My ICO/STO Discovery Journey
In this series, I will share my journey learning about ICOs. When I began hearing about Initial Coin Offerings (ICOs) and the capital that startups were able to raise through them, I became enthusiastically interested in learning about the process. Like many founders, I have a compelling product in need of a substantial infusion of cash to reach its true market potential. This has been quite a challenge, because again, like most founders — particularly female founders of color — I’ve been at the mercy of the Silicon Valley machine. Although I have been successful at raising venture capital, I am still caught in an exhausting cycle of convincing VCs of the massive potential of the self-service retail industry and why they should invest. A software product of this magnitude takes a lot of time and capital to build, and VCs want to see revenue generated before they will go ‘all in’ — keeping this in mind I began to explore my options for raising capital.
April 15, 2019: Round Closed, History Made!
When we closed the round on March 31 at $943,000 with over 100 people on the wait list I wanted to find a way to accept more funding to bring more people in. We initially set the limit under $1M initially because of cap table limitations, but honestly I did not expect to oversubscribe the Start Engine campaign the way that we did. Last week I met with our securities attorney and team and we decided to extend the limit to the full $1,070,000 and we hit the cap within 3 days…now the round is OFFICIALLY over as we have reached the legal limit under the JOBS Act. The round is officially closed and all investments have been accepted! THANK YOU to the 2,078 people who made history with us!
The success of the Start Engine campaign made me the first Black woman in the world to raise an STO of this amount! Now the real work begins — launch the product, generate revenue and scale. Many people on the wait list did not get confirmed but I am working on future investment opportunities for them. We are also raising a round for accredited investors (minimum of $10,000) — contact us at www.PopCom.Shop for more info.
March 31, 2019: Oversubscribed round
When they do not give us a seat at the table, we bring our own. Today our campaign reached the $943,000 cap from 1,669 people and our wait list is currently oversubscribed with $1,025,000 in commitments. The community rallied behind myself, the PopCom team, the token, and the movement in such an unbelievable way. I am really speechless, overwhelmed with gratitude and so proud of what we have collectively accomplished. We took many risks to raise capital this way, we went against what was traditionally accepted and supported because we believed that an STO was the best route for us. This is a win not only for PopCom but for the founder community as a whole.
Over the next few weeks we will be facilitating a series of #AMA sessions to discuss the status of the product and next steps for the investors and the people on the wait list. We do have the option to increase the limit and consider taking more investments, we have to review the cap table and discuss with our securities attorney what that would mean for the company.
This is only the beginning, we have a lot of work to do, our team is focused on launching the product and scaling, but it is important to celebrate the wins as we go!
March 28, 2019: History Made
The momentum from the Breakfast Club interview and our retargeting efforts were nothing short of amazing! The campaign grew so rapidly that we decided to spend an additional $1,000 to extend the campaign with Start Engine. This was a great decision that has now resulted in PopCom raising over $800,000 with several weeks left in the campaign and me becoming the first Black woman to raise a successful secure token offering (STO) in history. And to think last month I was just hoping we would hit $200,000. I have learned so much throughout this process, but most importantly we have demonstrated the power of community and group economics. We now have over 1,475 new investors and a community of unaccredited angels who invest in technology. I am excited that Start Engine allows for early disbursements and the capital raised has been put to immediate work to complete the product and finally get it in the hands of our customers. We are anticipating a Q3 delivery date for the PopShop, although we are 12 months behind schedule due to issues with our previous manufacturer, I am excited that we are back on track. This week I spent time in Shenzhen and Dongguan meeting with the team that will complete the design and build another prototype for mass production in the U.S. We are on our way…
March 13, 2019: Expectations exceeded
We have just passed $450,000 with 7 days left in the campaign…this huge spike in investments is a result of a few things:
- We started running advertisements on Facebook and Instagram targeting audiences that resemble my followers, we are experiencing an 8X ROA on our ads. The one about Black tech really resonated with our audience.
- More media: I was interviewed on the popular national radio show The Breakfast Club, the positive feedback from the interview was overwhelming! You can watch it HERE. We received an influx of press from other websites including Black Enterprise, Moguldom, and Disruptive CEO Nation that helped to drive more traffic to our site.
- Start Engine named PopCom as the campaign with the ‘Most Momentum’ on the platform and is now featuring us in the top spot on the homepage.
I can absolutely say that this campaign has exceeded my expectations already, I am proud of what we have been able to accomplish and we are still going. We have the opportunity to extend the campaign for another 30 days, it is something the team and I are considering, but for now we are focusing on using the funds raised to launch the product and deliver the PopShop to the 25 customers who are waiting.
FEBRUARY 22, 2019: The final stretch
We are in the final month, the last stretch of the crowdfunding campaign. I started with big goals to raise $943,000 but after two months we were right at $146,0000 and I was starting to feel like the momentum was slowing. Then, yesterday I appeared on the popular talk radio show ‘The Karen Hunter Show’ on Sirius XM. It was a live interview and within 24 hours our campaign was up $35,000, that was an amazing and unexpected spike that helped us pass $175,000. With only 26 days left in the campaign, I was starting to wonder if we would even hit $200,000 and then this happened. I know my social media followers are getting tired of seeing me post about investing everyday so placing the opportunity in front of new audiences has been our main focus. Two weeks ago we started advertising on Facebook — we targeted audiences with dual messages of investing in Black tech and investing in retail. We are A/B testing the ads to see which gets the highest response, we are really happy about the conversions so far. We hired a digital marketing agency with specific experience in promoting equity crowdfunding campaigns and ICOs, they have a vast amount of knowledge about online ads and strong success driving investments for their previous customers.
For the past few months I have spent a significant portion of my time speaking, writing, and posting to educate people about secure token offerings, PopCom technology, and the automated retail industry. What I have learned, or rather, reaffirmed, is that people hate to read. Instead of posting graphics with a lot of text we are now posting videos — they are converting much better and have higher engagement. After the campaign concludes and we have all of the marketing figured out through trial and error, I plan to publish a guide on how to effectively market equity crowdfunding campaigns. I really want to help other founders be successful.
FEBRUARY 1, 2019: People are getting it
Today we passed the $105,000 mark with 47 days left on the campaign. I feel like last week people really started to ‘get it’ — all of the content I have been putting out and interviews to educate investors and founders about equity crowdfunding and STOs finally clicked and the momentum is getting stronger each day. This week I traveled to the Twin Cities to compete for a share in $1.4 million that was being awarded by MEDA and Chase…and we won! I was excited to walk away with a $125,000 investment for PopCom which makes our total amount raised this year to $235,000.
I reached out to the people who invested in our Start Engine campaign and asked them why they invested in PopCom and what it means to them…the responses were amazing! When I decided to raise our next round via crowdfunding instead of the traditional VC route I got a lot of resistance. If you follow me and listen to the BARS! Podcast (and have followed this blog) you know how passionate I am about uplifting my people and the founder community. Starting a business is hard, building a product is hard, raising $1M+ as a black woman (or anyone) is hard, but when you take risks and take the road less traveled it’s even harder. I’m doing things my way, I’m not perfect and I don’t know everything but I feel good about the path I chose and reading these messages from my new investors is even more reassuring.
JANUARY 22, 2019: Evaluating metrics
The STO continues to gain momentum and we are attracting the right people to help us increase awareness even more. We passed the $75,000 mark over the weekend from our grassroots efforts (social media, press release, Start Engine email blast) and now we realize that we must invest in marketing the campaign to get the viral effect that we desire. With only 57 days left on the campaign, we need to get more eyes on the Start Engine page in order to convert more people to investing. One of the things I like about Start Engine is the fundraising dashboard with detailed data around the campaign and traffic.
We know the average investment is $508, over 7,000 people have visited the page, 489 have clicked the ‘invest’ button and 157 have completed their investment. Our current conversion rate is 2%, so if we want to reach our $943,000 goal with an average investment of $508 we need approximately 1703 more people to invest. That means we need an additional 88,000 people to visit our campaign page (this is my best math but you get the picture). Understanding our data and metrics will help us determine how much marketing dollars we need to spend to drive traffic. The team and I have interviewed several agencies that focus on ICO/STO marketing and we found a team that has proven results helping their clients hit crowdfunding campaign goals. We are learning as we go but I hope by the end of this we have a clear blueprint on how to raise a successful STO.
JANUARY 14, 2019: The word is spreading
We are 25 days into the STO and campaign has started to gain steam. We were featured in multiple blogs and online news media outlets as a result of our press release that went out on January 7 and we secured a few major press features that we believe will really take our visibility to the next level in the coming weeks. Since the campaign launched most of my time has been spent educating investors about secure token offerings and fielding hundreds of questions and comments from interested individuals and groups online. I use the Start Engine platform to my full advantage and post frequent updates that include media releases and live ‘ask me anything’ sessions that I record on Instagram and upload to YouTube. My latest #AMA can be viewed below.
With 105 investors and just over $56,000 raised, the average investment is $524, in order to reach our goal of $943,000 in the next 65 days we have to raise an average of $13,646 a day, we have to get really aggressive with our outreach in order to achieve this. We have not engaged any paid advertising at all yet, for the first few weeks we focused 100% on organic traffic from my personal social media, the company social media, and through our email lists. Now that we have passed the $45,000 mark we are eligible to be featured in the weekly email sent by Start Engine to their investor network, I expect to see a spike in traffic and funds from that. Our partners are enthusiastic to support our efforts and several of them plan to issue a press release across their network and we plan to invest in ads on relevant platforms to drive traffic to our token sale. We will also send the offering to a few large email distribution lists that are heavy with investors in the cannabis and cryptocurrency space.
The most rewarding part of this experience, in addition to raising capital, is how much I have learned over the past 12 months. Because of my intense study of the JOBS Act, Title III crowdfunding, ICOs/STOs I have emerged as a thought leader in the space and I have been able to educate countless founders and investors. Now, more than ever, founders are seeking non-traditional ways of raising capital and non-accredited investors are looking to put their money into early stage companies, the knowledge I have gained is helping so many others. That is a major win.
JANUARY 8, 2019: Great momentum, greater goals ahead
I am excited about the early traction we are getting on the STO, people have been responding in a positive way to our offering and eager to learn more about this new way of raising capital and investing. Our first press release went out yesterday and people were fired up! The headline “Meet the Black Woman Who is Raising $900K to Launch Medical Marijuana Vending Machines” really grabbed their attention. Although regulated products is only one the use cases of PopCom technology, cannabis is a clear fan favorite. As I type this, our campaign just passed $30,000 from 63 investors and many others who have verbally committed. With 71 days left to hit our goal, I feel very optimistic about us raising enough to hit our next milestone and launch the product. All of the months of work to prepare the campaign and the anxiety of wondering ‘if I build it, will they come?’’ was worth it.
During this process it has been important to me to educate entrepreneurs and investors and be transparent about the process, the benefits, and the work involved. I was interviewed about non-traditional ways to raise capital — I dropped some serious gems and encourage you to watch below.
I will be hosting ‘ask me anything’ #AMA sessions throughout the fundraising process on my Instagram account (@DawnWDickson) please follow me and tune in, this is an opportunity to ask me questions in real time. As much as I want to personally speak with every interested investor, it is not possible so I am using #AMA sessions, podcasts and interviews to make sure that all of the questions are being answered. It is a huge task, but I am totally up for it!
DECEMBER 28, 2018: Educating my network about STOs and investing
Thank you for everyone that joined my #AMA yesterday on Instagram. This was a great opportunity for me to respond to questions and share details about secure token offerings (STO), PopCom technology, and our plans for the future. I will be hosting these every week for the duration of the campaign. If you missed it please watch the video below.
If you have been following my ICO journey since April, you know that there was extensive time and research put into learning about new, unconventional ways of raising capital. Since the beginning of January 2017, Initial Coin Offerings (ICOs) have gained a lot of traction from the VCs as well as from the general public. I believed that an ICO was the route for PopCom, however, due to the lack of regulation as well as the get-rich-quick excitement, the crypto space quickly became filled with scams, putting investors at risk. That is when the SEC stepped in.
Even though the wild west of non-regulated 9-figure ICOs with 1000x promises returns is done, we have a new investment instrument on the rise…the secure token offering (STO). With an expected growth up to $10 trillion by 2020, the STO is emerging as a powerful and valuable alternative to private equity and venture capital financing for companies globally. It’s based on two needs: stronger regulation and the separation of speculation from the utility.
A security token can be backed by the company’s assets such as shares, the right to receive dividends or grants for voting power. This clearly provides a much more solid and safe investment for the investor who believes in the company’s future. A security token has a lot of advantages since financial regulators consider them securities. Ultimately, this protects token holders. They also mitigate the divergence of interests between project investors and project users. Finally, they give real rights to the token holders.
STOs are typically done using an exemption called Regulation D 506(c), which is a public offering of securities to accredited investors (anyone with a net worth of $1 million+ or an annual income of $200,000 or more for the past two years — $300,00 in combined annual income for spouses). This regulation means a company can solicit the general public, but potential investors must verify their accreditation status before they can participate in the STO.*
Another popular option for STOs is to use the exemption Regulation Crowdfunding (CF), which is an offering for the general public, meaning both accredited and non-accredited investors can participate in the offering, with the caveat being that there is a limit to how much an STO can raise in a given year, the limit being $1,070,000.*
We have filed both a Reg D 506(c) and a Reg CF so that we can accept funding from accredited and non accredited investors.
By tokenizing our cap table we now have a more flexible version of a regular securities — and blockchains offer a unique and highly-efficient medium for ownership and trading of digital tokens that can represent securities. Although the exchanges are not yet supporting the security tokens, big names like Coinbase, TZero, GBX and AlphaSwap are investing massively in the STO ecosystem and plan to open their doors in 2019.
DECEMBER 27, 2018: We reached our first milestone
We reached $10,000 today! I will admit that launching the Secure Token Offering (STO) on Start Engine right before Christmas made me nervous. Not only because investment activity is dead in December…I was also concerned that the public (accredited and non accredited investors alike) was not familiar enough with STO’s to jump in.
In true start-up fashion, we had to pivot several times during this process, we have been ready to raise money since June, but due to the changing rules around ICO’s we had to be patient. After months of research, we selected our platform and applied to launch STO on Start Engine in July, I expected to be raising money by August…I was wrong. We went through four months of compliance review and due diligence in order to be approved to raise capital from non accredited investors under the Title III crowdfunding act. I spent months meeting with investors about our ‘upcoming round’ but due to SEC rules I was not able to disclose the terms at all until the campaign was actually live on Start Engine. After telling people ‘it’s coming soon’ for months, the campaign went live on December 19. We were relieved that we could finally start taking investments from our network and excited that despite the holiday we hit $10,000 from 21 investors in the first week.
Over the past week I have been asked many questions about STOs and more information on PopCom. I will spend the next few months raising capital for PopCom and raising awareness about this new financial instrument called the STO that is changing the game. Stay tuned….
DECEMBER 19, 2018: PopCom + Start Engine: WE ARE LIVE
Thank you for following my journey for the past 9 months, I have learned so much and the rules and regulations around ICOs and token sales have changed drastically since 2017. We spent many months studying, planning and preparing and today I am excited to announce that PopCom secure token offering is LIVE on Start Engine and we would love your support. The minimum investment is $252 — Check out our campaign page for all of the terms and details — www.StartEngine.com/PopCom. Share, spread the word and let’s make history!
JUNE 5, 2018: PopCom + New York Blockchain Week
As part of our ongoing ICO/Blockchain journey, we recently spent a week in New York for Blockchain Week. There were several important events happening that were offering information and opportunities which aligned with our goals, so we headed there, to see what we could see! And here’s the run-down…
The first event we attended was the New York Ethereal Summit. There we got great exposure to Consensys’ ecosystem of companies and products, and great status updates on Ethereum’s usage throughout the blockchain industry. We got the impression that this event was geared more towards newcomers to the industry, as the panels featured fairly high-level and introductory material. We also had some great networking around the event and meetings with the Consensys team that helped support our decision to build as an ERC20 token.
Next up was Consensus 2018, a sprawling, incredibly energized event powered by Coindesk that is widely considered blockchain’s most important annual event. Nearly every major cryptocurrency company was in attendance, with a wide array of presentations, panels, and workshops to suit any background.
Also in attendance were tech giants Accenture, Microsoft, and IBM — which gave credence to the business utility that blockchain has to offer.
Civic, a decentralized secure identity platform, also made waves with the debut of their proof-of-concept beer vending machine. Lines snaked around many other booths to try the machine. We felt reassured that tangible use-cases for blockchain in the vending industry ignite curiosity and interest — and that PopCom’s blockchain solutions will likely be extremely well received by the community.
During this event we were able to meet with some important advisors and partners, as well as generate plenty of interest around investment in our plan to revolutionize retail.
The final stop on our Big Apple blockchain excursion was the Hamptons, for ‘BlockorNot Experience’ held at the Loeb House — made famous by the hit Showtime series ‘Billions’. The “orNot Experience” is a VIP event focused on educating execs about the opportunities afforded by new technology. Hosted by Loeb Enterprises and Bonin Ventures, at the center of this event, was blockchain technology. I was surprised by how many people knew so little about blockchain — signaling just how early we still are in the industry.
Our week in New York was informative and confidence building. And with each event and conference, all over the world, we have more opportunities to talk about PopCom and connect with potential investors and advisors.
The waiting list on our token page is getting longer, and our runway is shorter. It is time for us to make a crucial decision about whether our next round will come from traditional VC, or if we are going to take the leap into an ICO. We have options on both sides, however there are still some unknowns. Our next step is to compare and analyze our fundraising options and our pipeline, and identify all of the documents that we need to have completed in order to raise funds either way. We’re still undecided, but not for long…
MAY 22, 2018: Networking + Validation
The next leg of my journey took me across the globe, to Dubai. I arrived there mid April for the World Blockchain Forum ready to focus on investment and poised to announce PopCom’s ICO. Based on the speakers list, I knew this would be the perfect place to pitch to people I wanted to align my blockchain project with. I hadn’t discussed with my investors the fact that I would be announcing plans for the ICO in Dubai, mainly because I wanted to test the waters to see if it would be well received before I jumped off the porch into unknown territory — and this was a great opportunity to get some legitimate, industry focused feedback.
On pitch day I was a little nervous. This was my first time getting on stage to talk about blockchain technology and how PopCom would use the Ethereum blockchain and an ER20 token to securely register customer identity on vending machines to sell regulated products. I admit I was not fully fluent in the jargon of the crypto savvy, and we were still working out some details around our product — but my confidence in the project made me anxious to share it with the audience.
The best-laid plans…
I had 5 minutes and 6 slides for my pitch, I had it memorized perfectly. But when I stepped on stage, my slides didn’t work! I was privately quite panicked, but I remained calm and got through it. It wasn’t the strongest pitch I had ever done, and I did not take home one of the three cash prizes awarded at the conference. The companies that won were well ahead of Popcom in their raises (most had already raised several million in an ICO). So I was disappointed, but not defeated.
There was no Q&A, so after I was finished I spent the rest of the day at our booth answering questions and connecting with people. It was reassuring to have so many people stop by and compliment us on the pitch and the model. Several investors also visited our booth to talk, as well as advisors who wanted to talk about helping us through the process.
We also released the white paper online that day, and over 100 people signed up for the waitlist to receive information about our project and fundraise. Many times during the course of the event, I was told by crypto influencers and thought leaders that our use case is very strong and they have not seen anyone with a focus on regulated products. The crypto Gods had given me their blessings, and I was ready to move forward!
In the same week I pitched in Dubai, my episode of The Pitch, on Gimlet Media was released. On this podcast, “Are Vending Machines the Future of Retail?”, I pitched to investors to join my round. Despite them thinking our business model was great, they decided not to invest and said they would be interested in joining our Series A round after we have more customer validation. It was at the end of this podcast that I announced my intention to ICO, which was a bold move, especially since it was recorded prior to my trip to Dubai and I was still unsure about it. Fortunately, the podcast was a hit, I received overwhelmingly positive feedback around PopCom, our business model, and my reasons for wanting to ICO.
Extended Stay. Expanded Knowledge.
I spent two weeks in Dubai and attended another conference called the Future Blockchain Summit to continue to build my network and expand my knowledge base. I met some amazing people and had great meetings with thought leaders and advisors. My Head of Product for the Blockchain offering, Jared Korinko, accompanied me for this conference and we spent most of our time in meetings. It was productive for us. The questions were were asked challenged us and gave us a lot to think about.
We learned that most people raised a bridge of at least $1M in a private token sale or from traditional VC before moving forward with an ICO. The reason? ICO’s are expensive. There is considerable expense associated with the extensive amount of legal documents needed for compliance, and execution of proper KYC/AML diligence (in case you don’t know, KYC/AML are acronyms for ‘Know Your Customer’ and ‘Anti-Money Laundering’) people in crypoland use this acronym CONSTANTLY! Raising money, was going to take money.
By the end of my trip to Dubai we had close to 200 people on our waitlist and investors ready to commit tokens and fiat. I was excited about this progress however I knew that we were not ready to accept these funds because we did not have our Offering Memorandum (OM) and Private Placement Memorandum (PPM) completed. The last thing I wanted to do was take money/tokens on a pre-ICO and have to return the funds. I’ve seen startups pre-maturely accepting investments without the proper documents, and subsequently having to return funds. I definitely did not want that drama.
To ensure Popcom would be fully compliant and properly advised, we retained the law firm of Greenberg Traurig and signed with an advisor to help guide us through the process. We were also fielding offers left and right from crowdfunding platforms to raise the first $1M with them. I was overwhelmed with information. We needed to decide how were were going to raise money, and soon. So many options were presented — private pre-sale, ICO, STO, Ref CF, Reg D, Reg A-Plus. I needed to fully understand how each would impact my current cap table and investors.
Before we made any decisions we decided to hit Blockchain Week in NYC. This event hosted three conferences that would be attended by the ‘who’s who’ in crypto — Token Summit Blockchain Week, Ethereal Summit sponsored by Consensys, and CoinDesk Consensus 2018. We looked forward to having important questions answered, and connecting with key people…
MAY 2, 2018: Arriving at a Blockchain Offering, Worth Offering
I knew the first questions people would ask me would be ‘why are you considering doing an ICO?’ followed by ‘how are you using Blockchain?’ The short answer to both questions is, because ICO funding is attractive, and I believe Blockchain is the future of retail…and everything else.
But as I’ve stated so many times before, I was not going to raise an ICO without having a solid blockchain use case and a product already in development, or understanding all of the legalities around ICOs. So now that the PopCom White Label Solution was in the hands of my CTO and dev team to be completed this July and our hardware solution, the PopShop Kiosk was being built, I felt good about moving forward with writing the white paper and fleshing out the details about how we will use blockchain in our platform. And although our platform will not be completely dependent on Blockchain, there is one part of our product that needs it in order to scale. Let me explain…
In February 2017 we completed an accelerator called Canopy Boulder, in Boulder, Colorado. The program is funded by the Arcview Group, the top cannabis industry investor group in support of companies building technology and ancillary products that can be used in the fast-growing cannabis industry.
PopCom (then called Solutions Vending) was accepted into the program because we use Kairos Face Recognition software in our platform to collect anonymous information and consumer metrics around demographics, which create insight around consumer behaviors at the point of sale. We value consumer privacy more than anything, so we do not collect their identities without their permission. However, with a consumer’s permission, we can use Face Recognition to compare their face against a government issued photo ID to verify their identity and legal right to purchase and consume a regulated product — like cannabis.
The feedback we received during the program and at Canopy Demo Day was great, we had several dispensaries that were ready to sign up for our software and start selling in vending machines. I was excited to have customers for the product before it was ready to launch, but before I could start writing new business, we still had to figure some things out, like —
How would the ID be verified? Does the customer scan their ID on the machine or on an app on their personal device? Through our research we discovered that customers are still very concerned with privacy…understandably, considering the recent massive breaches that cause millions of individual identity and personal data to be compromised. Our team knew that we needed to develop a solution that was virtually hack proof in order for this to be widely adopted.
We concluded that by storing the customer data on the Blockchain and allowing the consumer to own their data — only releasing it when a Smart Contract is engaged is the best way. Since Kairos was building a product to allow customers to own their identity on the Blockchain, and we were already utilizing their technology, it made perfect sense to use the Kairos token to turn the consumer’s face into a biometric hash to for anonymous identity verification.
That’s when I had my ‘ah-ha’ moment.
It occured to me that cannabis is not the only product that is highly regulated, globally. What we recognize as the ‘Regulated Retail Economy™’ includes Cannabis, Alcohol, and Pharmaceuticals. These industries combined will generate $1.4 trillion in revenue by 2022. Firearms and ammunition are also regulated and can benefit from the immutable leger of the blockchain. Imagine being able to purchase ammunition in a vending machine, or being able to track when a firearm was purchased and how it changed hands — but all anonymously. The possibilities are endless.
Today there are cannabis vending machines in dispensaries in California and Colorado and people are purchasing wine and beer and tobacco products from self-checkout machines in retail locations across America. Currently when a person wants to purchase a product that is regulated (like cannabis from a dispensary or a bottle of wine at self-checkout at the grocery store) they have to present their government issued photo ID to the cashier to verify that the person standing in front of her is the person on the ID, then they are confirmed to purchase the product and then they present their payment. There is a heavy friction in this transaction that relies on humans to verify identity.
Human error can result in serious consequences for consumers and retailers.
We had to come up with a way to allow our customers to sell these regulated products in an automated way while still remaining compliant with government regulations around consumption. Our team determined that using Smart Contracts on the backbone of the Ethereum Blockchain to store the consumer data and verify their ability to consume a product — was the right approach.
Ours is a frictionless solution that will decrease wait time in dispensaries/stores,and help the retailer remain compliant with government regulations around who can consume the product and the quantity limitations, and reduce overhead costs associated with having extra staff on hand to check IDs. Our token would combine the biometric hash created by Kairos, with the compliance information for the cannabis (rules by state around consumption, recommendation information) and the geolocation where the products were purchased, so that the customer is following the rules state to state, enabling regulators and retailers to track quantity, consumption and compliance — but not identity.
Our goal is to be the currency used to purchase cannabis, and all regulated retail products everywhere in the world.
We want every retailer of regulated goods, globally, to accept PopToken. We plan to achieve this by partnering with retailers and regulators to adopt the token by giving their customers a platform to purchase regulated retail products in an anonymous way, while giving them them access to “smart inventory” that not only lets them know what to reorder, but gives them consumer insights to understand consumption patterns — all while keeping track of government regulation compliances.
Now that we understood how we could successfully utilize Blockchain technology, it was time to write the white paper, develop the token economics, understand how it affects our current cap table, determine the Architecture and Design of the token, and decide how the token would be distributed.
While ICO and Blockchain are kind of like the ‘wild wild west’ of funding and tech — a new sheriff has come to town — the SEC.
To add to the already massive amount of learning and work involved in developing a Blockchain product and taking the steps to raise an ICO, the laws around SEC compliance are literally changing daily — and they’ve even started arresting founders.
I know several companies that did an ICO and had to return the money because their acceptance of the funds was outside of government compliance. SAFTs, which were once the fundraising document of choice for ICOs — are now illegal. Most law firms are not at all familiar with ICOs, and are scared to come close to them because of the potential backlash. The first thing we did was find a progressive firm with a tech division to guide us through the legal maze of this process.
This journey will continue to be a lot of hard work and education…next steps are to align ourselves with industry leaders to advise us on the best way to move forward and get our project in front of the blockchain community to get their feedback. Blockchain conferences and events…here we come. First stop…Dubai.
APRIL 24, 2018: The Season Changed, and So Did My Focus.
As Fall approached, I made a point to spend more time with some of my peers who had valuable experience and knowledge about Crypto, ICO and Blockchain tech. To this end, I spent a day with my friend Erik Mendelson, CEO of Record Gram. It was an intense brain drain around ICOs and cryptocurrency. Erik, who has positioned himself as a foremost expert in cryptocurrency around his launch of Tune Coin, gave me some great direction. His guidance, and the guidance of all of my crypto educated friends, has been invaluable.
By Techstars LA Demo Day in October, which I had been working pretty diligently for months in preparation of, we had customers and investors lined up and ready to go. Although I was encouraged to raise two years of runway I decided to raise just enough to reach the next milestone, because at our stage of startup life, money is really expensive, so I chose to be more prudent.
Investors would say things like “…after all of the notes convert you will still have 30% of the company, which is good.”
To go from 88% ownership to 30% after one round of funding, felt uncomfortable. It just felt like too much about the cap table and my future percentage was speculative, so I decided to follow my gut and although I had over $1.1 million in commitments I did not take more than $650,000 on a $3M cap. The momentum from Techstars and pitching in Rise of the Rest in Columbus helped us come close that round pretty quickly. All of the commitments came in within the first 2–3 weeks and money was in the bank within 40days — which anyone raising capital for a startup knows, is awesome!
That runway would allow me to hire the core team to continue building the product, which would enable me to focus more of my attention on our next round and in understanding if an ICO would be the best way to go for PopCom.
PopCom ICO is a GO.
By November, I was over the fear I felt as a result of the Summer’s phishing attack and and investing in Altcoins. My strategy was, and still is, to be an early investor in coins with technology that I believe in and hold. Trading crypto can be stressful, I knew I did not have the stomach to be a ‘day trader’. Watching the markets all day felt like a full-time job, and I definitely didn’t have time for that. Rather than sitting on the computer all day buying and trading other company’s tokens, I wanted to have my own.
The first real step, as I had been advised by those who had been through the process, was the white paper. I will be honest, the task of writing the white paper was intimidating. It took me two months to start it. I had planned to spend December working on it and skip the holidays, but after completing two accelerators (Canopy Boulder and Techstars) in two different cities, closing a round of funding before the holiday, and spending November and December at every tech holiday party I could find networking and recruiting team members — I was mentally, and physically, exhausted. I would get back to it.
In the meantime, my friend and member of the PopCom Advisory Board, Brian Brackeen, was in the process of creating tokens and launching an ICO for his company Kairos. He has served as one of my most trusted advisors for the past 5 years, in fact, PopCom uses Kairos Face Recognition API to track customer emotion, engagement, age and gender for our platform. He’s like my SaaS spirit animal!
Brian was the first person to believe in my vision for bringing Face Recognition to vending machines and kiosks to better understand demographic and traffic pattern data, calculate conversion rates, and pay with face.
He started journaling about his ‘Crypto Odyssey’ on December 7 upon beginning his own ICO research to determine if it would be the right move for Kairos. By January 1 he had completed his research, written the white paper, launched the token sale and experienced overwhelming interest that exceeded his expectations.
Brian’s ICO success combined with having tirelessly having researched the mechanics of ICOs and engaged in endless Q&A sessions with ICO experienced peers — made me feel strongly that this is the future of funding — and I knew I wanted in. My next moves would be in the direction of ICO success…
APRIL 17, 2018: How it all began…
My Crypto Summer ‘17
As I was researching the process, I became aware of Chrissa McFarlane and her ICO for Patientory. And I was inspired. In June 2017, her company raised $7.2M in just 3 days. Here was a woman of color, not unlike myself, who decided to take matters into her own hands — and through non traditional funding, injected millions of investment dollars into her company.
After reading the press announcement about this raise and watching her live stream about the ICO and how they were using Blockchain, a few things occured to me…
I was even more determined to learn more about ICOs.
PopCom (formerly Solutions Vending) was in the process of planning the build out of our white label software solution for self-service retail machines. Our patent pending hardware and software solutions would revolutionize innovation in the self service retail industry, specifically the Regulated Retail Economy. So why shouldn’t we raise the capital we needed by going around traditional funding, too?
I really didn’t have a working knowledge of cryptocurrency or how I could invest in it.
I knew about Bitcoin from the dark web, but like most people, I really had no idea about the technology behind it. I’ll also go ahead and admit that I presumed it was pretty exclusively used to buy drugs online. The entire technology and use thereof was, and is, still very new. The amounts of money that startups like mine were raising was incredible — but how it all worked and what I needed to do to be counted in that group of forward thinking founders — I hadn’t a clue.
I grind. I learn.
During this time, July 2107, I was in the middle of the Techstars LA accelerator. So by day I was focused on building the business and refining the business model, and by night I was studying and reading all I could about Blockchain technology and decentralized currency (cryptocurrency).
I only knew a few people who were talking about and investing in Bitcoin. It hadn’t been all over social media yet, so the first thing I did was take a class on Udemy to learn how to buy and trade Bitcoin. Then I set up accounts on Poloniex and other exchanges to learn how to trade and understand the market.
My close friend Hartej Sawhney of Hosho.io — a crypto security company that edits smart contracts, gave me a crash course on Bitcoin and Alt coin and advised me to invest as much as possible before July 31, as a fork would happen in the Bitcoin Blockchain. I took his advice. When I bought Bitcoin it was $1700, ETH was $180 and LTC was $30, and they were the only coins on Coinbase.
Keep in mind I’m working with an early stage startup founder’s salary, so I could only afford to buy a ½ Bitcoin, 1 ETH, and 2 LTE just to see how things would go. We had just received $120,000 investment from Techstars and a BIG part of me wanted to purchase $10,000 worth of Bitcoin with that investment (before you report me, relax, I didn’t do it, but if I did that $10,000 would have shot up to over $100,000 at its peak).
After making those small investments in July I started following WhatsApp and Telegram groups about Bitcoin and Altcoins to build my network and begin researching how to invest in some of the Altcoins that people were talking about. I would invest $100–200 of my extra money into penny altcoins and I grew my portfolio to a total of coins that I heard and read good things about. After the fork on July 31 and the creation of Bitcoin Cash, the price of Bitcoin skyrocketed, it was exciting to watch the value of my portfolio grow every day.
Progress and Panic
By August I finally felt I was ready to invest in an actual ICO. So a close friend and I partnered to do just that. We invested 4 ETH for about 65,000 of the tokens. I was becoming more active on the exchanges and groups and learning the jargon, and the culture.
I was familiar with phishing scams and links so I made sure to always type and double check URLs before I entered my password. The ICO we invested in formed a private Slack channel for us to interact with the CEO and stay up to date as to when the token would be added to an exchange. One day, while in the middle of Techstars and working like crazy to get our MVP completed by Demo Day, I woke up to an urgent message in the Slack channel about our tokens. It was from a member of the ICO team and said we need to log in to this link they created for us before we lose our tokens.
It sounded credible, I thought it was a private invitation-only channel, so I trusted it. I clicked the link from Slack on my desktop, entered my private key into MyEtherWallet.com where my tokens were stored and checked to see what was going on. It was at that moment that I watched my wallet go from 65,000+ tokens and 2 ETH to 0. FAST. I felt sick. I logged off and back on and it was gone. One of the few things I did know about the Blockchain is that once a transaction is moved through it there is no turning back. I knew our tokens were gone forever. I was MAD. How could they let someone infiltrate the Slack channel?!?
When I informed the general channel that this had happened to me, no one cared. I looked like a rookie. Everyone else knew better than to click those links…then it dawned on me, I didn’t really know what I was doing — and I needed to take a few steps back.
After the phishing attack I didn’t invest more money. I just watched my portfolio grow and focused on Techstars Demo Day, acquiring new customers for PopCom and preparing to raise our round.
I was still absolutely interested in launching an ICO, but I still did not know enough about it and we only had about two months of runway. I had to raise some capital to hire the team and continue to build the product. I was certain that I did not want to follow in the footsteps of the many ICOs that have only an idea without a product, and have not raised any traditional capital. I wanted to have a product, customers, and investors before an ICO. It was important to me.
There was increasing opposition to ICOs among the startup and VC communities because they were not regulated. I also wanted to see how things with play out with all of the companies who successfully raised via ICOs, and make sure things had been, and could be done, legally.
The Fall would bring more knowledge, amazing ideas, and the start of the PopCom ICO …