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ICO Insight Transcript

Adam:
Hey, I’m Adam Chapnick.

Amy:
And I’m Amy Wang. ICO Investor TV has officially launched and it’s the first online video platform dedicated to ICOs. ICOinvestor.tvwill spotlight ICOs from around the world.

Adam:
Plus, we’ll feature legal and investor round tables, interviews with ICO experts, a global regulatory review, and the ICO learning center. It’s all at ICOinvestor.TV.

Amy:
Now, coming on today’s episode of ICO Insights, Bitcoin futures launch, details on that in your ICO and crypto headlines.

Adam:
Props by YouNow and Telcoin move forward with their respective ICOs. You’ll hear about both in our ICO Spotlight. Founder of Boost VC, Adam Draper is in our Investor Spotlight. What he says is important when looking at an ICO. Also, in our Investor Spotlight, we’ll bring you part two of my discussion with advisor and entrepreneur, Les [Porse 00:01:00]. That and much more is straight ahead.

Amy:
Now, let’s check the latest ICO and crypto headlines. The Chicago Board Options Exchange and Chicago Mercantile Exchange are getting into bitcoin futures contracts. The CBOE bitcoin futures contract opened at $15,000 and there’s a $16,600 within the first six minutes of training, and an 11% surge on Sunday. About 1,000 contracts changed hands in the first three hours of trading. The CME bitcoin futures contract launches later this month. Meanwhile, NASDAQ plans to starts its own bitcoin futures as early as the second quarter of 2018.

By the way, on Thursday, December 7, the price of bitcoin hit an all time high of $19,000 before falling.

Adam:
And now, it’s time for this week’s ICO Spotlight. This is where we will introduce you to a company that’s planning a launch or has launched an ICO.

Amy:
In today’s ICO Spotlight, PROPS by YouNow. Their ICO just launched on CoinList and Republic Crypto. PROPS by YouNow creates a new blockchain powered model for digital media networks. Before we meet the CEO, Adi Sideman, let’s take a look at YouNow’s pitch video.

Speaker 1:
Today, media distribution is controlled by a small number of networks who have amassed hundreds of billions of dollars of enterprise value. Yet, just a small fraction of this value is being shared back with contributors like me who have helped enabled such success.

Speaker 2:
A blockchain network has the unique opportunity to reshape digital media and that’s exactly what we’re building, a network of video applications that is designed to decentralize media, and we’re calling it PROPS.

Speaker 3:
YouNow was the first video application to introduce millions of users to a virtual economy where content creators can earn. This makes the YouNow team uniquely positioned to bring blockchain to a broader audience.

Speaker 4:
Over the past several years, people contributed computing power to crypto networks like Bitcoin and Ethereum. Earning tokens for those contributions and those tokens increased in value as those networks grew. Now, social media users can earn tokens for their contributions and have a stake in the future success of the platform.

Speaker 5:
Over the past three years, we’ve generated $50 million in digital goods sales. We shared a majority of our revenue with content creators. That’s at the heart of what we do. PROPS take this concept to the next level. We’re also introducing the first of many use cases for the ecosystem, the Rize app.

Speaker 6:
Introducing an open video platform. Designed apps using our personal infrastructure, create content and share experiences while getting rewarded for it in PROPS. Deliver content through a new distribution model where users watch together in real time. [inaudible 00:04:13] Connect with creators, get involved and be inspired. PROPS.

Speaker 7:
I welcome all of you in building the future of digital media.

Adam:
Joining is live from New York is YouNow’s CEO Adi Sideman. Thank you for joining us today.

Adi:
Thank you Adam. How are you? Hello Amy.

Adam:
We’re doing great. It’s good to have you here. So let’s begin with exploring your solution a little bit. You have an existing video based solution with, I gather, 40 million registered users and now you’re rolling out a new one. Can you explain the difference in the two versions?

Adi:
Sure. So we’re mobile video guy running platforms Adscale with 40 million registered users with 60,000 transactions, micro transactions on the platform everyday and millions of dollars in non crypto virtual currency being purchased every month. And we’re taking that along with our team of experts video engineers and virtual currency experts and we’re leveraging it along with blockchain layer and crypto economics in order to go after a much larger opportunity and a much larger vision and that is to decentralize digital media.

And if you think about digital media today it’s really controlled by two or three players who are amassing hundreds of billions of dollars in enterprise value while the folks who constitute the networks of the content creators, the content providers, the users who promote it and developers who’ve build on it see very little of that value. Think about Snapchat when they went public for $25 billion, the creators who help them get to escape velocity saw nothing of it. In a decentralized ecosystem everyone who contributes to the growth of the network is part of the network, has a stake in the platform and is rewarded fairly and accordingly and transparently.

Amy:
Great. So how are you planning to compete against the big players like YouTube?

Adi:
Well, you know, it is the small companies and the small projects that usually innovate and that usually introduce disruption. And we don’t see the big players, the public companies decentralizing anytime soon. They have ,you know, entrenched business practices and it will likely, if we look at historically, going to be a small player who is coming in with what we call an ‘Unfair advantage or an asymmetric warfare.’

And in our case, you know, we are a company of 40 people and growing, but we get to harness our millions of users, our tens of thousands of creators and the developers that are building on the platform to work in concert with them where all of us are incentivized together to go after this opportunity.

Amy:
So how are you going to try to motivate the user’s side to come over to your platform? Do you have any particular strategies for that?

Adi:
So, first of all, we are starting with a community of millions. As you mentioned before YouNow already has 40 million registered users. And so that’s an important note which is our new platform Rize will be inheriting that user base, and will be one of the only crypto projects in the world to have such mass consumer usage from day one with a token that works in the market from day one.

We’re launching the first app on the ecosystem Rize in the end of January. In addition, we have some great investors already not just Comcast Ventures who own NBC, but also some big YouTubers like Casey Neistat and Phil De Franco with millions and millions of users who are coming over to the platform and are invested in the platform. And in reality if you think about it for creators today the platforms, including YouNow take 40% to 50% cut on the earnings of creators on the platforms. We are changing that with PROPS where we are not doing that, where everybody gets rewarded based on their contribution to the network transparently, and there’s no centralized system taking that cut.

And that’s very appealing for creators whether it’s Comcast or whether it’s the Youtubers or any other content provider.

Adam:
Yeah. I can imagine that’s the hit them with in their pocketbook that always is an important place to get them. That leads me to another question about, sort of, the greater good. You guys are benefit corporation, is that right?

Adi:
So we announced that we are changing from a C-corp to a B-Corp and in reality we’re changing our business one 180% from taking the 50% cut on each transaction. We are stopping doing that and all we care about is the appreciation of the token of which the company is keeping 26% .And so to underscore that we have announced that we are changing from a C-corp to a public benefit corporation with a mission to grow the props ecosystem and appreciate the token.

And that really helps us align with the community where they know that we’re on their side, and we’re all working together towards the same goal.

Adam:
Love it.

Amy:
So your presale is really interesting. Most of the pre-sales that we’ve seen today that are compliant have really focused on a [accredited 00:10:12] investors which are really ,you know, wealthy high net worth individuals, you know, with networks of over one million. What you’re doing is you’re not only selling to accredited investors but you’re also bringing non-accredited investors into the forward. So can you tell us how are you doing that and what do investors actually get if they go buy a token? Does it represent equity or utility you are or what does it represent?

Adi:
So first of all this is a utility token and today because it’s going to be used in the market on day one on our platform PROPS and the first app, Rize. Today we started to pre-sales, one for our credit investors on coinlist.co and the other one for non-accredited investors and that’s limited to a million dollars where users can buy up to $2,000 worth of token. Both of these companies that we’re working with Coinlist.co for accredited investors where you can invest up to two million and. Republic.co where you can invest up to 2,000 are well established companies.

We feel very very fortunate to have been selected by Coinlist following the successful Filecoin and Blockstack sales. This is only the third sale on Coinlist. They had to over 2,000 applicants to run the token sale on Coinlist and we’re delighted to be selected. And with regards to the non-accredited investors on Republic A. I’m glad to say that that sale is, I believe, by the time we’re watching this already sold out because there is so much demand by our consumers, users, creators in the PROPS community for that. And we’re delighted that we were able to make PROPS available not just for the top 1% but for everyone.

Adam:
Yeah. That’s terrific. So can you tell us a little more about the Rize in terms of what you guys are going to do with all this money? What’s in the plan? What do you got in the cooker?

Adi:
Well, we are developing a platform that is very exciting. And if we were together in the same studio right now I would show you a demo because it’s already working, and we’ve been working on this for the past over a year. And this is basically a social video platform that allows many to many video interaction. Think about it as a developer being able to decide the logic of how group of people, individuals many will be interacting in a room whether you’re doing a trivia game where everybody is participating or family feud where you get into a group of four people and you’re playing against another four people or you’re watching together. I mentioned Comcast as an investor, watching television together, dragging a few friends to have a conversation and you’re watching. Or you’re participating in an auction and you’re raising your hand and you’re able to pay right there and then through the platform.

So we’re launching the first app on the ecosystem in the end of January. It’s called Rize and we’re already working with two outside development groups on the second and third apps on the ecosystem. And I welcome folks who are watching and who are developing video solutions to contact us and join the Props ecosystem we have a Foundation, a nonprofit foundation that holds 50% of the tokens that logarithmically distributes the tokens over years, every 24 hours to all the contributors to the network.

So any video application on the network is eligible to effectively mine new tokens if they are successful in their project, and if they’re using our technology, the many to many video technology.

Adam:
Fascinating. So this is not an easy process going through a token distribution. Did you work with other companies? Can you share some of the companies you worked with and you know whether that worked out?

Adi:
So we have teamed up early on with a group called Coin Fund which are based in Brooklyn, New York. They are experts. They have done multiple token distributions in the past. And we were introduced to them by Union Square Ventures one of our lead investors as our main advisors. That’s been very very helpful. We also teamed up with Marco Santori and his team at Cooley based in New York for top-notch legal advice.

We worked with Zeppelin which is a premier group that audits smart contract, smart contracts and then we were very fortunate to be selected by Coinlist to be featured and for them to carry our token sale to their tens of thousands of credit investors. And so that’s basically our team and, of course, Republic, as you guys mentioned.

Adam:
Adi Sideman CEO of YouNow. Thanks so much for joining us live from New York for today’s ICO spotlight.

Adi:
Thank you so much Amy and thank you Adam.

Speaker 11:
Thank you so much for having me and yes Republic the entire team at Republic and partners are incredibly excited to announce [inaudible 00:16:15] Props and that was open to both accredited and unaccredited investor because Props already had a large community of supporters. The support from the community led to the entire offering being over subscribed within the first couple hours. So we couldn’t little expect for, you know, for a better partner aligned to mission and a community that’s willing to stand for inclusion in blockchain right off the gate.

Most entrepreneur and most people tend to be believed that a shared economy anything that’s open to more people it’s always better than something that’s just for the few. But with blockchain technology it’s protocol network depends on people, a lot of people in the background participating, validating and building.

So to give to unaccredited investors or participants fair access it’s ,in general, so inherent to all blockchain protocol project.

And Props [inaudible 00:17:29]are no exception. Also the demand, the interest from them was strong and the Republic project was built to meet those demands.

I can only speak to the Republic Crypto to offers investor actually acting as lenders. They’re lending the issuer, say $100 that $100, if and when, they’re tokens generated and available for distribution will be used to pay back the debt. That’s why we called them Debt Payable by Assets or token DPA.

Yes. So the minimum amount would be set project by project. Asking little as $50 or $20 and the terms of the first offering is available on republic.co. So we will recommend people go there to just read offering terms. The way it works as I explained is that the investors/lenders are expecting a repayment of their debt with an interest rate or premium. So if there’s a day of a token distribution these coins are going to be offered publicly at say, for example, a dollar a coin. Investors in an early campaign like Republic would get back to their invested amount at a dollar a coin plus some interest.

So the net result is that they’ll getting more premium compared to investors in the main or buyers in the main public coin distribution now. [inaudible 00:19:13] that these projects may fail and never launch and there are no tokens to be distributed and that’s why based into the DPA we have mechanisms whereby capital is going to be released only if the benchmarks have been met.

Whether Props will or will not launch or will not offer a public token sale in 2018 that’s up to them and that’s for investors to determine. But assuming that they, in fact, offer do do a sale even in January ,as I mentioned before, the debt payment by asset has a premium that is interest rate. So for $100 people who invest through the Republic debt offering will get more token than if she was to use the exact same amount of money to buy coins during the public sale in 2018.

We do and that’s an issue that we’ve thought and pay a lot of attention to when we developed products for this space. Blockchain as a technology is poorly understood and highly speculated and retail investor that is an accredited investor, we believe deserves some added protection. So [inaudible 00:20:38] the debt payable by asset is structured such that the project would need to deliver or meet certain benchmarks, for example, white paper being written before we release them capital.

Block, you know, the public distribution is the roadmap [inaudible 00:20:58] have been there in order for us to distribute capital. Otherwise, a significant percentage of that capital will be held in escrow. So if the projects fail to meet those benchmarks investors will get some of the money back instead of losing all of the invested capital which in many cases accredited investors would lose total assets.

Amy:
We continue our ICO spotlight now with Telcoin. Telcoin is based in Tokyo. The company describes itself as a new crypto currency based on ethereum blockchain that would be distributed by your national telecom operator and made available to everyone, anytime, anywhere. Telcoin ICO also started this week. I sat down with Telcoin’s co-founder and CEO Claude Eguienta at the World Funding Summit in Los Angeles ahead of Telcoin’s ICO.

Claude:
Telcoin aims at solving the problem of financial exclusion. So we’re really trying to promote financial inclusion globally. It’s a very simple project that is complex in the backend and the very simple on the surface. It’s really about providing anyone in the world with financial services no matter whether they have bank accounts or not no matter with whether they have access to credit card, debit card or anything like that they should have access to simple basic financial services, and this is what Telcoin is about.

Amy:
OK so I’m guessing you guys have some sort of coin or token that you’re distributing. Can you tell us how that works?

Claude:
Oh, well, this is where it’s pretty simple. We have a very simple token [inaudible 00:22:35] token that we provide to telecom operators for at no cost. So they can sell it to the subscribers. So they make ,well, they can get financial incentive to do this but we get the reach because telecom operators are really widespread, right. I mean there is like 1.2 billion bank accounts with active means of payment in the world. But there are 5 billion active subscribers for mobile phones.

So we realized that if you want to provide access to financial services to people the simplest way is to go through the phones, and the simplest way we found to do this was to incentivize telecom operators. We’ve been selling to telcom operators for like 12 years so we understand the basics of how to sell to telcom operators, how to make something that works for them and we put them at the center of our business model in order to accommodate this service that we’re trying to launch again.

Amy:
All right. So if I have to telcoin what does it do for me?

Claude:
Well, the telcoin being a very simple token doesn’t do anything, itself right. I think this is the whole point we’re trying to bring. But let’s think about the first case that we’re currently focused on which is international remittances. You are, let’s say in Japan, would like to send money to Kenya. You don’t even have to know about telcoin at that moment but you have to be registered on a partner network, right.

And you would just send a simple thing on your phone. You not need an app. You will not need anything other than sending an SMS or USSD, I mean, very simple thing. We want to reduce friction as much as possible, remember the phone number of the person you would like to send money to. The fee of the money you would like to send will be added to your phone bill at the end of the month. It will be sent instantly to the other person, let’s say Kenya, and they can exchange it against mobile money.

And, you know, for example, in Kenya you have M-pesa which is really equivalent to like cash money there. So instantly the person without having to go to Western Union, fill forms or needing any ,sort of, bank account, they don’t even need to leave their house, and they have instant usable money. So to answer your question of “What can you do with telcoin?” This is the first case, send money to the loved ones at the other side of the planet for a very low cost instantly, and all this thanks to telcom operators.

Amy:
So are you guys going to do an ICO?

Claude:
Yes. We’re going to do an ICO on December 11th. Right now we’re in the phase of talking with our, what we call ‘pre-sell investor like presell buyers’ buyers. It’s all about bringing smart money. It’s all about finding people who can understand what we’re doing, who can help us in the long term and this is what we’ve been doing for the last couple months. So we’re going to launch right now like more, I mean, get out of the stealth mode right and talk more publicly about what we’re doing now that we will... We really we can have enough signal to talk about what we’re doing.

We have very smart people that agreed to participate in our ICO and hopefully we will extend the reach of people we talk to.

Amy:
Is there going to a public sale that follows the private presale?

Claude:
Exactly. There’s going to be a public presale exactly on December 11th. president. We’re really focusing on Japan because we live there. We [know all about 00:25:49] Japan. We’re focusing also on France because we have a good access to a good network in France but we realize recently the US can be interesting for us more more than we originally expected.

I mean we did a lot of groundwork to make sure we could work with American investors. We went to see law firms. We have like a very strong law firm that made us... Made it clear to us that we can work here. So now we’re exactly... We would like to open this as much as possible because we cannot talk about financial inclusion if we’re only talking for public sale to only two countries. Really we would like to open this as much as possible. The legal is really what we’ve been focusing on and now we’re clear. So that’s cool.

Amy:
So you’re users actually have to go buy a telcoin, is that correct?

Claude:
Only for the crowd sale.

Amy:
Only of the crowd sale.

Claude:
Yeah. Yeah.

Amy:
And then after that how do they get a telcoin.

Claude:
They get a telcoin by simply [inaudible 00:26:45] I told you about earlier about like sending an SMS to a mobile operator or a USSD really depends on the country where you’re in. If you’re in a country where USSD could be supported then you just dial .... You know, did you ever have a debit card?

Amy:
Yeah.

Claude:
So you know when you want you recharge prepaid card you type this like a sharp with one, two, three, something?

Amy:
Yeah.

Claude:
This exact same mechanism could be used to buy telcoin.

Amy:
Okay.

Claude:
Or you could also use an app and we’re going to deliver a very simple SDK for wallet owners to, well, integrate telcoin because it’s going to be a very simple API that you can use to like to integrate telco to allow your users to buy telcoin directly from their phone. We do not want to look people in an ecosystem or you should not be locked into the Verizon coin or the BT coin. Really for us it’s you can have telcoin on any sort of wallet that you can be ERC 20 compliant and can accept to send those USSD or SMS on the app so that you can have very simple way to send money home or have access to more financial services.

Because remittances is really the first thing we want to focus on but we’d like to expand expand the verticals to more.

Amy:
So, you know, I think the state of the ICO market has changed a lot especially just in the past... In just the past couple months. What are you seeing today as you’re going approaching these private investors and what are some of the... If you’re allowed to talk about it. What are some of the strategies you’re employing to, you know, get to these strategic whales that are probably getting bombarded with emails in connection requests and things of that sort.

Claude:
So in our case it’s actually pretty very special. I mean, every day we talk to people doing ICOs because we’re in the space, and it’s pretty interesting for us. We help people. I mean I’ve been advising companies in the crypto space for a while. So I’ve seen the density of change and I totally agree with you with what you said like everything has changed a lot recently.

In terms of strategy for us, I think, it’s all about going from the business angle. We have a clear business case. We are a company that wants to promote financial inclusion worldwide [inaudible 00:29:00] telcom operators. So we go see people who believe in this. It’s not about going to see crypto wealth. I mean, it’s not that we’re refusing crypto wealth, obviously, it’s really more like as you said they’re getting bombarded. So we don’t want to enter in the middle of a thousand requests to someone that might not have any... direct connection to what we’re trying to do.

But we do is to go see people who like the idea of promoting financial inclusion. People who like the idea of giving access to crypto currencies to more people because today, I mean, everyone talks about crypto, everyone talks about bitcoin.

Amy:
Yeah.

Claude:
But it’s very difficult to access it and we believe that if you could just access crypto just by typing a phone without even needing an app we could make like... We could really help a lot of people do something because crypto [inaudible 00:29:50] today because it’s so difficult to access is only for the happy few that want to speculate and would like to expand that.

So doing this means, for us, finding buyers that believe in this mission. Believe in like promoting financial inclusion for crypto, promoting crypto, doing all those things. So for us, I mean, it’s really must be about going to see investors that like what we do.

Amy:
Okay, All right. So, you know, as you approach these investors during this private pre-sale given that you’re looking for people who really believe in the mission of the company. Are you asking them for any sort of lockup period, if you’re allowed to talk about this?

Claude:
Well, we are definitely going... We will lockup period. I can’t disclose the exact terms of the lockup period because it’s actually still in review, but yes there is a lockup period.

Amy:
Okay.

Claude:
It’s a, I mean, on the one hand, you want to trust people, on the other hand, you don’t want to be too naïve.

Amy:
Yeah.

Claude:
And you want to guarantee people coming crowd sale that presale investors are not going to flip. It’s all about fairness and fairness ,in this case, means lockup.

Amy:
And a reminder we will bring you weekly ICO spotlights from around the world beginning in 2018. So keep it here on ICOivestor.tv.


Adam:
In this week’s investor spotlight we’re introducing you to another fresh perspective on the crypto world. Meet Adam Draper. He is founder of Boost VC and has helped launch countless startups. I recently sat down with him for an interview here at our L.A. studio. In part one of our interview here how Adam got involved with bitcoin and what he says is important when looking at an ICO.

Hello welcome it’s me Adam Chapnick. I am excited today to be here with our guest. This is a special time for us here because we have a legendary name in all things crypto and he has decided to come down and talk with us here in our humble studios. I’d like to welcome Adam Draper from Boost VC. He is the founder and he and his family have been involved with crypto since pretty much the beginning, and we’re really excited to have him with us today. Thanks so much and for joining us.

Draper:
Thanks Adam.C for having me and it’s not so much your humble studio. This is a fantastic studio.

Adam:
Yeah, well, we love it. It’s a lot of fun to do this and it’s especially fun to have you with us today. So let’s jump right in. I mean, you really have seen the light since a lot earlier than a lot of people certainly in the VC world and even just the rest of us. What was it all the way back that you saw that really made you buy it in a way that other people haven’t?

Draper:
So I actually had a really unique entry into bitcoin, the blockchain crypto... When people say crypto or ICO they normally are all meaning the same thing which is, sort of, this new wave of financial infrastructure, and I had a really unique entrance.

Brian Armstrong who’s the founder and CEO of Coinbase which if there was a room of people here I’d say, “How many of you own bitcoin?”, and they’d all raise... Like 90% raise their hand. And then like I’d say, “How many of you have a Coinbase wallet?” [Crosstalk 00:33:07] which is great. But, you know, five years ago that wasn’t quite as true.

And what Brian said to me, we were in a coffee shop in Mountain View and he said, “It wasn’t a question was at some point the world is going to be on one financial infrastructure, and bitcoin is the first step towards that.” And we want to be the on boarding system for that, and I bought into that hook line and sinker, and every time I talk to... And the other part of it. So that’s one part where I was sold by this CEO of one of the largest now bitcoin companies or crypto companies.

But then also if you get into this space, if you start talking to people and you start learning from them, what you learn is that every single person is the smartest person you’ve ever met. And like where you want to ... My business is all about investing in people and like where you want to be placing investments is really where the smartest people are playing. And crypto happens to have this like hard core researcher’s PhD side combined with high risk taker that it just, sort of, makes the thing go. So that was my entrance.

So really the, sort of, the vision of tomorrow with the global infrastructure, the currency of the world. What about the idea of, you know, bitcoin as a commodity that it’s, sort of, like a refuge maybe that people could use in times of uncertainty.

It’s so interesting because everyone’s trying to put a label on all of these things. Like they’re trying to name it as the old system would right.

Adam:
Right. Interesting.

Draper:
And so bitcoin I’d say the best likeness for bitcoin itself is gold.

Adam:
The commodity.

Draper:
It’s a commodity, well, yeah, it’s a commodity. So that’s the best thing online that you can say it is. But to understand ... So I don’t I don’t necessarily need to get into...I will get into everything.

So how explains bitcoin to people now is what I say is that, okay, so there are these computers that are all over the world and all they’re doing is solving one problem. And that problem logs a block of transactions into a ledger and in return for keeping that system online people get rewarded by the algorithm with a token and that token is called bitcoin.

And so that’s what it is. I think, the thing that everyone thinks about is like that they focus so hard on the currency that they forget about that it’s actually a reward. They’re being issued this currency or this asset because they’re leaving their computers on for that compute power, they get issued this thing.

So and end that ledger that is logging the blocks that’s the blockchain.

Adam:
Right.

Draper:
Okay and that’s really the huge innovation in the space. It’s just bitcoin happens to be the reward for that ledger to be operational. And so what ethereum did and so that if you want to take one step further because we’re probably going to cover ICO’s at some point while we’re talking.

Adam:
I think we will.

Draper:
Just to get everyone up to speed.

Adam:
Yeah, please.

Draper:
What ethereum did was they allowed for other things to be logged into the blockchain not only a token. They’re allowing for smart contracts. They’re allowing for data. They’re allowing for a lot of other things to be pre-programmable inside of this ledger that replaces third party trust with mathematical proof. And so what the ICO is is the first product that ethereum put forward to be in a blockchain which is an ERC 20 token. They call a token. It’s a smart contract that allows you to crowdfund from everyone in the world, all at once, which is the craziest thing that’s ever happened.

So, okay, now take it back to your question like, “Why is everyone so excited about it?” It’s because like the reason that Jamie Diamond is upset about it, everyone else is excited about it.

Adam:
That’s perfect. It’s like we’re [inaudible 00:37:09]

Draper:
And so like in the last year $135 billion worth of these assets, crypto assets, has gone into the world.

Adam:
Without a bank.

Draper:
Without a bank.

Adam:
Right.

Draper:
And in the United States we actually ... Even though there are a lot of people who are unbanked we actually have a pretty frictionless banking system.It’s not that bad like it’s a pretty good. But when you start thinking globally, when you start thinking about Argentina, Venezuela, India all these other places that have a really really poor banking system this makes so much more sense. Being able store value, not in a mattress digitally, it leapfrogs the old system for them and that’s the exciting thing is bringing everyone up to, essentially, the same speed that the US has. And by the way China has a better system than us.

Adam:
So as far as Boost goes now you guys how long has it been action?

Draper:
Yeah. What Boost VC is ... So I met Brian Armstrong two weeks before I founded Boost VC.

Adam:
Okay. Was the impetus in some part?

Draper:
No. No. I was in the transit to do this and I happen to be seed investing in a couple deals and one of those deals was Coinbase fortunately as it is today.

Adam:
Well [inaudible 00:38:20]

Draper:
Yeah. And I launched an accelerator for startups because I felt that I had a lot of value to be able to deliver as a, sort of, translator between the expectation in a new investor and what an entrepreneur thinks, and that’s where I fill a big void. I had previously started a company. I made every mistake known to man, and so I founded this accelerator. Growing up with entrepreneurs as heroes is definitely a value add especially in the business that I’m in where you really align with the entrepreneur and you really feel for the system that they’re going through the ups and the downs.

Adam:
That’s great because it also backs sort of the popular impression of you know VC like Venture sharks and, you know, all that venture capitalism.

Draper:
[Crosstalk 00:39:09] and I’d say there’s been a big evolution in venture capital in like 30 years ago it was much... It was a different culture than it is today and I think that actually today there’s more power in being an entrepreneur. Like the entrepreneur... there’s so much liquid capital which is in a large part in relation to ICOs, in relation to crowdfunding, in relation to like angel... The rise of the angel investor, the rise of the micro seed funding.

So it like the power is a lot in the entrepreneurs hands and it’s just about understanding, having that entrepreneur... Like the reason I’m saying I’m a translator is like that entrepreneur needs to know what the power... What power they have, and so that’s what we help with. So we’ve been doing for five years. What we do is a pragmatic approach to investing. Twice a year we take 20 to 25 startups and we provide housing which is unique to us, office space and we invest in a startup for a three month program.

Yeah what I was just saying before this was that I wouldn’t recommend just like slapping housing onto another accelerator program because like unless you started with it, it’s just like a logistical nightmare.

Adam:
I can imagine.

Draper:
But it’s so valuable for if Silicon Valley, I mean, it’s still valuable because it’s expensive but also like we can take companies from all over the world at the drop of a hat and have a place for them to stay. And so we’re very global as far as a company goes like we’ve backed, I think, 32 different countries or something like that at this point.

Adam:
Oh wow!

Draper:
Yeah. We have companies in Malaysia. We have companies in Singapore. We’ve got companies in South America and the two industries that we focus on are crypto and virtual reality and both of these are such global technologies, and that’s really the exciting thing about it, and that’s the reason that Boost VC is such a good way to solve a problem for them because, I believe, that there is a network in Silicon Valley that’s really important to give you a competitive edge in building a startup. But, I believe, entrepreneurs can be everywhere and that’s what we’ve... That’s the thesis, and that’s what we’ve been driving towards.

Adam:
Terrific. So that’s more of a tradition of structure of investing though, you go with you take equity in exchange for the services, the housing the, sort of, the accelerator model. This is not an ICO-based investment vehicle.

Draper:
Not solely, no. So what we say, I mean, at the end of the day people have been asking me a lot recently what’s important when looking at an ICO? Like what...

Adam:
Great transition. What’s important when looking at an ICO?

Draper:
So many people asking me this. And what’s really interesting is my answer is the same. It’s you look at the team like you’re always looking at who the team is, what they do to make... Who are they? Can they deliver the product that they’re promising to deliver?

The only difference between I would say, a startup that’s not in the token- crypto ecosystem and startup it is, is one of the more important parts of the crypto space is the community that that project is built. And so you really want to keep an eye on like whether there’s sort of a self-policing vetting system that’s been created by this crypto community, and they’re very stern on one another. They’re very passionate and very encouraging but also like they like knock they’re very... Not closed off like they welcome people in with open arms, but you need to really know your stuff like.

And so it gets vetted by all these very great, the best technologists and like you need to make sure that the community that’s being built around that is great. And that’s really the only thing that’s different ,I would say, because at the end of the day it’s the person... The people. The people are going to drive this vision home. And so you want to be backing the good people in this big space who are thinking about changing the world.

Adam:
But those two different kinds of tokens, you know, what you’re talking about are, sort of, vetting the fundamentals of the company for security as a security token, right. But if it’s a utility token that like a whole different bag of beans.

Draper:
Same deal.

Adam:
Same deal. Interesting. Okay.

Draper:
But that it is important to state the difference. And so I would... So what’s important to understand is that a token can be a security but a security is not always a token. And so a token... These utility tokens are the ones that are not securities. So securities like everyone’s talking about regulation, everyone is talking about those different things like, yeah, if it’s a security it should be subject to securities regulation. That completely makes sense to me.

Adam:
Okay.

Draper:
But there’s this new concept where you can own a piece of a protocol. Like what if you could have invested in TCPIP like the Internet? You probably would have, but like as a business it didn’t make sense. Like as a business it like it generates... It doesn’t even generate any money. It’s just a thing that keeps the entire... If you knew like the money that is being supported... Like supporting the TCPIP it’s not that much money. Like the entire Internet is like a 500K a year budget. Like it’s not very big.

Adam:
Well, it’s slightly terrifying.

Draper:
Yeah. It’s super terrifying. [inaudible 00:44:35] And so what if those people who built the Internet could have been rewarded and owned a piece like the early users, the early adopters, the people who... The creators could have been incentivized and rewarded with some of some value. And that’s what we’re really saying is like it’s... Everyone is trying to say it’s securities. It’s dead. It’s whatever it is but like what if there’s something new? What if there’s this thing that it’s like a quantifiable piece of a network that we haven’t really seen before but it has... Obviously, has value.

And we’re obviously like seeing an emergence of a new type of financial system based off of it.

Adam:
Yeah. What you’re saying is like it’s mind blowing. It’s kind of mind blowing because when you say to, I mean, us all, if you had had a chance to invest in TCPIP in what? 1991, would you have? No. I wouldn’t understand the first thing about it. I would have said this makes no sense.

Draper:
Completely.

Adam:
And ,similarly, I think, a lot of people certainly five years ago with crypto currency and whatever, and then worse when the whole, you know, Silk Road and all that like negative association...

Draper:
Was, there was a lot negative association. The fun part is that like we’re rebranding like you know, like everyone still pictures like [inaudible 00:45:53] only... By the way if someone is running like a drug cartel on bitcoin it is The worst currency to run it on.

Adam:
Right. It is referenced.

Draper:
It is a ledgered currency. It’s like every transaction gets [inaudible 00:46:05]. Like you’re literally leaving bread crumbs.

Adam:
That’s right.

Draper:
So like don’t [inaudible 00:46:10].

Adam:
Isn’t that fascinating ...I always thought how fascinating with Silk Road thing. People thought bitcoin was the problem as opposed to... well, that’s a separate conversation.

So but back to what we were saying about there was the two kinds of coins and you hit on some really fascinating that you had mentioned earlier when we were talking before was about how the function of security tokens and how maybe you can talk a little bit about what you had just mentioned about you’re investing in a network. You’re not investing in a company.

Draper:
Yeah. And I think a lot of people totally don’t know that.

Adam:
Yeah.

Draper:
So a lot of people feel right now... It’s just a miscommunication, I would say, like it’s like everyone... There’s this bridge of the crypto and group and then like the world that needs to understand this crypto group.

Adam:
Yes.

Draper:
And right now what everyone’s thinking that if you’re investing in a ICO you’re owning a piece of a company.

Adam:
Right.

Draper:
Because that’s what people understand.

Adam:
It’s smells that way, it looks that way, right?

Draper:
Yeah. That’s what people understand but a) if read the white papers that’s literally like it is very clear. And so I really highly recommend any time anyone is investing in an ICO do your diligence. Don’t just back it because like someone you believe is smart backed it.

And so like make sure to do the diligence, read the white papers, research the people like those are the most important things. And then like talk to people talk to everyone and figure out if it’s a feasible concept.

But the securities those token things like... The real answer is like we don’t know yet. We don’t know what’s going to happen. We don’t know how it’s going to work out. All we know is that like where there’s smoke there’s fire. There’s a real opportunity to support people’s beliefs and ideas and to change the financial infrastructure of the world and that’s what we’re seeing. Like there was never a technology ... Like everyone got really excited about crowdfunding, you know, like five years ago, six years ago when the US passed a bunch of rules.

But what if the whole world was able to participate like that’s what we’re dealing with right now is that like [tasers 00:48:22] was able to raise $250 million because everyone in the world wanted to participate and that’s really exciting. These other projects are... And the other thing I love about the ecosystem is like they’re all thinking big. They’re all thinking I’m going to dominate the world. I’m going to change the world.

Adam:
Yeah.

Draper:
And like that’s the coolest part is like these people that are thinking., “Hey I’m going to raise $50 million or whatever which, yes, is ridiculous like, I think, that a lot of this stuff is like it needs to calm down. There needs to be a little more like substance but you know if they’re raising like $50 million and they change the world, that was a small price to pay.

Adam:
And we will bring you part two of my conversation with Adam Draper coming up on next week’s show.

Amy:
We continue today’s Investor Spotlight with part two of our interview with angel investor and advisor Les [inaudible 00:49:15]

Adam:
Les works in the music industry here in Los Angeles and has an interesting take on the crypto world from an investor point of view. Find out how he approaches investing in ICO and how ICOs could impact the music industry. Is there anything that when you see it yes it’s got all the kind of marks that you might like but there is there anything that makes you run the other way? Maybe it looked good at first and at further sniff [inaudible 00:49:34].

Les:
You know the strange thing about it is there’s been a lot of those situations and I don’t know what it is that made me not pull the trigger on sending the [inaudible 00:49:44] invest in it. But that’s happened a lot.

Adam:
Oh interesting.

Les:
And it, you know, look I don’t know if it’s just a gut feeling but there have been certain things that I’m going to do it, I’m going to do it, I’m going to do it. But then at the last minute I don’t do it and then you’d kind of take a look at the after results and they didn’t quite raise as much money or something didn’t happen just right. You know, and so...

Adam:
You’ve just accumulated enough of the sense from you being in it four years which is an eternity you can if they’re not... if it’s not clicking on all of the boxes it’s just....

Les:
If it’s not click and it’s not and, I think, too the other part is I’ve met a lot of these founders. So that’s a rare position I get to be in. So if I get to meet the founders of these really exciting companies then, you know, we have conversations about other companies that might be exciting or what they’re working on and, you know, that gives you a different sense about what you approach and how you approach it.

The thing that has gotten complicated for me is, you know, at one point it was an ICO but it’s not an ICO. You know, there’s all these pre-sell dynamics now. How much is it discounting? You know, and so this is another factor that you, kind of, look at. Is there venture involved? Is it going into a pre-sale? How is that connected? Those are different, you know, dynamics completely.

And you’ll see companies doing, you know, $50 million in a presale and then do $180 million, you know, on a ICO. Well, those are all factors that lead to the big ICOs as well.

Adam:
So what do you think about that in terms of this whole presale dynamic? When you’re talking about the anarchist, the whole vision of the dis-inter-mediated world and then suddenly pre-sales only for the rich guys. Does that... is that okay?

Les:
I like the idea of doing them in a discount, but I’ve never done one. So, you know, and it’s not because I haven’t been invited to do them.

Adam:
[inaudible 00:51:36]

Les:
I’ve just been, kind of, really careful about the presale hype. You know and, there are just these astronomical raises that are happening right now, and I just don’t understand all of them why so much money is being raised for certain product offerings ,you know, that...

Adam:
What do you think?

Les:
What’s that?

Adam:
What do you think, I mean, why do we see...

Les:
I think it’s because it’s like ,you know, any good pump and dump, there’s a lot of hype behind certain things, and because there is this bubble mentality you buy into something, you know, which is inexpensive you’ll be able to get out when it’s expensive, hopefully. Once you’ve received the token and there’s a way to actually exit it. And, I mean, those are all, again, factors and I think, you know, money for me can’t be the driving factor of the companies I select.

I think, when we take a look at the crypto hedge funds, I know there’s 102, or something. You take a look at fund managers and what they’re dumping money into it’s a different set of rules. It’s like how my going to make money off this? You know, what pieces I’m going to take? And there’s a lot of people building exciting things right now. I mean, and if we go back to just the pure nature of this and how it’s going to evolve this is a new Internet for me.

It’s an Internet of money and what that mean, you know, we’re at the ground floor. The application layer is actually going to be the more exciting layer because whoever builds the next, you know, search engine on top of the blockchain like those are going to be the exciting opportunities, and those are the companies I want to be involved in.

Adam:
You know, they call the ‘Netscape moment.’ When somebody is going to figure that out. Yeah. It’s exciting.

Les:
and that to be there at the right time and, I think, the way I approach it is what are those bets, you know, that possibly have the odds of becoming that and let me invest in those things because those are the right investments to make right now.

Adam:
Immense. So speaking specifically about what you’ve built as a career knowing about, like it or not, you know, you you know your music and you know your entertainment. You’ve been around it you’ve been in it from like every different angle. You’re still in it in all different things.

Les:
I’m still in it. Yeah.

Adam:
Like it or not, where do you think the music and blockchain or music and crypto like where is that in [inaudible 00:53:49]?

Les:
You know, it’s funny because in my whole career is about intersections and ,you know, I work for Zynga, for instance, as a consultant and I do music licensing and that gave me the ability to do a IP deal with Wynonna Judd who’s a country artist so now I manage her, and it was a strange intersection of technology and traditional music.

Along those lines I have worked with a lot of app companies and built a lot of, you know, music applications, kind of, built the first social karaoke...

Adam:
Oh really.

Les:
Application when the App Store launched.

Adam:
I don’t if I should thank you for that. [inaudible 00:54:27]

Les:
I was Lady Gaga and their team at the time, and it was really interesting because licensing an IP was a big part of that and, you know, UGC and we did a bunch of those. We also you know built one of the early Voip apps which was a voice changer and it downloaded a significant amount of applications.

So it was this convergence again of music related ideas and technology, and I ended up working for a lot of great companies, you know, because of those ideas, but I was a builder. So I was building products then that had this kind of intersection. With crypto which came a little bit later for me, you know, I didn’t think about the music intersection with crypto then. I just didn’t think it was the right time. I didn’t see the natural fit. Well, that’s changing now.

There’s companies emerging, you know, Ujo which is a consensus company that Jesse has that’s really interesting. You’ll hear more about it from him but there is there is interesting, kind of, music opportunities emerging right now. Vest is another one, you know, I don’t know how well they did, but it’s something that relates to music rights.

And, you know, you’ve got Music Coin and Opus, and so you’re seeing the emergence of music-based block chain technologies. You know, Benji has had is thing forever. What’s going to be interesting is the divide because now we’re also hearing about security tokens connected to, you know, revenue streams, connected to music. So, you know, it’s starting to happen now. I don’t know if that makes me want to get into it or run away from it. I haven’t really decided but I do like the idea of licensing an IP and data on the blockchain because what the music business doesn’t have is a centralized database that allows you to look at things, kind of, in a public way, and understand where the ownership of those rights lie.

Adam:
Yeah. It feels like there’s a natural marriage there.

Les:
It feels like it except for the fact that the record companies you know for the longest time loved to slap down innovation and, you know, you can sit here and say, “I’m going to use the block chain to identify” but at the end of the day you can’t use it to grant because you don’t own those rights are in cumbered.

And if those rights are in cumbered by someone else that has to grant you consent, it makes it a complicated layer.

Adam:
If you have questions about ICOs we invite you to check out our website ICOivestor.tv. There you can checkout the latest ICO regulations from around the world on the ICO global regulatory review ,and our ICO learning center.

Amy:
Also be sure to send us your questions on ICOs by visiting our Facebook, Twitter and Instagram pages and stay with us our global ICO coverage coming up in 2018. I’m Amy Wong.

Adam:
And I’m Adam Chapnick for everyone here thanks for joining us.