Cointelegraph Japan: TEC — A New Way of Fundraising for Cryptocurrency Startups (Exclusive Chat with Ceres & SynchroLife)

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SynchroLife

6 min readAug 17, 2018

SynchroLife founder and CEO Tomochika Kamiya was interviewed last week by Cointelegraph Japan to discuss SynchroLife’s recent fundraising and what “token equity convertible” (TEC) fundraising means for the cryptocurrency and blockchain community as a whole.

Thank you Masae Okada for this great article! We have included an English translation below, or you can read the original Japanese here: https://jp.cointelegraph.com/news/ceres-and-synchrolife-talk-about-new-financing-scheme-tec

Cointelegraph Japan — August 13, 2018

TEC: A New Way of Fundraising for Cryptocurrency Startups (Exclusive Chat with Ceres & SynchroLife)

On August 10th, GINKAN announced a fundraising round including a new “token equity convertible” feature that allows shares to be converted to tokens. This fundraising was done to further grow SynchroLife, their social restaurant recommendation service with a token economy. This 720,000 USD (80 million Japanese yen) seed round was an allocation of new shares, and the smartphone media company Ceres Inc. was joined by Former CEO of Cybird Holdings Fujio Komura in investing. The fundraising included rights to exchange shares for the cryptocurrency token used with SynchroLife, the SynchroCoin (SYC).

American venture capitalists have been calling this kind of fundraising method a “Token Equity Convertible (TEC)”, and it is expected to become more commonly used by cryptocurrency related startups in the near future. According to Ceres, they believe they are the first company to actually finalize a TEC. Today I sat down to talk with Takuma Iwasa of Ceres’ Corporate Planning Office (who originally proposed the TEC) and with GINKAN’s CEO Tomochika Kamiya to discuss what led up to the decision to use this fundraising method.

ICOs are a bottleneck when trying to do traditional equity investment

GINKAN’s subsidiary company SynchroLife held an ICO in September 2017. Mr. Iwasa of Ceres says that was quite an issue when they first considered investing in GINKAN.

There are no examples of the audit and accounting process for cryptocurrency in either Japan or the internationally with the International Financial Reporting Standards (IFRS). They also had to consider the possibility that auditing companies may not even accept a company that had done an ICO. Considering this, an exit by GINKAN going public might be difficult, if possible at all. We can see these kinds of accounting troubles happening with Metaps Plus (listed on Tokyo Stock Exchange Mothers) and their Korean subsidiary company’s ICO already (click to read more about that here).

“I realized the only way to avoid the obstacle of an audit would be a token equity convertible. I believe this was our best solution,” comments Mr. Iwasa.

TEC allows for a faster exit than going public, by selling tokens. And even if a company can’t go public, this also allows investors to get back on their investments to companies that have done ICOs by exchanging stocks to tokens.

You don’t have to give up on an ICO for the sake of future funding

“Since last year I’ve heard a lot of startups debating between whether to aim for an ICO or an IPO. In Japan right now, a lot of people feel that by doing an ICO you have to give up on ever doing an IPO,” comments CEO Mr. Kamiya.

Mr. Kamiya says he thinks it is a mistake for companies to give up on doing an ICO just because they are worried about not being able to do traditional fundraising or having auditing issues in the future. “By holding an ICO you can create a community of supporters for your project and token while raising money. It’s marketing too. I don’t think there are any demerits as long as you do it within regulations and have a real business plan. Even if you can’t hold an ICO in Japan, there are other places around the world where you can,” he comments.

By using the new TEC method, companies who have held ICOs can now get traditional funding more easily and companies considering ICOs can ease investor concerns.

On the other hand, some token designs are not a good fit for the TEC method. If the token is designed so that more can be issued, investors are faced with the risk that the value of the token may be diluted if too many are issued and it is hard to predict the future value of the token. Mr. Kamiya comments he believes the TEC method works best when there is value for both the company and investor can share in the value of both the token and company.

Looking forward to more cryptocurrency startups and investments

“Including a token equity convertible means that when the business is going well further down the line we don’t have to waste resources worrying about going public. If the business has moved forward successfully, both the tokens and stocks will do well, and that’s how ICO projects are supposed to be.
We don’t have to worry about debating over the technical details, they can just focus on their product…
If this method becomes more common it’ll be easier for companies with a business model involving a token to raise funds in the future. Without a token equity convertible, you’re kind of obligated to go public. But this removes that. If the business plan isn’t well thought out and executed the token won’t increase in value, so I think this is a good solution for good ICO projects. It’s helpful for investors who felt restricted before as well,” comments Mr. Iwasa

Ceres and GINKAN have been discussing their business alliance and funding round since May 2018. It took 3 months to conclude the deal because there were no examples to follow as to how to do a TEC, and they had to make their contract from scratch. They had to sort out the relationship between their Japanese company and Hong Kong subsidiary company, as well as the rights regarding their ICO tokens. Both parties believe this new fundraising method is an efficient and logical method for many startup projects. Perhaps we will be seeing other startups following their example soon.

Thank you again Masae Okada for the interview, it was great to meet you! For those interested the original Japanese article can be read here: https://jp.cointelegraph.com/news/ceres-and-synchrolife-talk-about-new-financing-scheme-tec

You can also learn more about SynchroLife’s recent funding announcement in our recent press release here:

GINKAN Announces Business Alliance and Seed Round of 720,000 USD with Ceres Inc.

Seed round includes new token equity convertible (TEC) investment method

medium.com

Please visit the following links to learn more about SynchroLife! 📲

Official Website: https://synchrolife.org
White paper: https://synchrolife.org/whitepaper.html
Twitter: https://twitter.com/synchrocoin
Facebook: https://facebook.com/synchrocoin
Telegram: https://t.me/synchrocoin

SynchroLife Mobile App:
iOS App Store: https://itunes.apple.com/app/id557532449
Android Google Play: https://play.google.com/store/apps/details?id=jp.co.synchrolife