The Post-ICO Checklist: Replace Your Advisors

A market correction in crypto, multiple high-profile security breaches and the looming prospect of U.S. securities regulation: Nothing seems capable of cooling enthusiasm for so-called “initial coin offerings” (ICOs). New entrants are announcing their plans for a token generation event (TGE) at a rate of about one to two per day, according to the flow we’re watching on Token Tracker.

Some of these will be successful. But how many have given thought to what they will do with the funds they receive? A few concerns rise to the top: One is security; but another, not often discussed, is how to manage a stack of crypto assets while managing company payrolls in fiat currency. And, how to retool for operations after setting up for fundraising.

“Many of them should replace many of the advisors they have and replace them with real advisors that are mentors.”

Some issuers accept a variety of cryptocurrencies in exchange for their new token; others only take one or two. No matter what the terms may be, the operators of a successful TGE will likely finish holding at least two currencies: Their own coin, and one or more coins they accepted in exchange for it.

I spoke to William Mougayar, crypto startup adviser and co-author with Ethereum co-founder Vitalik Buterin of The Business Blockchain, and Ty Danco, a fintech angel investor based in Boston. Here’s the second of two short videos from that conversation, above. (The first was titled, “The Pre-ICO Checklist.”) Mougayar and Danco gave me the following short checklist:

1. Once your TGE is complete, convert enough of your crypto holdings into fiat in order to have a two-year runway
2. Don’t sell all your crypto; stay long on your own newly minted currency and the ecosystem currency on which it is based
3. Make a plan to manage the money and provide transparency to your token holders, delivering regular reports
4. Replace your advisors: If you brought on advisors to market the token sale, recruit new ones who can help achieve product-market fit and win customers

“They have to give some transparency on the treasury aspect: How will they manage the money? They have to keep giving progress reports, credible ones,” Mougayar said. “Many of them should replace many of the advisors they have and replace them with real advisors that are mentors: People that have had startup experience and can help them go through the rough waters they will go through.”

Don’t make the mistake of selling all the crypto. Projects that raise a lot of ether, for example, are likely to depress the market, if not crash it, trying to sell it all at once. And those who are building on the Ethereum network are likely to be long Ethereum; if they’re right, the currency’s continued rise against fiat could significantly increase the value of their fundraise.

“It’s funny the people who raised money when Ether was low. If they didn’t sell their ether, benefited greatly and all of a sudden raised all this more money,” said Danco, an angel investor and serial entrepreneur. “But then you have the experience of someone like Ethereum, when they bought and Bitcoin went down. They had to do it with half the stake. There’s no rule on that.”

It would be easy for a successful company, post-ICO, to turn itself into a crypto hedge fund. That would probably come at the cost of time and energy into developing a product and a business. It’s not as easy as it looks, Mougayar said, recalling his early involvement with the Ethereum project.

“Everybody looks at ethereum and they want to copy their playbook, as if it seems to be easy: ‘Oh yeah, go to Switzerland, do a foundation, checkmark; then get some advisors, check mark; then do a white paper, check mark,’” Mougayar said. “In reality there was a lot of hard work. … Believe me it wasn’t very rosy the first 18 months.”