Last year ICO promoters focused on how to get around the SEC by calling their offering a “utility token” maintaining it was not a security. As I’ve written before the SEC views tokens for what one can do with them, rather than how the promoter intended them to be used.  The SEC appears to have won the battle against startups who didn’t want to register their token as most ICOs I see today are now doing so. That means we’re right back where we began – in Reg D land. It’s déjà vu, all over again. Most ICOs I’ve encountered are running a Reg D offering as the accredited investors are familiar with it but some ICOs are turning to other security offering methods such as CF (crowdfunding), Reg A+ (which lets you raise up to $50M), and others. The token sale is now a funding stage just like raising a seed round from an angel or a series A from a venture investor. The token sale is no longer the solo shot to raise funding for your company. For most ICOs, the promoters raise a pre-ICO round of $500K to build out the MVP and the basic tokenomics. Then in a private sale the promoters raise funding from accredited investors to establish the platform and prepare for the token crowd-sale.  For the private sale, promoters offer a 30% to 50% discount off the tokens. As the private sale winds down with a diminishing discount, the promoters prepare for a crowd-sale of their token to the general market. The token sale is one more tool for the fundraise toolbox. Hall T. Martin is the founder of TEN Capital and a builder of entrepreneur ecosystems by startup funding through angel networks, funding portals, syndicates, and more Connect with him about fundraising, business growth, and emerging technologies

At TEN Capital we continue to see a strong flow of consumer product good investments. The shifting landscape in the food and beverage industry brings new opportunities for investors. Food and beverage predominate but health and beauty products and other categories continue to raise funding. Investors give some sectors more attention than others. The move to “healthier” alcohol is an interesting one in which all natural juices and herbs/spices added to the alcohol command higher exit valuations. Alternatives to meat and dairy also receive quite a bit of interest from the investors—in particular the strategic corporate investors. Exits in these areas come at 3X to 5X multiples which is in the same league as SAAS-based tech businesses. I find the CPG space fits the angel investor well. When I led the Central Texas Angel Network for its first two years, I found that almost half the funded deals came from CPG. Investors often found the tech deals were too often “smoke and mirrors” so they had to spend a great deal of technical due diligence to figure out what was real. With CPG, the product is more easily understood and the business model is straightforward. When I helped launched Incubation Station (now called SKU), I found CPG deals held up longer than most tech startups. Half of the tech startups in an accelerator are dead within a year. CPG companies with a product in the market can carry on for many years as a loyal customer base is the same as a recurring revenue SaaS product. The key to investing in CPG is being in the right vertical and its ability to build a brand. It’s not hard to check interest with the strategic buyers to see what sectors they are looking for. Brand building can be taught and learned. In the Tech space, branding is an afterthought. In CPG it’s the primary skill. The basic criteria for most CPG deals is at least a 40% gross margin and a category growth rate of double digits. If the startup seeking funding doesn’t know what a category growth rate is then it probably should be a pass for the investor. There are many CPG deals to choose from but as the rule of startup investing says – the top 10% will return good money, the next 15% will return some money, and the rest will return no money.  It’s best to start with the right sectors and then explore for the best teams from there. You can learn more about CPG investing with TEN at this link: http://staging.startupfundingespresso.com/ten-cpg-syndicate  Hall T. Martin is the founder of TEN Capital and a builder of entrepreneur ecosystems by startup funding through angel networks, funding portals, syndicates, and more.  Connect with him about fundraising, business growth, and emerging technologies.

In 2017, two guys with a whitepaper could raise substantial funding through Initial Coin Offerings. As the dust settles on those days we now find over 40% of the ICOs from 2017 are already dead. As the ICO market matures, investors in ICOs demand a great deal more than just a whitepaper. They look for proven teams and substantial technology already built before they will engage. Today, investors are still very interested in the blockchain and the ICO space. Blockchain technology will underpin the next generation of the internet and solves many of the basic issues including security, identify, and trust. Investor interest skews to the proven – as they ultimately do with every new technology. For those running ICOs, the SEC has determined (for now) that all ICOs (regardless of their use case) are securities and must be treated as such. There are efforts to appease the SEC who looks upon tokens not for what they were intended but for how they could be used. Even if you declare your token to be a utility, the SEC will consider it a security if a user can treat it as such – i.e. sell it on an exchange for a gain. Most ICOs are choosing a Reg D raise while some are considering Reg A+ for their fundraise. The Reg D has no limit on how much you can raise but all the investors must be accredited. The Reg A+ is limited to $50M but you can raise from anyone. One can also use Reg CF but this limits the raise to $1M so it may not make sense to use for an ICO. The TEN ICO Syndicate consists of angels, venture capital, crypto hedge funds and others seeking blockchain-based solutions. For most of the investors the token usage is a secondary consideration. The primary care about is the team and the technology. The investors look for deals with a domain-experienced team and a substantial platform that can solve big problems and can scale. The Emerge ICO Summit scheduled for October 10, 2018, will be a gathering of the ICO Syndicate and those raising ICO funds. To learn more please check out http://staging.startupfundingespresso.com/txvf17/ Hall T. Martin is the founder of TEN Capital and a builder of entrepreneur ecosystems by startup funding through angel networks, funding portals, syndicates, and more.  Connect with him about fundraising, business growth, and emerging technologies.

I receive calls daily about the TEN Investor Syndicates- in particular the healthcare syndicate. For those raising funding or interested in investing in healthcare startups and growth companies, here’s more information about their investing criteria. Revenue- The company needs to have more than a $500K annual revenue run rate. Typically, the investors want $1M revenue but the exits in the healthcare space tend to outstrip everything else that the investors will engage earlier than usual. Growth is king- you must have a growth story. The investors monitor the progress of the startup over two to three months to see the momentum and traction. As the saying goes, investors don’t invest in “dots”, they invest in “lines.” Huge forecasts don’t count for much unless they are grounded in some historical reality. Proven team- if this is your first go-around it’s going to be tough. They want someone on the team who has been there and done that at least once. Competitive Advantage- They are going to ask about your competitive advantage and a handful of patents will not suffice. You’ll need a competitive advantage that either gives you a 30% increase in revenue over the competition or a 30% reduction in cost. Many of the members of the healthcare syndicate are physicians so they understand the applications and the space very well. They evaluate deals from the physician’s point of view and ask how does this make the physician’s life easier and how does it profit the physician. In summary, the TEN Investors look for a growth story underway and: $500K revenue run rate Strong growth rates Proven team Competitive advantage If you meet these criteria, please contact TEN Capital, and let’s start a discussion.   Hall T. Martin is the founder of TEN Capital and a builder of entrepreneur ecosystems by startup funding through angel networks, funding portals, syndicates, and more.  Connect with him about fundraising, business growth, and emerging technologies.