Why Is Getting ICO Investment So Hard
Why is getting ICO funding so hard? Tracy and Monica take on this hot subject that has been weighing on a lot of people. They discuss why they think the whole ICO investment and monetization models are broken. Weigh the pros and cons of seeking ICO investment as Tracy and Monica explore whether getting on this rollercoaster is right for you. Discover whether you need to seek funding or not, learn if are you at the right stage and in the right kind of business to ask funding, and know whether it can make your venture grow fast enough to compete in a global marketplace.
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Why Is Getting ICO Investment So Hard
We are hot on a subject that has been weighing on us.
I hear about it all over the place. I’ve experienced it myself. It is not fun but it’s relevant. It’s something a lot of people need to know about.
Why is DC and ICO funding so hard? I was at a DC Fast Pitch and the founders looked frustrated. They were almost pissy. They’re almost like biting the heads off of the investors because they had enough of the same old questions and the same step. It still doesn’t get progress. They’re frustrated by it.
It’s totally frustrating. It’s a funny dance where you’re supposed to be enthusiastic. You’re supposed to be knowledgeable. Any question that comes at you, it’s Jeopardy! on steroids. Meanwhile, it feels like you’re also on Wheel of Fortune because who knows when you’re going to hit the lottery.
You’re not supposed to be desperate.
It’s enthusiastic, not desperate. You have all the money in the world, but if you had all the money in the world, why would you be pitching and dealing with this instead of building your actual business? It turns out maybe you’re a little desperate.
The whole process is broken to me. I keep hearing from people. They’re like, “That’s why we’ve done the crowdfunding model of where you can go with unaccredited investors up to $1 million.” That whole model is even worse because you’ll waste a year trying to get public because you have to get so many different people. It’s even harder to build that. I have yet to see someone come through that successful. I don’t know about you. I haven’t seen anyone come through it.
It only bootstraps any company I’ve ever done. I have always been the sweat equity partner or the lone wolf with the money. I started this spreadsheet of every single credit card I had, every promotional rate it had, when it expired, when to kite it to the other one, when to send it back, how much I’ve paid on each one when they were all due when the payments were made because I couldn’t let my credit score go down. I couldn’t lose access to my credit lines because that was the only way I was paying for things in the first couple of years of my last business. I’ve sold that business. I’ve sold my other real estate holdings, but I still have a spreadsheet of exactly what my expenditures are because I’m bootstrapping. I have a limited amount of time to get over the hump. An investor wants to get in on that. That’s like they’re privileged to be a part of that journey, except they don’t treat it that way. They treat it like we are privileged to take their money.Demonstrate value to your deal, to your product, or to your business that proves that it is going to work. Click To Tweet
I have heard various views on this. The thing is that I’ve never sought funding. I’ve had thirteen Angel Investors in my very first business and because of that experience that I never did it again. It became a full-time job. It kept me from doing the things that were accelerating my business constantly communicating with the investors. At the end of the day, it was a detriment to the business. We sold it for a profit. We were happy to be out of it though because we now could run the business our way. We now could run it into what we wanted to do. It was a burden and yet it was supposed to be a help. That’s where you look at it, is this the right thing for me to do? I’m sitting back thinking hard about my venture that I’m working on. This is the year I’m either going to get funding or I’m not going to do it at all. We’re going to not even bother.
The thing is that I have a couple of reasons I’m considering it. Having this conversation openly helps people frame and understand when the right time is, if you’re in the right business, if you’re at the right stage to go seek funding because that also is part of the problem. A lot of ventures don’t have any proof at all and going into whether it’s proof of experience, proof of concept, proof of the model working, there’s a lot of that. It will take you a lot longer than you think at that point to get someone to come in at that early stage. It’s the early stages that are hard. This particular venture that I’m working on, for those of you who don’t know, I own two businesses, one is called Brandcasters, which is producing this podcast show. That’s what the business does. We produce podcasts. We also have a hosting platform. It has some unique things that we’ve invented and put into it that allows us to do things with the advertisement, maximize people, show them monetization and things like that. That is where our real growth value is and I know that.
When you look at a host of a show compared to the hosts out there who have been in the market for a long time, we’re competing against a lot of people who have 300,000 users and we want to hit 1,000 this year. That’s our goal. We’re small in the scope of things. We’ve got a lot more benefits and features that are of great benefit to independent podcasters. The people come on our platform are excited and raving fans. We get referrals every day. We haven’t done any marketing or advertising. We do it word of mouth. I can’t rely on that to grow fast enough because I have to compete in a global marketplace. There are a couple of mediocre competitors who have gotten $34 million in venture capital.
Their model of monetization is what I call localization, which is the old radio model. We’re in international waters. Why shouldn’t you maximize your brand value, brand awareness, advertisement, all of those things in a different way? I’m breaking the ad model by what we’ve invented and do. They’re making podcasting work in the old model. It’s so much safer. They got $34 million. I’m looking at that going, “They’re going to explode their marketing and all of that. They’re going to track people who aren’t going to get the value back for their show. They’re going to give the value to them and that’s the opposite of what we want to do.
Part of why I started exploring blockchain was thinking, “Could I tokenize? Could I do an ICO on my Podetize platform, which is what we call the hosting? My Brandcasters which is production services, it’s consulting. It’s services provided. It’s steady cashflow. We have that because we have clients every single day producing episodes. Could I separate the two because I only need growth on one side? I don’t want to mess with the services and what I’m doing on the other side.” It’s an opportunity to do that. That’s what I’m exploring thinking about. I’m also sitting back thinking going, “Do I want to be on this rollercoaster?” Do I want to go and seek funding? Do I even need it? Is it going to happen anyway? Are those other models going to fail because they will when something better comes along or do I need to set myself up to be at that place? This is the only thing that has come back for me, Monica, is that value placement. In other words, being positioned in the marketplace up at those who have taken in that’s not taking in the money. Is that the investors not giving us credit and saying, “You guys are of value?” I don’t need the money. Do I need them to say, “Yes, we’ll invest $34 million to you but never touch the money?” Do I need to do it that way? I need that market credibility.
As a five-time entrepreneur myself, I’ve always bootstrapped. I’m now seeking funding, but I’m also doing two conversations at once. I’m doing strategic partnership conversations and investment conversations. When you talk about how you need that market validation, it’s not like every investor is talking to every other investor. It is a matter of how many brands can you align yourself with? How many partners can you be in with? A partnership with a funding partner who says we’re going to throw money at this and we’ll throw our name on it as well, you come out of Y Combinator and you end up with some great funding partner. You also could place yourself and get the same type of placement, not in the funding sense but in the strategic partnership sense.
For me, it’s in the real estate space. Can I get in with CBRE? Can I get in with JLL? Who can I get in that’s big even if it’s the tiniest little deal so I cannot be lying when I put that logo on my website? I didn’t take any money. I did a small deal with them, whatever that small deal is. Is it worth branching out and having an additional full-time job of fundraising or is it worth branching out and having a tiny little deal job with one strategic partner? Which one is going to get me more and take up less time? I know how to build a business. I don’t know how to fundraise.
I have to wonder am I going to go and learn an entirely new job description and also succeed at it? Succeed at that in time before my runway to build the actual business runs out or do I build the business and say, “If they come to me and they went in, that’s a privilege that I might give them if they’re the right funder. Otherwise, I’m going to buckle down and do this my way.” Once I’m revenue-positive, once I have the places that I want, once I am at the level that I think there’s more external validation of value, then it’s going to be a much easier conversation with those funders. They missed the chance to get in when the equity was a lot cheaper.When you talk to investors, you want to make sure that they get to feel smart while they learn, too. Click To Tweet
I want to break it down because I sit on a lot of panels and do a lot of coaching of people who are pitching. Are you showing proof in your deal? Are you at that stage where you’re attracting in it? It’s coaching not from the side of the investor because I don’t have that experience because I have not invested anything but my own ventures before. It’s the viewpoint of, “Are you demonstrating the value to your deal, to your product, to your business that says, ‘I’ve got proof that this is going to work?’” I do this a lot on tech products and hard goods, consumer products because they’re inherently extremely risky. Trends change, fads change, and people with deeper pockets in tech all of a sudden shifts in the marketplace. A platform that you thought was going to be the thing, “Are we going to be in Bitcoin or are we going to be in Ethereum? What are we going to be in? Do I base my whole entire business on that?”
These are questions that could shift on you without anything that you have control over. Investors look at that and they go, “It’s inherently risky.” That’s how I advised. I look at the deals and I say, “You’re not demonstrating that you have core deep value to the thing, to the why people should buy if that’s the case. This is the advice that I usually give them. Also, I hear a lot of bad pitches in general. How do you speak better? How do you speak more clearly about your tech? How do you get out of your own head? This is the hardest thing for a lot of people. I did an interview with someone where her specialty is to de-lingo the tech and talk at the top level, talk at C-Suite, talk to investors, talk to people who are not in the industry and know. That’s a critical path to making sure that you fund faster because they don’t want to appear stupid next to you, whether it’s an investor or whether it’s a tech partner or whatever it is. They don’t want to appear knowledgeable. You don’t have to dumb it down, but you also don’t need to be in your lingo, in your industry, and your tech speak.
That’s basic psychology. How do you talk to people? When I wrote the book, Blockchain 101, this is not deep tech. This is not going to make you think that I’ve talked over your head. This is not quantum physics. It’s storytelling around new stuff that shouldn’t be so scary and let’s keep it short and sweet. When you talk to investors, you want to make sure that they get to feel smart while they learn too. It’s pedagogy. How do you make sure that you take someone from where this body of knowledge that they don’t know about? Introduce them in a way that doesn’t scare them and keeps them feeling smart while it also shows them that you have the advantage that you know what you’re talking about while not making them feel left out. We’re talking to people that already made their money in tech and they feel smart. They want to be validated. They don’t want to be told anything. They want to poke holes in what you’re doing from their precision of what they already know. They don’t necessarily want to go to a new place. The pitch environment is an extraordinarily difficult one. It’s set up almost wrong.
I hear a lot of models because I get asked to speak in a lot of places and do a lot of things. I get the models broken all of the time. This is what I hear, “We’re changing that. We’re starting an incubator. We’re starting a pitch fest. We’re starting this. They have all of these different ways to do it. Part of it is getting at why this is so broken. Why is the funding process so broken? It’s broken because investors don’t want you to know who they are. That’s the first part. They want their privacy. They want to stay on the other side of it and decide who they listen to and who they don’t. Trying to do that one on one and introductions to them is so time-consuming. That’s the first thing. When you go to the second thing, which is you go to a pitch fest and you’re in front of them. It’s highly competitive and confusing and too fast. This is what I hear from the investors. It’s not enough information and I barely get intrigued enough to decide to do any of them. That’s not valued either.
There are two types of conversations you have with people no matter what it is. It can be with your spouse. It can be with someone at work. You can be at a conference. There are two types. One is two people each competing to make a point and be the one that wins the point. It seems like a pissing contest. Those are the conversations that you end up in with people that are experts, “Yes, well.” All you can is either like agree and be submissive or step up and compete, but those are your only two options because if you do anything else, it’s not a conversation for you. The other type of conversation is a discovery conversation. Yes, the person across the table from you has things to tell you. They’re going to have a good point that you didn’t know.
That’s why you’re there, but also you’re going to make good points and both people are there to discover that. Both people go there to contribute, not compete. If people don’t enter from it, it’s almost like I made a discovery competition or a pitch discovery rather than a pitch competition. It’s only in those relationships that are fostered in safety and communication that happen when people feel like they can be vulnerable to learn something new. They feel safe. They feel knowledgeable enough. They don’t feel stupid. That is the conversation you want. Competition is the other conversation. There’s no reason that competition is going to help anybody. People have wacky ideas about how capitalism and even Darwinism works. You’ve got a sense of like, “You think we might need to cooperate or discover something together? No, compete?
There’s also this fundamental problem that what we don’t realize. I’ve interviewed a lot. I’ve written articles about a lot of venture capital groups and investors from things from their perspective. What I hear a lot is they’re failing at a great rate. They have a lot of failures. It’s like nine out of ten, but the one that succeeds has like 10x return and it makes up for everything else. I hear that a lot. I’m like, “Why would you do that?” That’s like gambling. Why would I do that with my money? I would never do that. That model is so broken. To me, I’ve always built my products and run my client work with switching that and flipping the odds. Why do it otherwise? It’s no better than playing the lottery and I don’t do that.
This is where I’m like, “Why does this make sense to you? Why would you keep doing this if it’s such a high failure rate?” Many of them start thinking, “I need to take control.” I’ve heard different models, “We put in our management structure and every one of our investments have to use the same HR group, the same tech group, the same logistics, like whatever that is because then we can ensure that our money isn’t being wasted in there. It’s being leveraged.” I’m like, “Maybe that works.”It's only in relationships that foster safety and communication when people feel like they can be vulnerable to learn something new. Click To Tweet
You can only take in investments in a very limited range that fit that model. You’re going to sit through hundreds and hundreds of pitches to find the right ones. How do you go about doing that? There are others that go about and do these incubator groups in these things which leave out people like you and me, who are not willing to go and pick up and go plunk ourselves down. We’re not 22 anymore. We’re not going to go plunk ourselves down and sit in there. These are viable businesses that are more likely to succeed because of the track records of the founders because they won’t do that. They have families and they have lives. They have businesses that they’re actively running at the same time sometimes. That leaves out the possibility of being able to get great people who know what they’re doing. That’s one of the fundamentals. You’re supposed to be investing in someone you believe can do this, who has the credibility, who has the capability, and who has the track record. If you’re ruling them all out by your whole process, then you owe no more likely to succeed than the ones who decided that they’re going to build this whole infrastructure.
That is square one, which is bootstrapping.
Which leads you back to where to do it. I’m involved in so many education groups and everything like that. Here they are, they’re like, “Let’s educate you on how to speak to investors, but it doesn’t work any better. It improves the small percentage who can’t talk to people. It might be the difference maker for them. For overall, what I’m not seeing is I’m not seeing a better process to connect the two people together because they don’t collaborate.
I decided when I went to Web Summit, I got there and I was like, “Why am I so bombed that I have to be here? This should be fun.” I was like, “Because I don’t want to drink my face off all week to be extroverted and alcohol helps with extroversion.” It’s like finding a needle in a haystack or it’s seeing all my friends again. Either way, what am I doing here? What’s the real ROI on this? I’m spending money to be here. I got a free ticket. I have good accommodations, but still like I’ve spent money to get here what for. If I’m not speaking at the event,” which I was speaking at a couple of other things but not the actual Web Summit. I still thought, “I need to change what this allocation of my budget is for and make it more targeted.
I decided to have an investor dinner. A dinner full of not investors but like-minded people. It wasn’t like a hard sell dinner. That seems like not fun. I had some people that were in impact, people in cryptos and people in blockchains and people that work for family offices. A couple of high-net-worth individuals were invited and said they were coming. One of them canceled with his guests, so two of them canceled the day off after I’d already shelled out $800 for all of the catering, space, and the booze. The other one who was the top guy who had said right away yes did a no show. I put the same amount of money that I could have put towards like a small conference or something. I thought more targeted and I still felt like, “Is it me or is this stupid?”
To get people around a table where you have good food and you have a targeted audience. You have something that’s not a hard sell and you have context. You’ve got several people that are also planted there that already support you. It’s like you create a wonderful environment. That’s what I thought. I’ll invert the model and make this intentionally a good nourishing environment for someone to learn about what I’m doing and about the context in which I’m doing it, which is a social impact and real estate. I’ve got some people from all these worlds that are going to be at the table, let’s have a meal and have a conversation.
I have a good friend and her conference is coming up, Wendy Lipton-Dibner. It’s focused on impact. That’s what she believes impact. She is one of my favorite people on Earth who is focused on impact. Her conference is a killer, first off. It is four days of I cannot believe the amount of intensity that she has going on it. The conference is called Move People To Action. She’s got deep research. She’s built so many businesses. She understands the whole full process. Move People To Action is an acronym for the number of steps in the process. We try to dumb it down in these conferences. You hear it all the time, “The five things you need to do.” If it’s a long enough conference, it’ll be seven things. Hers is Move People To Action. That’s a lot of steps because she’s not dumbing it down.
She’s got deep content and details about all of it. The most important thing that she’s building is she’s building this incredible process. She calls them vintage entrepreneurs. Those over 40, over 50 rarely who have such deep experience, have built businesses and done all the things that they need to do and now they know exactly what they should be doing. They’ve got it refined it into this great high-impact message, product, system, or whatever it is that they’re going to do. They’re the least funded group. Women have problems getting funded. Those are for 50 are the least funded group and yet they’re the most experienced. This is where I don’t see a lot of people walking the walk. They’re talking. They’re saying this is what our investment group is all about. We believe in credibility. I’ve heard them, they all give speeches. They say, “These are the three Cs of investing with us.” They go through all of those things. The reality is they’re skipping out and not even taking meetings with the most viable candidates based on that. Wendy wants to break that. She wants to switch that up. She wants to put them in a fold in which they can be brilliantly them and do it.If you've got a good thing, they'll come. Click To Tweet
Move People To Action is one thing. It’s on both sides here and until there’s disgruntlement on the investor side where they’re like, “If I have to sift through one more pitch thing,” I would like to hear that.
That’s what she’s done. That’s what she’s doing. Not only did she work on getting government money, which she did, but she worked on getting the investors into her side saying, “We don’t want to do this. We want you to vet them. We want to vet them through this whole process because we don’t want to do this anymore. We don’t want to go seven out of ten or nine out of ten failures. We don’t want to be in that model with our money. We want to see these things work.” That’s what she’s done. She’s bringing them together in collaboration, which I think is brilliant. She gifted us on our other business, on our other podcast. There’s a coupon code. It’s pod gift or something like that, but I’ll make sure that coupon code is in there.
If you want to go check this out, whether you’re in the process of wanting to get funding and you want to know what this is about or you want to understand like, what am I missing in my business? What am I missing in the scope of building this that isn’t getting people to take action? That isn’t getting the investors to come my way, that isn’t getting my business growth fast enough? What am I missing? This is the event. I can tell you that I go to a lot of events, but I came home from hers with a book of notes. If I can learn something somewhere, you can imagine what you can get out.
Where is it being held?
It’s in Orlando. This is an interesting thing that we’re in this process of this whole thing is broken. There are people like Wendy out there, there are people like us out there who are looking for what’s the alternative? Why does this have to be hard? Why can’t the connections happen more organically? Why can’t they be right? Why shouldn’t it be happening that I’m finding the right people? It should be natural because if you’ve got a good thing, they should come. We want to say that and I know it doesn’t always happen, but that’s not true because in my world there’s always a channel for something.
This process of building the businesses, like you go to market and you say, “Do you want to consume this thing?” “I’ve got it,” and that happens and you either get to the right people, you solve it the right way, you talk about it the right way or you don’t. That’s that. It’s not an ICO. It’s selling something, but it might as well be because if it’s a B2C play, it’s a whole bunch of incremental engagements in terms of money. You’re either viable because you do it fast enough or not. Going to an investor, you’re basically saying, “Here’s an idea, it’s going to work.” That’s a completely different thing to do. There’s a reason why my last company, I made it an arts-related social business, the first one of the world’s, Starry Night Retreat and Starry Night Programs. I also decided not to go nonprofit even though we would have had great tax incentives to do so. I knew I’d be managing my board. I knew I’d be managing donors. I knew people were going throw it when we had hard times when I had that payment plan spreadsheet. The first thought would be go to donors and start courting them, try to get money out of donors. That’s not sustainable. Develop a new line of business. I’m going to go add another product. I’m going to go make another thing. That I think what has saved the business.
This is what is so interesting about what you did, Monica, is that you stayed in the element. That’s where I feel that this whole process is broken because it pulls us out of our element, out of our industry, out of building this business for an entire year to get the funding. What good is it? You’ve lost ground and you haven’t done what you needed to do. Do we take in professionals? Do you get a wrap? What is the process we are working in?
It turns out to be able to be able to fundraise for a company. They have to have a very special license, a Series 7 License to be able to sell securities in another company. For them to do that, they can take a percentage of what they raised, but investors hate it when that happens. They feel like they got a brokered deal. I don’t mind giving it away, but it’s so hard to find it. In the end, I know so many people and I’ve been on this site too where I’m in a position, I’m advising a company and they’re looking for funding. I’m talking to a funder. It’s not even my own company. It’s someone else’s. I’m advising them that the company can’t give me any money for what I raised for them because that’s illegal. I don’t have the right license. The investor doesn’t want that to have it, but I should still be making these connections. It’s like it was the same that I found nonprofit fundraising where it’s against the Code of Ethics for a fundraiser to take a percentage of funds raised where I’m like, “Why?” We said straight up, you’re going to get 5% of everything we raised or 15% of whatever, then we know that’s built-in and now your advice is to be successful. Why wouldn’t we want to do that? Somehow there’s this thought process in there were like, you’re not supposed to treat that skillset like the valuable skill set it is.Start reinventing the way you do things and really step out of it. Click To Tweet
Those introductions, I know exactly what you mean. This is the other thought process. I always look at something because I’m an inventor at heart. I always look at something and said, “Something is broken. Why is it broken? Let’s shine a light. Let’s illuminate all of these negative things that are going on in there and how can we fix it and how can we change it? We’re doing that. We decided we don’t have to sell our value to our existing podcasters. They get it. They know the value every day. There are raving fans. They’re the ones who refer us all the time. Let’s offer them value instead. We offered up and we called it a growth plan. It’s a simple name to what it is.
We offered them a year unlimited program. We offered them a two-year unlimited limited program. They were already podcasting and we said you’re going to spend less money over two years if you come on and do this now. It’s like pre-funding and that’s what we did so that we didn’t have to take in any seed money. It gave us the cushion to be able to go and say, “Do we want to raise money? Do we not raise money?” In the back of my mind, I’m sitting back thinking that maybe the tokenization process isn’t about me going out and using it to ICO or to eventually raise money outside.
That instead is a way to do what would be like an employee-owned company. Do a podcaster-owned company. Let them all invest in. I’m thinking that might be the process I want to do it so that I’d never had to sell because they already know the value. They’re already there. This is where I want to challenge you. This is why Monica and I brought this up. We wanted you guys to be thinking about this process isn’t working. It’s broken. It’s stacked against you. However you want to look at that, it’s hard as we said at the beginning. When we get to this place of where that is, this is the time to think creatively. This is the time to start reinventing the way you do things and step out of it instead. I don’t have to play by these rules, do I?
You don’t have to play by these rules, but it’s tough. It seems like either you’re in the know and you’re going to be a part of it. We’re funding ahead of those within its own circle or you’re just out of it. There’s got to be some new way to do it. The ICO seemed like some way to do it, but not quite. The model, I can’t say it as broken because I hate saying something’s broken without saying how to fix it. Honestly like I’m all ears if people have more input. To give to this, I am all ears about how to fix this problem.
I suspect we have a lot less investors reading this than we do those that are seeking investment. We love to hear your stories and experiences. We want to reach out to you, come find us on social media at The New Trust Economy. Also, you can go to NewTrustEconomy.com and message us there as well and tell us your stories. We want to hear what you’re doing. If you’re doing something unusual and different, we want to highlight that. We’d love to invite you on the show as well to hear these interesting stories, specifically if you’re working in blockchain and cryptocurrency. That’s what the show is all about, but because so many of you are seeking funding or investment model, we’d also love to hear anything outside of it. If we can model something that is different, but it’s starting to work, we let women, why wouldn’t we early adopt that? That’s what we’re here and we’re all about. You can find us at New Trust Economy. I encourage you guys to reach out, tell us what you want to hear. We also are looking for new episode ideas all the time. We want to hear what this show can do for you. This is all about you guys.
We want to hear from you because that would be great to get some more mind share around this one for sure.
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