There are risks associated with investing into token sales. However, there are also risks in investment funds, and in venture capital and angel investments. In fairness, the advice you would give to potential investors in token sales is not too different from the advice you would give to potential investors in any of the other more traditional vehicles:
· Do proper due diligence. Find out everything you can about the company, the team, the project details. Find what the SEC refers to as “fair and lawful investment opportunities”.
· Don’t be influenced by hype — whether this is excessive valuation of companies, sales push from fund managers and underwriters or crowdfunding targets.
· Invest in a risky class only as a portfolio diversifier and invest only what you can afford to lose.
Unfortunately, many startups hope that having “two geeks and a whitepaper” will be sufficient to raise millions of dollars via a token sale. While this might have been true, even a year ago, the token sale market has matured, and investors expect these sales to be backed by solid evidence of investment value.
Perhaps start-ups expecting to be taken seriously should be able to answer the questions that serious investors ask:
1. What is your company in a nutshell?
2. What problem are you solving?
3. What is your product:
· Why is your product the best way of solving the problem?
· What is the current status of the project (with MVP, at least, as a requirement)?
4. Your team:
· What makes you capable of executing on this opportunity?
· What makes you different from everyone else in the market?
5. The market:
· Provide some numbers: Total available market; Serviceable available market; Serviceable obtainable market?
6. Business model:
· How are you going to make money?
· What is your route to market?
· How scalable is your product?
7. Competitor analysis
8. Financials
9. Investment required
· How much? For what? In exchange for what? Why now?
· What else do you need besides investment?
Play2Live — why this is a good investment
We analyzed Play2Live against the demanding criteria set for traditional investments — and found that it comes up with considerably more than a few geeks and a whitepaper. This is a well-conceived and carefully executed project, that may warrant more than a second look.
1. Play2Live in a nutshell
Play2Live (P2L) is the first decentralized streaming platform for streamers, gamers and eSports fans.
Its goal is to create an ecosystem where every participant, including the viewer, the streamer and the eSports tournament organiser, is part of an interactive system. Everybody can be part of peer-to-peer interaction and everybody — even the viewer — can earn money.
2. What problem are you solving?
eSports is a good example of an industry that had become “stuck” because existing technology did not allow for what participants in the industry really wanted:
· To move beyond just viewing and chatting, to interacting directly with the games and players
· To have personalization options
· To influence content generation
· To monetize their interest or their input to the business, without having to go through laborious administrative procedures and long waits
· To avoid being bombarded with advertising content
Other problems that can be solved via new technology such as a blockchain include:
· Lack of opportunity for amateurs in lower leagues of games, because most funding is being skewed towards professional players.
· Cheating, both within the gamer community and within the betting community.
· Monetization of digital goods earned in games is problematic. Related to this is skin gambling. There is no secure way to sell these digital assets to other players or across games or geographical borders, and to convert skins to fiat currencies.
3. What is your product?
The core function of P2L is a streaming service, featuring video broadcast of gaming and eSports content. Blockchain technology allows P2L to introduce a unique mixture of interactive features and monetizing tools, currently unavailable on existing streaming platforms. The solution changes the rules of the game in the industry, giving monetization opportunities to all participants, including viewers.
It features a blockchain platform called Level Up Chain, with a native utility token called LUC.
Why is your product the best way of solving the problem?
The economic model of the platform empowers streamers and users to determine the type of content they want, the way it is displayed and its monetization type. All users incur costs — paid for in LUC to P2L. But they can all also earn LUC.
The interaction is direct, between players and viewers. The role of P2L is maintenance and implementation of technical functionality, along with other areas of participation. Some examples of this interaction include the following:
Streamers can earn money from their very first stream, regardless of the size of their following. They can interact with their audience, distribute prizes and gifts and implement marketing campaigns. There are 11 different ways for them to earn money from the site.
Viewers can influence the content of the streams. They can earn income through watching adverts, carrying out tasks set by streamers, voting, and sharing their computer resources. They can place bets with a variety of bookmakers without moving from the P2L site and can purchase games from outside suppliers, using LUC earned on the site.
eSports tournament organisers have 11 schemes for monetization on the platform. They can tap into the ready-made betting system and totalizator. The transparency provided by the blockchain technology enhances trust between themselves and other partners on the platform — e.g. bookmakers.
This interactivity goes beyond just the streamers, viewers and tournament organisers on the platform. It extends to existing crypto projects in eSports and gaming, that can be added to the P2L ecosystem and that can then also interact with users on the Level Up Chain platform.
Other problems that are solved by P2P include
· Lack of opportunity for amateurs in lower leagues of games: Improved monetization options, including the facility to crowdfund local tournaments, can enable the development of local clubs and teams.
· Cheating, both within the gamer community and within the betting community: P2L applies a system of consensus and voting where viewers (represented by “witnesses”) take part in judging or in reviewing games. Smart contract can be set up for tournaments. This reduces the chance of cheating and automatically distributes prize pools.
· Monetization of digital goods earned in games and skin gambling: Blockchain and tokenization are the obvious answer here.
What is the current status of the project (with MVP, at least, as a requirement)?
There is a working MVP which is being updated constantly. It can be viewed at https://p2l.tv/
4. The P2P team
What makes you capable of executing on this opportunity?
The team brings a set of skills to cover all aspects of the business. They have solid experience in eSports, gaming, cryptocurrency, marketing and promotion of gaming projects. They are backed by advisors with experience in business development, investment, media, blockchain, ICOs — and even gaming itself, in the person who is a former world champion for StarCraft.
What makes you different from everyone else in the market?
The team is led by the Founder, Alexey Burdyko, who brings experience in setting up successful and profitable businesses in both IT and eSports. This includes founding the Game Show project, which is the first and largest eSports tournament operator in Russia and the CIS, with a 2016 valuation of $36.8 million confirmed by Ernst and Young.
He has had working experience with the top existing streaming platforms, where his role was to attract audiences to their platforms. As a result, he has arguably the widest business network for eSports in the world.
5. The market
Total available market (TAM)
The gaming industry is BIG BUSINESS, and growing. It is predicted to reach $115 billion by 2018 and $130 billion by 2020. Video gaming is the biggest entertainment industry in the world, and eSports viewership has overtaken viewership of traditional sports.
According to Newzoo’s 2017 Global Esports Market Report, revenues grew 52% from 2015 to 2016, and 41% in the next year. The revenue forecast is for 36% CAGR between 2015 and 2020, when revenues are expected to reach $1.5 billion. Sponsorships should reach $665 million, and advertising $224 million. (Some forecasts double these figures, which will move advertising to half a billion dollars.) Betting is a major part of the eSports world. According to some estimates, the 2016 global volume was about $600 million, and estimated to reach more than $5 billion by 2020.
Audiences are also growing. A SuperData study (“Trends and insights on games and interactive media”, 2017) showed that 665 million people around the world tune in to sites like Twitch.tv and YouTube to link up with their favorite games. This is a big audience, made even bigger when we know that this number does not include the Chinese market, which is by far the biggest one! The CS:GO world championships in 2017 attracted 46 million viewers, and the League of Legends world championships 43 million.
Prize money is growing exponentially, driven by crowdfunding. The Dota 2 International in 2017 had a prize pool of nearly $25 million. This should be compared to prize pools in major traditional sports like the Tour de France (less than $3million), the US Golf Open ($10 million), the cricket IPL ($8 million).
Serviceable available market (SAM)
It is the fan base that really sets eSports apart from other sports — and is the basis of its growth. eSports was born from community. It becomes part of the lifestyle of its fans, who build social connections, interactions and friendships through the games. It is estimated that 9 billion hours will be dedicated to watching professional gaming by 2021. The accessibility of top stars to their fans is a feature of the sport.
It’s the composition of the fan base that is of most interest. Research undertaken by BI Intelligence identifies an “enthusiast” group of about 150 million. Most are millennials, (born between 1982 and 2004), 60% of them male. They have above average education, higher income, they spend more online and are significantly more likely to place a wager online, than the average population. They tend to consume content online rather than via TV or other traditional channels. They are difficult to reach, and do not respond to traditional advertising. They look for engagement and connections via social media, and respond best to user generated content (UGC).
The millennial market is huge. They make up 25% of the world’s total population and their buying power is estimated at $65 billion per year. All the indicators are that if you don’t provide an opportunity for interactivity with your brand, you will miss this market.
So, the eSports platforms that provide the highest levels of interaction between viewers and streamers will attract and keep the highest numbers of millennial audience.
Serviceable obtainable market? (SOM)
eSports, like soccer, is a global sport. There is a convergence of business models across media, entertainment companies and brands to reach the market. The technology behind the P2L business makes this entire market available. The roadmap describes the steps that will be taken to connect with and grow the market. MAU is expected to reach 10 million by Q2 of 2019 and 20 million by the end of 2019.
6. Business model
How are you going to make money?
The platform is set up to earn revenue for itself, with the LUC as the unit of exchange. There are 15 sources of revenue built in, spread across
· Advertising: anticipated to contribute 19% of revenue
· Partnership programs (eg for betting and gambling, duels between players, purchase of games). This is anticipated to contribute 32% of revenue.
· Micro-transactions and interactives (eg subscriptions, donations, assigning tasks to streamers and viewers, promotion of broadcasts, totalizator of eSports events, P2P CDN, etc): This is anticipated to contribute 49% of revenue.
The system is also set up to share 11 of these income streams with users:
Streamers can earn money from their very first stream, regardless of the size of their following. They can interact with their audience, distribute prizes and gifts and implement marketing campaigns. There are 11 different ways for them to earn money from the site.
Viewers can influence the content of the streams. They can earn income through watching adverts, carrying out tasks set by streamers, voting, and sharing their computer resources. They can place bets with a variety of bookmakers without moving from the P2L site and can purchase games from outside suppliers, using LUC earned on the site.
eSports tournament organisers have 11 schemes for monetization on the platform. They can tap into the ready-made betting system and totalizator. The transparency provided by the blockchain technology enhances trust between themselves and other partners on the platform — eg bookmakers.
The P2L platform moves beyond just these three primary participants to include advertisers, bookmakers and suppliers of games into their ecosystem — and to share revenue with them.
All of these benefits to participants are likely to drive the growth of the platform and the value of the LUC token.
What is your route to market?
Drivers of audience growth are illustrated in the following figure, taken from the P2L pitch deck:
How scalable is your product?
Blockchain solves problems holding eSports back from breaking into the sports mainstream. Play2Live provides a comprehensive ecosystem to drive the growth of eSports. Further modules will be added to the P2L bouquet as MAU grows. In addition, further new businesses can be launched on the P2L blockchain, all using the LUC as a medium of exchange.
7. Competitor analysis
Blockchain and tokenization are central to the P2L business model. Without them, the interactivity and monetization of activity on the platform would be impossible.
This means that existing streaming companies like Twitch.tv and YouTube are not really competitors. It would be prohibitively expensive for them to convert their current businesses into a “blockchain version”.
There are other start-ups aiming to leverage the benefits of blockchain to set up smart contracts, host tournaments, facilitate the purchase and exchange of virtual assets, allow for legal betting, develop player skills and build communities. However, they offer fragmented solutions. For example:
All of these are good ideas — and P2L has included most of them into an integrated ecosystem. In addition, P2L offers:
· Easy interoperability that encourages other products, partners and users to join its ecosystem, rather than competing with them (this is much like the Steam model)
· Inbuilt crowdfunding and escrow systems
· A new approach to advertising which sees advertising disabled by default on the streaming platform. Viewers are incentivised to watch the adverts, as they are rewarded with LUC every time they do.
And P2L has designed a revenue-sharing model and provided enough incentives to encourage viewers, streamers, tournament organisers, publishers, bookmakers and advertisers to migrate to this platform.
8. Financials
The P2L White Paper sets out a very clear financial plan, commencing with the structure of the token sale, the distribution of LUC tokens, the budget for investment received and a roadmap, dependent on the amount raised during the token sale.
Token sale
The maximum number of tokens issued will be 1 308 800 000 and 62,5% of them will be sold on the open market. A closed round, open only to investors, will be followed by a pre-sale (with bonuses of 30%) and a token sale.
Funds allocation
The allocation of funds received shows good understanding of how the gaming industry works and of the necessity to attract as many streamers to the platform as possible, as quickly as possible. So, 20% is allocated to broadcast rights, 15% to negotiating exclusive rights with streamers and 10% to marketing. A significant amount is also directed to CDN services to ensure high quality streaming (this amount to be reduced later by implementing a P2P CDN programme).
Roadmap
The roadmap sets out the development that will be possible if targets are achieved, starting from $5 million and projected to $30 million.
Ensuring token liquidity
Important to note, too, is the deliberate plan to ensure liquidity of the LUC token. Steps include:
· Price appreciation:
o This will initially be through the release of the LUC token onto the open market directly after the token sale, backed by solid marketing and information to investors.
o The LUC token is the only currency on the platform, ensuring maximum utilisation across all of the monetization options available. Liquidity is therefore assured.
o Trust in the token will be built through the easy exchange of LUC to other cryptocurrencies and fiat, via the internal gateway/API
· Buybacks and token elimination.
o A clear plan is set out regarding mechanisms to ensure buyback of tokens from the open market, and the elimination of 25% of tokens by the date that the project reaches breakeven point.
· Other mechanisms include an investment in the Bancor Protocol system, the running of an Operations Fund and improving the internal economy.
More detail of how P2L plans to ensure liquidity of its LUC token is available here.
9. Investment required
The soft cap is $5 million and the hard cap is $30 million. BTC, ETH, BCH, LTC, DASH and USD are the currencies that will be accepted. The minimum purchase is 0.1 ETH.
CONCLUSION
Play2Live hopes to attract a large number of eSports and gaming enthusiasts to its token sale, setting up the seed base for the future. However, given the strong business plan that underpins this project, institutional investors, venture capitalists and angels might be equally interested.
Stay tuned!
