This week we were proud to announce the names of the 7 Batch X startups with Startupyard for our 10th round of acceleration. Traditionally this reveal is followed by a series of in-depth discussions with the founders of each company.
We begin the series with Intelligent Trading Foundation or ITF, helmed by a team of three: Head of Engineering and Innovation Thomas Counsell, Head of Finance and Strategy Ben Lakoff CFA, and John Venport, the Head of Marketing. The team prefer not to refer to themselves as “co-founders,” and don’t assume traditional C-level roles that many startup companies assign their members.
ITF will pitch for the first time to the public, along with the rest of the Batch X companies on November 29th, 2018, at our next Demo Day in Prague.
I caught up with the team this week to talk about their journey so far, and to get some insight into where the blockchain and cryptocurrency world is headed next. Here’s what they had to say:
Hi Ben. I think we should jump right into this conversation by first acknowledging, you’re the first startup we’ve ever taken post-token sale (or ICO). Can you tell us what that process was like for you?
Absolutely. Running a token sale turned out to be a LOT of work. Turns out the “easy way” of raising funds for a crypto project is far from easy if you want to do it right. We were terrified of being hacked, or having something go wrong with the process.
Both Tom and I were still working full time jobs at the time, so this was something we were doing (mostly) outside work hours. We thought running the token sale was hard, but the real work starts after that. You face the fact that crypto or no crypto, you’re building a real company and dealing with real company issues.
I think successfully raising funds via a token sale helped to validate our idea in our minds, but that did not eliminate the struggle to find product market fit. Like any startup, building up our tech stack does reveal potential directions and products that might work even better (not straying from the original intention of helping bring sophisticated tools to investors in cryptocurrency to make better decisions).
We raised funds by selling what’s called a “utility token,” which means that essentially the buyers of the token are buying access to the product itself, where the token can be used to transact with us and access the premium products we offer. There turned out to be a pretty big catch raising funds in this approach, and that is that many of the people who buy the token are not actually your end users, but people who want to speculate on the price of the token going up. As has happened with many, even most other utility token sales, the value of our tokens post-dropped dramatically, and suffered from low liquidity. This meanshat those who hold it are unwilling to sell it, and those who want it are unwilling to buy it at current prices.
This is predictable in a way. Although we had a working product at the time of our token sale, it was really only for early adopters and needed to be improved before reaching more users. It’s sort of like selling tokens to play in an arcade that hasn’t been built yet. There is not much reason yet for the buyers of the token to sell, and there is not much compelling others to buy it, so the market price dropped. However, there is one way to increase the demand for the token, and make the investment potentially worth it to those who have already bought in, and that is to make relevant products available, using the token as a way to access them. .
In a sense, I think one of the hardest things about a token sale is that in the end it doesn’t change the economics of human behavior in the least bit. People still behave the same way, whether a market is distributed or centralized. As a group, it is hard for people to make long term decisions about the value of things, which is what causes so much volatility in markets, including crypto markets.
The legal and ethical responsibilities for those startups who do token sales do not go away. They consume an inordinate amount of time if you approach them with the intent to do the right thing. That’s just the way it is. As much as we’d like to make it easier, our system is complex because there are many stakeholders to be considered and protected. Decentralizing technologies do not change the need to balance the interests of many players at once.
What led to the two of you working together? How did this end up as Intelligent Trading Foundation?
Tom, John, and I all met in late 2016 in Thailand through different tech conferences. It’s funny that we all met in Thailand, because we’re all from the midwest in the USA and we had all been living in Thailand for different reasons (Ben with RMA Group, John with entrepreneurial projects, and Tom consulting for startups and working at Agoda).
We immediately clicked and decided to work together in some way. What started as a “Young VC Club” – we eventually tested a couple of different business ideas that didn’t get much traction. Midway through 2017, John’s eLearning project took off and ended up being a lot larger than expected, so he was pulled away to focus exclusively on that.
In the meantime, Tom and I had been trading cryptocurrencies and were looking for a solution to make trading easier and more efficient. Classic scratching your own itch thinking. Since Tom is highly technical, he started building out a tool to help. Once people found out about the tool, we decided to do a token sale and raise money to further develop a suite a products to help investors in the cryptocurrency markets.
In September’17, we completed our token sale, raising $2 million dollars, and started building out the team. It was at this time that we opened our incubator in Prague, Blockchain Hub, to help ITF synergize with other Blockchain Startups. In February’18, John finished his eLearning project and was able to join the team as a co-founder.
Since then, we’ve been steadily developing our product and growing the team. Currently we have 12 members on the team, and are looking to hire more.
- Head of Finance
- Developed strong global finance experience through 10 years of international assignments in the US, Brazil, Afghanistan, Southeast Asia, Czech Republic and through the award of his Chartered Financial Analyst (CFA) certification.
- Broad and diverse experience across various finance roles including corporate finance, mergers & acquisitions, equity markets, and banking.
- Head of Marketing
- Owned and sold marketing agency
- Sold various types of digital products and software online for the past 3 years
- eLearning project in Thailand in 2017.
- Head of Technology
- Developed commercial payment software for small business owners in Morocco while he was living there in the Peace Corps
- Owned software development consultancy
- Served as CTO for startups in Morocco, Thailand, and Czech Republic
How does your utility token work, and what does the product do?
ITT, our native token, is a utility token used to access premium subscriptions on the ITF platform. We’ll continue to add new products and tiers to utilize the ITT token.
The flagship product of today is a predictive alert system that keeps a trader informed about potential movements in the crypto market, and points out opportunities that the trader is likely to find interesting throughout the day. This product is targeted more for active traders. Our next product, ready later this year, will be more targeted toward retail investors, offering a simple way for everyday investors to get more involved with investing in cryptocurrencies.
ITF’s mission is to provide sophisticated tools for cryptocurrency investors, and we’re doing everything we can to simplify their investment decisions. Eventually we want to be able to offer a suite of tools that rivals platforms like Betterment or Wealthfront, but in the crypto space, where traders are able to leverage sophisticated technologies and easily get involved in the cryptocurrency markets.
By having our own token we’re also enabled to do some neat things, like staking, where HODL’ers will get access to premium features just by proving that they have the tokens in their account (they keep them). We also credit any payment for our premium products toward a user’s ‘staked’ amount, which is somewhat of a ‘rent-to-own’ model. That’s something that cryptocurrencies allow that traditional software platforms generally do not.
The ITT token is essential to access our platform, but since it suffers from low liquidity and is traded on rather difficult / non-intuitive exchanges, we’re doing our best to make it easier. We’re currently testing many assumptions with our ITT token. We’ve recently attempted to make it easier to access our services by allowing users to pay in ETH and other cryptocurrencies, and in the background we’re buying the ITT token ourselves on the user’s behalf.
This I see as one of the core problems for the whole crypto market, which is to say that low adoption rates and trading volume of many tokens creates a poor environment for actually utilizing the advantages of the token. A classic tragedy of the commons.
What would you tell another company that is thinking about going the ICO route? Would you do it again yourself?
We definitely don’t have any regrets. Raising money via a token sale allowed us to build ITF into what it is today, and dream up what we think it can be in the future. It’s a fundamentally different thing to build a product for people who have already bought into the platform, as opposed to equity investors who are buying into the business. That’s a very different kind of relationship.
If we were to do it again knowing what we know now, I would say we would work on validating the product and achieving more of a product market fit prior to doing a token sale. We had an alpha, with some early users, but hadn’t proven that there was sufficient demand to build a successful company from our original product yet. That led to the situation of low liquidity we are in now.
Let’s get deeper into what ITF is doing on the market right now. How does the technology work?
In broad strokes, we’re attempting to provide sophisticated tools for cryptocurrency investors, and we’re doing everything we can to simplify their investment decisions.
We’re moving toward two products: A Telegram bot – targeted toward crypto traders, and a Portfolio Management App – targeted toward retail investors. These two products enhance each other, allowing us to reach crypto traders where they are already communicating with others, and build our own proprietary platform where investors can access the crypto market using our technology.
We have developed quite a few sophisticated technologies, including AI and Genetic Programming that we’re currently working to incorporate into trading strategies and the portfolio optimization tools we will offer. Karla, our chief PHD data scientist, has made 4 discoveries that we could potentially publish in a scientific journal.
Our Portfolio Management App can automatically execute trades on users’ behalf and rebalance their portfolio to their desired allocations or apply our machine learning algorithms to trade and optimize their returns. We already have a beta version in testing and will release a version for the public in early 2019.
Think of this as similar to Wealthfront, but for the cryptocurrency markets.
We have a clear roadmap of where we are going, and we are testing many assumptions along the way.
How do you see this evolving as a business, including monetization?
SaaS is the current business model that we are targeting.
Currently, we have over 3000 free users, and a handful of paying users for our first product’s premium plan which costs $20 per month. Our payment and checkout process has proven to be too difficult for most users because they need to use our utility token. We are reworking everything so that users can pay with more easily with different currencies. We will launch additional products later this year that will follow the SaaS model as well.
How does the fact that you’re also dealing with your own token, either compliment or complicate the development of your products?
We raised funds via a token sale by issuing a utility token, ITT. Thus, any of the funds used will be to used with the goal of increasing the value of the ITT ecosystem. You can’t do a token sale and then not have a token, in other words. That’s what the token sale contributors bought.
Currently, the token complicates things due to liquidity issues, but we’re actively working on some solutions to that and thinking about additional ways we can further incorporate the ITT token with ITF’s future products. The truth is that you just have to have a clear offering of valuable products to justify the existence and use of the coin.
Where would you like to be with ITF in 5 years? What kind of a position in the market would be most desirable?
Many may argue that the cryptocurrency industry might not be around in 5 years, we don’t agree with that opinion.
We’re bullish on cryptocurrencies, and are taking the longer approach with all of our product development. We’re committed to provide sophisticated tools for cryptocurrency investors, and we’re doing everything we can to simplify their investment decisions. Our current best-guess is with the two products we’re working on, but we will be making things incrementally better over time and keep trying out new helpful products until we find something that works.
We are here for the long term. This is something we want to build for the future.
I know you’ve explored a lot of options with StartupYard mentors over the past few months. What have been some of the most surprising insights or ideas you’ve come across? How do you think the mentoring process has shaped the company so far?
Although we have worked very hard to build a great team and culture, our number one takeaway from all of these sessions/workshops is that we need to spend more time thinking critically about the business model and strategy for the product itself – many smart startups fail as they’re married to a product idea/features.
If the features don’t sell, you don’t have a business, right? If the product isn’t compelling to your target market, then either the product or the market is wrong. That takes a toll on your ego if you’re proud of what you’ve already built. It’s hard to see good work go to “waste”, but that is the nature of early stage startups.
Now, we need to really spend some time on what the goal is. As the StartupYard team says: “how do we define success?” Who are our target customers and how do we want them to use our products? What outcomes will they experience with us? Do we simplify their lives? Complicate them? These are questions you must have answers for.
Is it a tool that helps them make more informed decisions? How do they use it? Having a builder mindset is great for making cool things, but an explorer mindset is equally important to actually figuring out what people need and what they will respond to. That is something we have gotten from StartupYard in the past few months – that explorer mindset that says “question everything,” and then do it again, and question that too. Test all assumptions rigorously.
Then, obviously, when you’re sitting down with nearly a hundred highly experienced people from nearly any imaginable business, you are bound to find out things that you had no way of knowing.
What remains so important, I think, about the acceleration process is that it’s really the only way of getting this particular kind of feedback, and mentor-relationship with people who can really help you. You aren’t being criticized, or judged, you’re just being listened to, and being given the benefit of someone else’s experience.
There is no other medium where that can happen without any other ulterior motivations. Nobody is selling their advice. They are just giving it freely, because they want to, for their own individual fulfillment. That is so important to startups, and it’s the best part of StartupYard. The management team knows this, and they just sort of guide you through that process, and let the magic happen. It’s a great experience.