If you want to raise some money in cryptocurrency for your garage band startup with a revolutionary this or a decentralized that, messaging app Telegram is the game in town. It’s not the only game, but it’s the game.
Telegram is considered to be the best channel for startups to raise awareness for their initial coin offering. Those ICOs keep raising money—around $13.7 billion year to date, according to industry analysts. On one hand, ICOs are a fund-raising moneymaking machine for thousands of companies with no connections to venture capital and no product. On the other hand, the ICO has become synonymous with scams perpetrated by savvy guys living east of Warsaw. These communites are the infamous home to the pump and dump. Then again, Telegram’s ICO communities are also used as a de facto focus group for startups looking to build a better product and a real company.
Many of these ICOs live and die by the community count. Duds have a few hundred followers and no investor wants them, at least not in any big number. Rockstars, or potential rock stars, have hundreds of thousands of followers.
Elina Yurina is the business developer for a three-year-old startup called Naviaddress, and one of the Telegram’s rockstar ICO communities. Naviaddress is a virtual addressing company. Tim Draper’s Draper University is on Naviaddress. They were the first private entity to get one. Naviaddress is also in the ICO game, but Draper is not an investor. They had so many followers, they had to create three Telegram accounts to market their utility token. Telegram only allows for communities of 100,000. Naviaddress’ idea to make addresses easily translatable and bring a traditional postal address to those in emerging market countries that do not have a physical address at all made it one of the popular kids of Telegram. “We have around 300,000 followers in three chats,” Yurina, a former Moscow Stock Exchange executive, told me in San Francisco recently.
Telegram is filling a void. The big American social media companies have all banned ICO advertising.
“We became part of a pilot program at Telegram to float ICOs,” says Dmitry Khmelidze, Naviaddress’ CFO for the past two years. Telegram calls it Telebot. Basically it’s a crypto startup marketing tool. “Telegram helps you build a community and turn them into investors. When we started out a couple months ago this was all brand new. Now it costs tens of thousands of dollars to get started on Telegram,” he says. Naviaddress has over 2 million addresses in its system thanks in large part to Telegram.
“Facebook blocked my DraperU ads for an educational blockchain program. Twitter took down the VoteCal3 site because it wasn’t sure we were 18 years old,” Tim Draper tells me. VoteCal3 is his project to break up California into three states. “People need free speech, and it is nice that Telegram provides a safe environment for free speech.”
But what about all those bad Russians scamming innocent foreigners to buy their crazy coins on Telegram?
“I like Russian entrepreneurs. All bad ads are not Russian,” he says.
Another Russian startup, Datecoin, a cryptocurrency mostly used to pay Russian and Ukrainian escorts, raised over $25 million thanks to its popularity surge on Telegram. Japanese token buyers fell in love with it on Telegram, and later during road show meet and greets in Japan.
Last year, Facebook, Google and Twitter all banned ICO ad campaigns. Their decision can be traced to Jay Clayton, chairman of the Securities and Exchange Commission. He made them nervous. Clayton said that any asset that looks like a security investment has rules on how it can be marketed and to whom it can be marketed. That includes full and fair disclosure of all information, something that really does not exist on Telegram.
A lot of ICOs may end up being deemed security tokens, so if you’re an American advertiser, you don’t want to go against the SEC or you could get sued.
Enter Russian-developed Telegram. Pavel Durov, the company’s founder, has built a trustworthy service that has grown in epic proportions. Draper is an early investor in their security token.
They have done a few things that allowed themselves to become the thought leaders in the crypto space. These communities are an essential part of their brand. Telegram’s Telebots help create the communities that Naviaddress is a part of. The bots help populate the community initially. Soon, hundreds if not thousands of bots are following companies. Real people join. Just how many are real and how many are not is anybody’s guess and dependent on each individual community.
At some point, everyone believes Telegram will have to address regulators like the SEC who don’t like American investors getting scammed by real people, let alone a bot algorithm.
“They will have to think about the proper way for these startups to promote themselves,” says John Wu, CEO of SharesPost, a 9-year-old broker/dealer with alternative trading licenses. It’s part of a new class of financial services firms trying to build a crypto securities market place.
“Telegram is a global company working in countries with different rules on what you can sell to potential investors,” says Wu. “There is some crazy stuff out there in the ICO market. Some of the things these guys say about their coins are incredible, like guarantees of big winners and home runs. I think Telegram will have to think what’s the best way for them to comply, especially once the world of security tokens takes off,” he says.
Hundreds of companies are selling their stories on Telegram, which has become somewhat of a virtual Y Combinator. Newcomers are there to entice and to solicit investors. Startup companies create chat-room communities centered around their ICO launch in order to gain insights, and a fighting chance. Others are just looking for a quick million. The burnout rate is huge. Most of these companies won’t make much off their ICO. Some investors will lose their shirts, thinks Alexey Ivanov, a crypto assets fund manager behind Polynom Crypto Capital in Moscow.
“I believe you’re looking at maybe 5% of those startups pitching on Telegram will actually raise money,” he says. “Maybe one or two percent will succeed,” he says.
Telegram will succeed. They will outlast them all.
Durov and his team noticed that communities were forming on its messaging app to promote their “project,” a popular word in the crypto world. Just like in Hollywood, everyone in crypto is working on a project. Just like in Hollywood, most of them won’t see the light of day or will die on the vine. But that doesn’t stop anyone from trying.
For better or for worse, Telegram is home to this community of creative talents and hacks, making it the biggest ICO hub in the world. It’s not an indictment on Telegram, nor is it a praise. But without them, the ICO market wouldn’t be what it still is today, a multibillion-dollar gold mine turning people into millionaires. All of this continues to happen, even at a time when one Bitcoin is worth $14,000 less than it was in December.
“Telegram made a rational decision to capture these companies. I think they have done a great job curating the ICO environment,” Wu says.