How To Pick An ICO? CEO Of Shipit Iskander Karimov For Euronews

Given the turbulence on the crypto market — recently BTC once again dropped below $6k despite its attempt to rebound — the market of ICOs has also been affected. Naturally, people who are still interested in investing in new coins cannot help but ask how they should pick an ICO. CEO of Shipit Iskander Karimov tried to address the issue on analytical show ‘Exchanges’ in an interview with its host Kirill Muraviev.

ICOs are not big news these days. Everyone has already heard of them and of the profits that some of them brought to investors. However, these days ICOs seem to be experiencing a stagnation. What is the reason?

Iskander (I.): The main reason is that most of the projects that hyped last year have failed to actually achieve the results promised during their ICOs. Running an ICO, promoting and marketing your project, is one thing and running a business is another. Unfortunately, very few projects managed to copy with that task. That is why today we do not see huge ‘surges’ and ridiculous Xs and we see that the market is shifting towards ‘big-time’ investors, crypto funds and institutional investors.

Does it mean that despite being a CEO of the project that aims to use ICO as a fundraising tool you have had to consider the dynamics on the market and switch to the tactics more common to the field of venture capital?

I.: That is true and here is why. Ideally, the tokenomics should follow the demand-supply rule and the value of a token should be increasing proportionally to the number of people who use that token. Currently, it does not work like that and, unfortunately, the ICO market remains that of speculation, viral news and other crypto currencies pursuing Bitcoin. That is why private individuals have lost their interest in such products. They do not see the same surges in prices of new tokens after them hitting the exchanges anymore. On the contrary, these days the price of a token usually drops significantly after it gets listed on exchanges. Subsequently, investors rather focus on long-term deals expecting the profits long after the ICO than expect immediate ROI as a result of market speculation.

It is hard to disagree that the ICO market remains dependent on news and impactful statements from authority representatives. However, it is also hard to deny that the success of any project — be it a next cryptocurrency or token — depends heavily of how Bitcoin performs on the market. Whenever Bitcoin was on the rise, all ICO and crypto currencies were doing fine, but every decrease on Bitcoin charts turned that idyllic state of affairs into chaos.

I.: It is absolutely correct. To tell the truth, we did expect this correction to happen. I believe that we are about to witness the story of different ‘.coms’ that emerged in early 2000s to repeat itself. Only the companies that are backed up by a viable product, solid team and actual activity on the market can survive. That is why the market is changing; there are fewer scams or speculative projects that aimed to hit the exchanges and make 10x-15x profit than a year ago. Today most of the projects understand that and prefer long-term partnerships and long-term results and investors should look exactly for such projects.

Well, it could actually be a good sign of the market becoming more mature and more fair. A year ago anyone could literally write a Whitepaper promising a bright future for investors which was not supported by anything, raise funds, do nothing and face no consequences. Is the market different today? Take Shipit, for example. Do you have an MVP?

I.: Sure. We first created an MVP and only then found out that it was necessary to immigrate the application onto the blockchain. Then we started the development and at the same time went live with our Token Sale. The changes you mentioned were absolutely necessary as they contributed to market’s health. Now all the projects which never even planned to do anything after their ICO are likely to get culled. No doubt, there is still a great number of ICOs that spend 80–90% of the funds raised on further marketing rather than improving their product or service; but I strongly believe that within a year such projects will eventually cease to exist and the market will become even healthier.

Iskander, if we continue this line of thought with Shipit… Shipit is a P2P delivery platform. This means that every user can find a third party — an individual — who can make a delivery on the way to another country. At what stage of development is your product? What for, exactly, do you want to raise funds?

I.: First, Shipit does not focus solely on international deliveries because local ones will also be an option; especially in the countries with underdeveloped logistic chains. Today, we already have a working MVP that has been tested and already has got an initial customer base. Therefore, we are sure we are entering the market with a business model that works and can be scaled up. In order for us to move forward, we need funds and this is why we decided to conduct our Token Sale. It is not like we only present a pitch deck and let’s go!

So you need the funds to start a marketing campaign and advertise your product?

I.: Yes, absolutely. Our RoadMap in the Whitepaper actually clearly states what we are going to do with the funds we raise and why we need them.

Then it is a good thing that the second half of ICO market — the developers — reacts accordingly and the ICOs are a ‘go’ only after an MVP is ready. However, working with venture capital presents ICOs with another set of challenges and risks, doesn’t it? And there are probably certain issues with investors who can cover your soft or even hard cap.

I.: To tell the truth, working with capital funds and running an ICO at the same time makes the life easier for us — the companies. It is different from conventional venture capital model in a positive way. Conventional deals with venture capital usually lead to that after Pre-Seed, Seed, Series-A and Series-B the company is mainly controlled by the investors rather than the founders. Working with crypto funds is a completely different story because such funds are interested in the growth of token’s value and not in controlling your company.

If a fund buys in at the Pre-Sale or Private Sale on more lucrative terms and helps an ICO create hype, it can then profit from the surge in token’s price after it gets listed on exchanges. However, there are two options for the fund from there on. The first is the one that is more painstaking and more right, if I may put it like that, and consists in making a long term investment aimed at helping the product to enter the market and gain critical mass. And the second is to abuse of the hype and dump everything the moment the token starts circulating on exchanges. What about these risks?

I.: True, those risks are always there as there are two types of funds: those that invest in technology and those that invest in speculative enterprises. That is why it is important to choose the right kind of investor. However, the crypto market is different from the conventional IPO market. Even if the dump happens, the company does not suffer that much from it. In case of an IPO, there is a huge risk of the company being bought by a competitor as a result of the equity value rushing downwards. This does not apply to the crypto market.

Iskander, there is another hidden issue here. Even a set of issues. And it is vital to consider them before starting an ICO. I’m talking about legal aspects. SEC monitors closely every ICO project these days and vigilantly checks whether they are offering security or utility tokens. Did you have to address this issue?

I.: This could be an issue with SEC as it considers every token to be a cryptocurrency. This means that American market becomes a difficult one for a company as it will be required to pass numerous compliance procedures and there is still no clear guideline for that. This is why any company that plans to launch a Token Sale should go for utility token only. Any dividends, ownership rights or vote rights are off the table. As well as countries that forbid their citizens participating in ICOs and Token Sales.