This document discusses initial coin offerings (ICOs) and the blockchain startup market in Germany. It notes that Berlin has the most blockchain startups of any German city. While most current ICOs issue utility tokens, the document argues that future ICOs will increasingly issue security tokens that represent ownership stakes. It predicts that the number of German blockchain startups will rapidly increase in the next few years, while many current utility tokens will lose value. The future of ICOs lies in security tokens that provide standard investor protections.

1. ICOs – The Future
of Startup Financing?
meetup #1 | March, 28th 2018 | Berlin
Florian Huber
POWERED BY

2. Two camps of people when it comes to Blockchain/ICOs...
www.chain.de | as of March 2018
The Crypto Critics The Crypto Enthusiasts
This is just a hype
This is all fraud & scam
It‘s all bullshit
There‘s no intrinsic value
A huge bubble
All tokens are wothless
When lambo? When moon?
This is the New Internet!
Everything will be decentralized
Everything will be tokenized
There‘ll be a huge token economy
... let‘s all get rich!

3. www.chain.de | as of March 2018
www.chain.de – a directory of all German Blockchain Startups

4. The German
ICO/Blockchain Market
www.chain.de | as of March 2018

5. All German Blockchain Startups (105)
www.chain.de | as of March 2018

6. Top 3 Locations of Blockchain Startups
www.chain.de | as of March 2018
Berlin is the
Blockchain Capital
of Germany!
Berlin – 58 startups
Munich – 10 startups
Frankfurt a.M – 8 startups
Other locations – 29 startups
58
8
10

7. www.chain.de | as of March 2018
Industry Focus of German Blockchain Startups
Finance
(22)
Public
Chain
Infrastructure
(11)
Enterprise
Infrastructure
(5)
Intellectual
Property
(6)
Digtital
Identiy
(6)
IoT
(5)
Real
Estate
(5)
others
(45)

8. Blockchain Founders (male/female)
www.chain.de | as of March 2018
95%
5%

9. ICOs
Initial Coin Offerings
www.chain.de | as of March 2018

10. Not all Blockchain Startups are ICO Startups,
but all ICO Startups are Blockchain Startups.*
* this will change with the rise of security tokens

11. All German ICO Startups (53 out of 105)
www.chain.de | as of March 2018

12. All German ICO Startups
www.chain.de | as of March 2018
Past ICOs (18) Current ICOs (15) Upcoming ICOs (25) + stealth

13. Successfull German ICOs (examples)
www.chain.de | as of March 2018
Envion
$ 100M
Savedroid
$ 35M
Raiden
$ 32M
Copytrack
$ 10M
realisto
$ 1,7M

14. Legal structure of a token
www.chain.de | as of March 2018
Utility Tokens
Description: It’s best to think of a
Utility Token as a pre-paid voucher for a
non-existing services
Characteristics:
• Closely tied to the functionality of
the issuing network or application
• Internal network/app currency but
not necessarily attempting to be a
currency
• Grants owners the right to actively
contribute to the system vs. passive
investor role
• Avoids security-like features
Security Tokens Cryptocurrencies
Description: A token that behaves like a
security (“Wertpapier”)
Characteristics:
• Showcases security-like features,
e.g. voting on decisions regarding
the issuing entity, dividends, or
profit shares
• Holders are regarded as owners
• Little or insufficient utility
Description: A token that is a pure
cryptocurrency
Characteristics:
• Acts as a store of value and medium
of exchange
• Not emitted by a central authority
against which owners have claims
• Examples: Bitcoin, Litcoin, Cardano
Source: Untitled INC

15. Token Models (utility, security, currencies)
www.chain.de | as of March 2018
•99% of all ICO startups are selling
Utility Tokens
• ... to avoid regulatory issues of being qualified as a security (=“Wertpapier”)
• ... based on the ERC20 token standard (Ethereum Blockchain)

16. Utility Tokens: Startup’s point of view
www.chain.de | as of March 2018
• Utility tokens can be traded on a secondary market (early liquidity)
• chance of quick wins by token flipping (momentum trading)
• raise capital without giving away equity
• raise capital without giving away control
• raise capital without vesting schemes and lock-up periods
• build up a community even before the launch of the product
• regulatory issues, changing regulatory landscape
• preparing an ICO can be expansive (legal fees, marketing expenses)

17. Utility Tokens: Investor‘s point of view
www.chain.de | as of March 2018
• utility tokens can be traded on a secondary market (early liquidity)
• chance of quick wins by token flipping (momentum trading)
• no shareholder rights in the startup
• no exit and no dividend participation
• no pro-rate right, no liquidation preferences
• no control and no information rights (“black box”)
• no real due diligence possible
• no valuation guidelines (you are probably paying too much!)

18. Two big issues with utility tokens
www.chain.de | as of March 2018
Utility tokens only make sense for:
• business models based on decentralized protocols or networks
• and business models for which decentralization gives you a real
competitive advantage to existing centralized market players
Misalignment of investors interests’ and founders’ interests as
utility tokens don‘t grant any shareholder rights in the startup.
So, the value of the utility token is decoupled from the success of the
startup (and ultimately the performance of the founders).
1
2

19. We are entering the 2nd wave of ICOs
www.chain.de | as of March 2018
S
1st Wave: Utility Tokens
Tokens get their value
from their utility
2nd Wave: Security Tokens
Tokens represent
ownership of assets
100X market potential

20. What happens when Venture Capital meets the Blockchain
www.chain.de | as of March 2018
Venture Capital brings:
• deal sourcing, selection, structuring
• comprehensive due diligence
• proven legal framework for balancing
investors’ and founders’ interests
• active portfolio management
The Blockchain brings:
• transparency, security, scalability
• fast and easy transactions of shares
• increased liquidity as security tokens
can be traded on exchanges
• more inclusivity (i.e. an opening to
new investor groups).

21. 5 Predictions
www.chain.de | as of March 2018
• The number of blockchain startups in Germany will go from 100 to 1.000 within
2 – 3 years
• The current wave of utility tokens ICOs will be over by end of 2018
• The value of most (not all!) utility tokens will go to ZERO
• The 2nd wave of ICOs will be the sale of security tokens
granting investors shareholder rights. This is ICO 2.0!
• Berlin will stay the Blockchain capital of Germany,
maybe become the Blockchain capital of Europe

22. THANK YOU!
@florianhuber
www.florianhuber.de
www.meetup.com/chain-de/