

But we’re not doing what most ICO’s usually do. And we are very much not a ‘scam’.

With all this said, we removed Michael’s name, image and bio the minute his objections became clear to us. Although I’ve already apologized personally to him several times via Telegram, I’d like to offer him my apology again here, in a more public forum. There was no malfeasance here, just a bit of a communications screw up. And though I can appreciate how Michael would be upset at our mistake, a simple communications mistake that was corrected as soon as it became clear, is not the same as lies or a scam, and shouldn’t be treated the same.