I can tell you right now, if you were to give me a topic in the cryptocurrency space, I could send you a very compelling whitepaper, in 72 hours. It has nothing to do with my experience in the industry or any ability to build a team that could build a platform or business that has revenue and adoption.
–Dean Sutton, CEO of BlockTech Ventures
When it comes to whitepapers, put your guard up
There are hundreds of whitepapers out there on new cryptocurrency ventures and new businesses that are coming out of the woodwork, all promising that they have the next decentralization solution. The problem is that people consider whitepapers to be actual legal documents, instead of a preliminary mission statement. “It’s an interesting theory to read about,” says Dean Sutton, the CEO of BlockTech Ventures. But execution is a completely different topic, and industry validation is a third, separate conversation.
But at the end of the day, a whitepaper is just a promise to consumers about a given venture. It’s one thing to learn about a concept through a document or an ICO, but it’s another thing entirely to understand the difference between a conceptual theory and an actual, validated business proposition.
Sutton emphasizes that this has no bearing on whether the individual(s) involved can build an incredible business.
Asking The Right Questions
During my conversation with Sutton, I realized that even when talking with influencers in the industry, it’s all about knowing which questions to ask and where to place emphasis. Sutton told me that when an investor or business is looking to enter the crypto space and invest in a particular coin, token, or venture as a whole, they need to ask themselves certain fundamental questions.
Why You, and Why Does It Matter?
Most companies can never answer this question, because you’re asking them to make a promise to deliver on what seems to be valuable and useful information. Understanding that, you need to look to the utility of the company and why this company, which may have no credibility or track record, is apparently better than a company which has been successful with a largely constructed business. Sutton told me that he’s been building and investing in companies, since age 19, and in the crypto space since 2014.
Armed with knowledge from experienced influencers like Sutton, you then have to ask others in the space why they have the distribution, token economy, and distribution of scale that makes their currency better than others in the market. Yes, anyone with a wallet can invest in cryptocurrencies, but at the end of the day, we are all rockstars when the markets rise. It’s the volatility of the markets that changes the game; those instances where people thought they’d be in one financial position, but ended up in a much different one.
When it comes to ICOs, any company can conduct one. Sutton compares ICOs to a casino—you put money in, believing that speculation and interest from people wanting to make money will rise, and drive the price of that market. But, he cautions, this has nothing to do with fundamentals; it’s fear, greed, and perception that drives these types of markets.
What Kind of Exposure Are You Looking For?
Before investing your time, energy, and wallet into this space, it’s important to ask yourself what level of exposure you’re looking for.
- Do you want to try and learn the space, and invest a few bucks?
- Are you trying to put money away long-term, and come back in time to see the gains?
By learning about what cryptocurrency is, how blockchain technology comes into play, and understanding research protocols and platforms, an individual can become a more sophisticated investor in this new space. That starts by identifying how one can generate revenue by creating a token, and its digital representation, whether a utility or security.
At the end of the day, you’re not investing in ICOs—you’re investing in protocols.
Why Are You Investing In The Company?
What does this company have that is unique? Do they have an established platform with millions of users, that will allow the token to thrive with a new business model?
More importantly, do you or those involved understand token economics, game theory, et cetera?
- Who’s behind the company?
- Do you understand what the business is built on?
- How is this venture different from mainstream currencies off of which it is built?
Taking a Holistic Approach
Like they would with any investment portfolio, investors need to look at their assets as a whole to understand the risk and return in this space. “Remove the blockchain aspect from your business, and pretend this is a venture investment,” explains Sutton. Then ask yourself, Why am I giving this company money when they haven’t done anything yet to warrant it?
At this point, whether it’s a pre-sale or ICO, there is no fiduciary responsibility to deliver on any promises or statements contained in a whitepaper. There’s no recourse if nothing’s done, no confirmation that the venture is real; yet people invest anyway.
A Sustainable Business Model
Sutton’s company, BlockTech Ventures, which recently partnered with IBM, is centered around industry growth, focusing primarily on healthcare at the moment. Sutton’s goal is to build a company that has sustainability and can always adapt to the market, creating a strong, fundamental solution which is open to working with enterprises around the world.
“Through healthcare, we have been trying to develop a solution around data,” explains Sutton. Similar to crypto wallets, they are applying this to medical data and electronic medical records. The issue in this space is that it’s almost impossible to tie into EMR, where you can have one central location with all this information.
In many instances, these companies develop a half-baked solution, raise money based on an opportunity, possess an illusive team, throw faces on a page, call it a whitepaper, and advertise their new venture.
Asking the right questions to completely disqualify these companies could save you money, and reveal that most of the companies out there are anything but investment-worthy ventures. “It’s a reverse method of building full-heart capital,” explains Sutton.