Sohrob Farudi called us last week. What followed was one of the most fascinating pitches Adam and I have ever heard.
Sohrob is the co-founder and CEO of the FCFL (Fan-Controlled Football League). He’s starting a football league. Like the NFL, it has real players playing real games – but there’s a BIG DIFFERENCE.
The fans call the plays… in real time!
Not only that, the fans draft the players, hire the coaches and decide who’s playing. Everything that happens in the league – on and off the field – is controlled by the fans.
And the more FCFL tokens a fan holds, the more influence they have over fan-generated decisions.
The technology got a test run in February. That’s when the company created the world’s first fan-controlled sports team. The team did well. The technology passed with flying colors.
With proof of concept nailed down, FCFL decided to launch its initial coin offering (ICO).
But why was Sohrob talking to us?
Well, we recommend crowdfunding opportunities. But SEC rules have made ICOs a risky proposition when offered to non-accredited investors.
At least, that was the old reality.
And what’s the new way of doing things?
ICOs are now available to EVERYBODY, thanks to three startup portals that have recently begun to offer these deals under crowdfunding rules.
Sohrob’s FCFL “token presale,” for example, was made available by our friends at MicroVentures. FCFL is raising $5 million. The minimum investment is $500. It plans to raise $30 million early next year via a full ICO.
When that happens, the people who invested in the presale will receive coins (also referred to as tokens) at a discounted rate.
Republic and StartEngine complete the triumvirate of portals offering ICO opportunities… now that these offerings have been stripped of many of the legal risks of the past. These three portals have adroitly positioned themselves as the crowdfunding hubs of ICOs.
Each has adopted a different path in doing so. What follows is a brief overview of each portal’s strategy, beginning with MicroVentures.
MicroVentures. This well-regarded startup portal has joined forces with a much larger portal, crowdfunding pioneer Indiegogo.
Together, they’re offering these presale ICO opportunities under the Simple Agreement for Future Tokens, or SAFT. It treats the tokens up for sale as securities while promising investors future tokens. When the companies eventually launch their ICOs, MicroVentures will categorize them as utility tokens.
By the way, they’re considered utility tokens and not securities because they have a specific use in the protocol developed by the ICO’ing company.
Companies can raise up to $1 million from crowdfunders. MicroVentures’ model also allows companies to do a presale under Regulation Crowdfunding while at the same time raising millions of dollars more from accredited investors.
StartEngine. This was the first startup portal in the U.S. to offer SEC-registered ICOs. As I write, it has four listed ICOs raising funds.
We’ve been following this hard-charging online startup enabler ever since it listed Elio Motors and helped it raise more than $16.9 million. Like MicroVentures, StartEngine lets companies use its platform to sell up to $1 million worth of tokens under Regulation Crowdfunding (and it plans to list companies using Regulation A+ to raise up to $50 million worth of tokens).
In one ICO option, the portal gives each investor a wallet containing the security tokens they buy. In another option, listing companies can issue a limited number of tokens that can later be exchanged for utility tokens. Ridecoin employs a combination of these.
Ridecoin is currently raising funds under an ICO on StartEngine and is using two distinct tokens. One is the Ridecoin Token, which is ONLY used for day-to-day transactions between riders and drivers. In the absence of scarcity (a substantial amount of new Ridecoin tokens will be minted every quarter), they carry no expectation of profit.
The other coin is the Ridecoin Security Token. It’s categorized as a security and, as such, is registered with the SEC. This is the token that will be distributed to ICO investors.
Howard Marks, co-founder and CEO of StartEngine, told me that his company wants to bring ICOs out of the shadows by making them compliant with the law.
Republic. We also know the people who run Republic, an offshoot of AngelList. They recently began a Republic crypto site, using an alternative to the SAFT that they say “better protects investors’ interests.”
Republic calls its crowdfunding security the Token DPA, short for “Debt Payable by Assets.” It lets investors receive part or all of their principals back, earn a cash return or receive the desired token when certain events occur.
With a SAFT, an investor must wait for a public token sale by an issuing company to receive tokens. If it doesn’t happen, their right to a return on their investment can go unfulfilled.
The DPA features several protective measures. For example, it mandates that funds raised are used slowly or are returned… and it allows investors to earn interest on their investments or eventually receive tokens at a substantially discounted price if the company ever reaches an ICO or PCO (Public Coin Offering, Republic’s term for ICO).
The site currently has one ICO offering, called Props. It aims to decentralize the video digital media economy. Minimum investment is $50.
A Long Way to Go
The number of ICO offerings should increase next year. But for now, says Indiegogo co-founder Slava Rubin, coin offerings don’t make sense for most companies, given the many complications.
But those companies for which a coin offering does make sense?
When the offerings are listed on one of these portals, regular investors can invest in them. We’ll be shining a light on the best of these cryptocurrency offerings through a new 100% crypto-focused research service we started in late November.
Cryptocurrency may have a long way to go, but we’re going to help it go mainstream a little more quickly.
Along the way, we’re giving members a much better chance of making money and avoiding crippling mistakes.
Co-Founder, Early Investing