Question: how does HelloGold delineate Token Sale vs Equity funds?

Harith Kamarul
Aug 9, 2017 · 5 min read
Delineating this is probably easier than doing so for raised funds

On Monday, we had a great Q&A session with Jake from the CoinFund team about our upcoming Token Sale. Afterwards a member of the vibrant community in CoinFund’s Slack picked up on a question that wasn’t covered in-depth in the Q&A:

It was an interesting point raised: in this space, how does a running company separate its Token Sale from its equity funds? Should it?

The first point to note in HelloGold’s case is — as set out in the documents found on our Token Sale site, the HelloGold token (“HGT”) is not, nor should it be construed, understood, deemed or interpreted as an “equity interest, voting or non-voting security (or its like) in, or claims against, HelloGold Foundation (“HGF”) or any other entity in any jurisdiction”. In non-legalese speak, HGT holders will have no say in how the funds raised in the Token Sale is used.

That said, the documents do set out:

the proposed use of funds raised. This will enable everyone to decide whether they want to support our development plan for the next 12+ months.

how HelloGold will produce a fortnightly update on progress towards the expansion goals outlined in the documents. This will enable HGT holders to assess HelloGold’s ability to deliver on the goals set out in the development plan.

how to check the amount of gold AUM held by HelloGold on a daily basis. This will enable HGT holders to assess HelloGold’s ability to convert the results of the goals in the development plan into the acquisition of more customers and, ultimately, more gold savings.


In terms of development, the core product has been built and is currently operational in Malaysia. The traditional tech remains proprietary (it is already developed; and it is necessarily proprietary as we need to retain security and privacy both for customer data protection and for protection of our customers’ assets). The blockchain elements will be open source (once we have finalised them and completed relevant security audits and peer reviews). IP is less of an issue as HelloGold isn’t developing a protocol level blockchain from scratch based on/supported by the funds raised from a Token Sale.

As the core product is already operational, HelloGold intends for the grant provided by HGF to support the accelerated expansion in two areas:

1. Geographical coverage — concurrently into a) new markets in Asia with the current platform and b) across the world with the launch of the gold-backed token (“GBT”)

2. Product development — in terms of a) GBT and the creation of the user-friendly services and features to support this product and b) expansion of services and features in HelloGold’s infrastructure, system, blockchain services and native mobile applications

Without the Token Sale, HelloGold will only be able to launch into two countries over the next 24 months and will only be able to deliver a subset of the proposed features for its native mobile applications in its development plan. The success of the Token Sale will therefore enable HelloGold to accelerate its expansion so that the underserved and unbanked in emerging markets around the world can have better, more affordable access to simple financial products beyond cash. A measurable outcome of these efforts is both in the number of customers who can access the product and the gold AUM held by HelloGold. Supporters of HGF will therefore be rewarded based on the growth of AUM (the objective of the Token Sale).


HelloGold decided to set up HGF as an entity that is separate from the business because we wanted to make sure that there was a management team focused solely on:

• legal and financial management of HGF

• supervision of the grant management process covering application management, financial tracking and reporting, and operational delivery and reporting

• provision of reports on a regular basis to the Advisory Committee

HGF intends to set up an Advisory Committee that will monitor the delivery of the objectives set out in the Token Sale amongst other responsibilities. Several of these advisors have been appointed already and we will add details of others as they are confirmed on HelloGold.org.


The Token Sale documents also state that “HGF may periodically, at its sole and absolute discretion, distribute such number of GBT to HGT holders as rewards for their support of the Token Sale” and that “any distribution of GBT as a reward to HGT holders will be divided proportionately amongst all HGT holders including those retained by HGF for Rounds 2 and 3 of the Token Sale (i.e. GBT rewarded / 1,000,000,000).”

As this reward is revenue based (10% of gold AUM management fee) it is both less risky and more liquid (tradeable on exchanges and the reward may be made each month) than equity funding. Equity funding is based on profitability (riskier than revenue) and is less liquid (there is no market for HG equity until the point of exit — which is uncertain). HGF does not intend to use any of the fee income received from HelloGold to fund its day-to-day operations. Instead it intends to retain sufficient funds from the Token Sale to cover these costs.

We have developed the Token Sale structure around a fair reward for Supporters over the long term; one that rewards Supporters who agree with and want to support the two key objectives, namely expanding blockchain into the mass market and increasing financial inclusion. Hence the release of 3.8 million grams of gold (currently valued at ~$150m, or ~$230m assuming a 5+% annual increase in the price of gold — the historical trend over the last 20 years). It is quite easy to do the maths on the price of an HGT and the value of the share of gold due for release to see the potential return if AUM were to grow only as per the business plan (blog post outlining this to come).

As the Token Sale is Round based (over 2017, 2018, and 2019), the market will ultimately decide whether HGF are meeting its objectives. It may then choose to reward HGF with more funds both via Round 2 and 3 sales of the HGT and the price achieved (market price driven by demand/supply).


In short, no we won’t delineate the use of funds. As with any token sale there is a ‘leap of faith’ required in both the project and the team. We hope by structuring our Token Sale in the manner we have, this jump is made as small as possible.

photo credit: https://twitter.com/VladZamfir/status/891700981091549184

hellogold

Buy & Sell Gold. Anywhere. Anytime.

Harith Kamarul

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hellogold

Buy & Sell Gold. Anywhere. Anytime.

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