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REVITALISING THE TOKEN MARKET

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By Gavin Smith, CEO at Panxora

 

With interest rates near zero and fears that whipsawing stock markets are set for further plunges, many investors are turning to alternative markets in the search for returns. Money flowing into cryptocurrency hedge funds and trusts like Grayscale is at all-time highs and the large cap coins seem to be entering a bull phase, but that capital is not trickling down into new token projects. Why are blockchain token projects struggling to attract funding?

 

Seed investor scepticism

Setting aside the reputational issues with mainstream investors, even those educated in blockchain tech are not signing on the dotted line. This is certainly due in part to the hangover from the early token market.

During the heady days of 2016/17, investors could buy tokens during the token sale, and if the project was legitimate – even if the business case wasn’t particularly strong – prices would soar based on market enthusiasm. Early investors purchased at a discount and cashed out almost immediately for a handsome profit – and then repeated the process again. The token sale allowed founders to amass a war chest large enough to finance the entire token project – without having to give up a large chunk of company equity. Everyone got what they needed out of the deal.

Running a token sale is far more expensive today than it was during the boom. Getting the attention of the token buying public in a market where advertorial has replaced editorial is expensive. This coupled with a regulatory framework that requires the advice of accountants, solicitors and information gathering of KYC details for investors all comes with an escalating price tag.

To accommodate the change in cost structure, tokens now need to acquire funding in two rounds. Frequently there is a first round where capital is raised from a few, large investors. This cash is then used to finance setup and marketing the main token sale. The token sale, in turn, provides the capital needed to run the entire business project.

 

Bridging the gap between token projects’ needs and early stage investors

To successfully get a token through the capital raising process, founders must acknowledge the risk assumed by those very early investors and reward them appropriately. And given that tokens may stagnate or fall in price post token sale means that a deep discount in token price is not necessarily attractive enough to get investors to commit.

Many tokens have turned to offering equity in the business in the effort to raise that first tranche of capital. If you look at the number of successfully concluded token sales, the downward trend has continued since Q2 2018, so offering equity is not sufficiently stimulating the market.

 

Two sides of the coin

So, what is the answer? It’s a complex question but one thing is certain. Any solution must be rooted in a deep understanding of what both parties need to successfully conclude the deal.

On the one hand, token founders’ needs are clear: they need enough capital to get the token ready for and through a successful liquidity event that will provide sufficient funds to build the project. The challenge lies in striking the right balance between accruing that capital and making sure not to offer so much project equity that give up either the control or the incentive founders need to drive the project forward.

On the other hand, while the needs of the seed capital investors are more complex, there are two areas of key concern: transparency and profit incentives.

 

Transparency can mean many things, but almost always includes providing more informative cost and profit projections, as well as answers to a whole range of questions, not least the following:

  • What happens to investor capital if the token sale event fails? Token founders must be transparent from the outset. The token market is highly speculative and early investors run the risk of losing their money should the project fail. Therefore, investors require a well-established fund governance process in place throughout the fundraising so they can make informed decisions on whether the project is worthwhile. 
  • How are the assets for the entire project managed? Investors need to know that their money is in good hands and that proper treasury management techniques are being used to manage cryptocurrency volatility risk. Ideally, an independent custodian will be used to hold the funds and limit founders’ ability to draw down the capital – releasing funds to an agreed-upon schedule of milestones.
  • How are the rights of investors protected, for instance in the case of a trade sale? Investors need to know what happens if the company they are investing in is sold. What impact could this have on the value of their stake? Would a separate governance framework need to be established? These are critical questions and investors aren’t likely to settle for any ambiguity in the answers.

Profit incentives are important when it comes to encouraging early participation in a project. Investors need convincing that the proposition will keep risks to a minimum and focus on providing a strong probability of a return. This means that founders need to be able to defend the case for the increase in the value of their token.

But this isn’t the only incentive that matters. Investors can also be incentivised by preferential offerings such as early access to projects and services that might help their own business.

Let’s not forget that investors don’t support just any project. What really matters is that there is something special and unique about the business being underwritten by the token. Preferably something that could be shared upfront and directly benefit the investor – proof that the investment is really worth it.

And that’s what it all comes down to. Ultimately, while token projects are having a hard time finding funds at the moment, if they can prove their worth and provide full transparency and clear profit incentives to ease investors’ concerns, the money is out there. And deals can be done.

 

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5 tips to ensure CSR efforts come across as genuine

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By Mick Clark, Managing Director, WePack Ltd

 

Corporate social responsibility – or CSR – is playing an increasingly pivotal role in the long-term success of modern-day companies.

The harsh reality is that only a paltry 46 percent of people trust the brands they buy from. And with more competition than ever in all walks of business, a positive brand reputation needs to be earned or customers will simply take their money elsewhere.

That’s why I share my insights on the importance of CSR in modern business and introduce an effective plan to avoid coming off as disingenuous to your employees and customer base.

The value of CSR

The needs of modern employees and consumers are changing. There is a higher emphasis placed on the ethics and morals of companies and their handling of hot button topics like the environment or social issues.

59 percent of UK workers believe their business should be investing in charitable initiatives. 67 percent of people aged 18-19 feel this way, showing a generational shift in favour of companies that support ethical, social, or environmental causes.

Mick Clark

At WePack, we recognise the importance of this and make sure to regularly donate to a variety of charities including RRT (Rapid Relief Team), and donated £6,000 to the charity’s social causes last year.

An example of good CSR can be found in search engine giant, Google. It has had notable success with its CSR initiatives. Its flagship CSR campaign, Google Green, is a companywide commitment to using clean sources of energy, cutting down on its use of fossil fuels and drastically increasing energy efficiency as a direct response to the climate crisis.

It has been so successful that its data centres now require 50 percent less power to run than the average data centre and it’s poured over $1 billion into jumpstarting renewable energy projects.

Customer attitudes are fundamentally changing, and people are far more concerned about the values that their money could be indirectly supporting. In fact, 71 percent of customers prefer buying from businesses that align directly with their values.

In the modern-day, demonstrating high levels of CSR boosts brand perception. Businesses that make it a priority are more attractive – from an investment standpoint – to both customers and potential stakeholders.

For example, more than a third of consumers are also willing to pay more for a product or service if the business prioritises sustainability specifically – so it pays to be responsible.

Businesses with purpose-driven and ethical goals and proven commitments to CSR help retain employees. Millennials will make up 75 percent of the workforce by 2025, and it’s that cohort that is increasingly demanding socially responsible employers.

Those that fail to meet the needs will ultimately see their customers take their purchasing power elsewhere.

Addressing the challenges

As obvious as it may sound for a business to take on as much CSR as possible, many organisations face limitations.

Pressure from investors can disrupt the growth of CSR initiatives. Sometimes, the direction that stakeholders want to take the company doesn’t fully align with plans to target social or environmental issues.

Companies face becoming fixated on linking profitability with CSR programmes. It can be tough to present a genuine CSR programme without it coming across as a marketing ploy – presenting an extra hurdle for businesses to overcome.

Despite the challenges businesses face that are out of their control, many firms unwittingly make their own mistakes that cost them dearly.

For example, businesses can struggle to bolster their CSR programmes if they don’t consult their customers and staff first. A simple survey helps companies decide what issues to put as a priority and target to satisfy their customer base and employees.

Any attempt to create an effective CSR programme needs top-down support. Many businesses wrongly treat CSR as a separate entity, rather than fostering a companywide culture. This can lead any attempt to push back on global issues to appear disingenuous to those looking in.

Shifting the CSR approach

Because of the global shift in public needs and opinions in recent years, businesses need to better demonstrate their efforts to avoid having their campaigns labelled as a box-ticking exercise.

It’s no secret that consumers are doing more research and are becoming more switched on to spotting lacklustre approaches to CSR. Also, everyone can have their say online – it’s much easier to get exposed if your CSR campaign is nothing but an empty publicity stunt.

For example, Volkswagen’s reputation was left in tatters after its ‘greenwashing’ scandal promoted a newer, cleaner diesel vehicle that wasn’t any better for the environment than previous models. The company took it further by fitting a device that helped it cheat emissions tests – resulting in a $125 million fine.

For this reason, CSR campaigns need tangible results to be credible and trustworthy.

Sharing top tips

When it comes to structuring a strong CSR campaign, it’s critical to demonstrate several things to prove your strategy is effective in helping the chosen cause.

Firstly, evidence the fact that your efforts are helping wider communities. Whether it’s through statistics or showing proof of investment in social causes, tangible evidence goes a long way when legitimising your CSR campaign.

Secondly, balance your rhetoric. Effective communications are vital to the success of a campaign. However, it can damage a company’s image when done poorly. Businesses should speak about their chosen issues in their dialogue rather than spending too much time talking about the solutions the company has implemented. This stops them from becoming too self-promotional or sounding braggy.

To further avoid this, make sure you can directly tie your CSR campaign to corporate values and beliefs. As well as helping to strengthen your comms, it will also guarantee that company values are more than just surface-level – helping to facilitate tangible, long-term change.

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Business

How to Build Your Credit Up Safely

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by Taylor McKnight, Author for Compare Credit

 

What Is Credit?
Credit is money owed by a person that allows them to pay off debts at a lower interest rate. Most banks use your credit score to determine how much they should lend you. Any business loan or mortgage requires that you have a good credit history. However, if someone has poor credit(www.comparecredit.com/credit-cards/credit-range/poor/), they may struggle to pay back these loans, resulting in higher interest payments, making it more difficult than ever to repay the debt. Lenders are aware of this issue and keep a close eye on your credit rating to ensure that no negative information gets reported. This could prevent you from getting another loan in the future. It is important to note that having a bad credit score does not mean you have had a bankruptcy or other kinds of defaults. Many people often face this problem because of unpaid bills or late payment fees. However, this does not mean that you cannot repair your credit – it simply means that all parties involved must work together to solve the problem.

How to build your credit safely
Building your credit score is a major concern for most people, especially if they plan to purchase something as big as a home or car. A good credit score will help one get better rates in the future and make it easier to finance their next venture. Here are some things you should know to improve your credit to be used for the best possible purposes.

1. Keep paying down your balances every month: One of the biggest mistakes that could hurt your credit score is not paying your balance down each month. People who don’t pay their credit card down within the agreed-upon time typically have high-interest rates and expensive monthly costs.

2. Pay your bills on time: The same goes for making payments on a bill. Not paying it within the specified timeframe will result in negative information being added to your report, further lowering your credit score. Ensure that your bank statements are accurate and that all accounts are up to date.

3. Become an authorized user: Some companies will allow customers to become authorized users after meeting certain requirements. Take a look at the terms and conditions before applying for this option. These programs usually give access to one particular service, such as checking or ATM transactions, but are helpful when you need additional coverage.

4. Set up automatic credit card payments: There are several ways to set up auto payment options on your credit cards, including sending them directly to your checking account via email or the phone. In addition, you may want to consider enrolling in online banking services that automatically make payments from your checking account into your credit card accounts.

Other tips when it comes to credit
1. Learn how to manage debt responsibly. This is true for both personal and business debts. Many people tend to spend more than they earn, especially during rapid growth and expansion. If you find yourself facing difficult circumstances, you can seek assistance by talking to friends and family members, getting professional advice, or using online budgeting tools.

2. Don’t skip any repayments. This rule applies specifically to late payments. You need to continue making regular payments, even if you’re behind by a few days or weeks. Once you miss a payment, you’ll start accumulating late payments that negatively impact your score.

3. Try consolidating your loans. Consolidation involves combining multiple small loans from various sources into one large loan, thereby lowering the total interest cost of the loan and reducing the risk associated with it.

4. Be wise with your credit report. One huge mistake most people make is neglecting to pay their bills on time or paying only the minimum due balance each month. As a result, bad information remains on their reports, impacting their scores. All outstanding balances must be paid off completely. Otherwise, negative items that remain on your report can keep you from achieving the best borrowing potential.

5. Get your questions answered. If you have any questions regarding your credit, ask for answers now rather than waiting until you’re experiencing trouble. With a little research, you should be able to learn enough to begin repairing your damaged credit report.

What to look out for that can harm your credit
1. Not checking your credit report: Most people use their credit cards frequently but fail to check their credit reports periodically. Checking at least every 12 months can give you valuable insight into whether or not there are errors on your credit.

2. Paying your bills late: Late payments can lead to hard inquiries affecting your score, which means it appears that you’ve applied for more credit elsewhere. Make sure you never miss a bill.

3 You Close Old or Inactive Credit Cards: If your close old cards, they may show up on your credit report for some time. Closing accounts can impact your score by causing “hard inquiries” that appear on your credit report. Before closing them, look for inactive or closed card accounts on your credit report.

4. You Have Negative Records: Many people think they’re protected because they haven’t had past credit problems. However, many factors may cause a “bad” rating to linger. A single application for a credit product with a low limit may count towards a negative review.

5. There Are Errors on Your Report: Mistakes such as missing debt or inflated balances can damage your credit report. Find out how much money you owe and what types of products you purchased, then try to dispute those entries on your credit report. Ensure you correct any information that needs to be corrected. Failing to do so could hurt your chances of getting approved for future credit.

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