Making the future a reality
By Sharmila Ganapathy-Wallace July 12, 2017
- Aims to be a one-stop shop for projects seeking funding and helpers
- Targeting a global launch in Q1 of 2018.
JACK Ser and Kenneth Tan were struck by an ‘aha moment’ in late 2016 over coffee with a friend who was heavily involved in cryptocurrency crowdfunding.
“Back then, ‘cryptocurrency crowdfunding’ was a big word that although meant a lot, was a bit fuzzy to us. However, we were intrigued by the potential of cryptocurrency crowdfunding as a new funding model that could empower project creators to get funding for their ideas from a global audience and bypass traditional fund-raising avenues plagued with high transaction costs.
“We wanted to help make virtual currency crowdfunding more accessible to the masses, and at the same time create a product that could allow project creators to request for project help, funding and reward backers,” recalls Tan, who is chief operating officer and co-founder of Pinnacle One Consultancy. He started the web design and consultancy firm with fellow co-founder Jack Ser (also the chief executive officer of the firm) in 2014.
Their business amassed them a strong portfolio of clients; however they also noticed a common recurring problem with clients. “We often have clients with brilliant ideas coming to us to develop their product, but many of them are unable to bring the project to fruition due to insufficient financing or the lack of talented staff with the right skillsets to help them complete the project execution,” says Tan.
That coffee session, combined with the gap that they discovered, was the inspiration behind FundYourselfNow (FYN), a cryptocurrency crowdfunding platform that aims to reinvent the crowdfunding industry, using the latest innovations in blockchain technologies and virtual currencies.
“We believe that virtual currencies are here to stay and will disrupt the entire finance industry. We are starting to see the legislation and technologies being developed that are rapidly allowing for mass adoption of digital currencies.
“One local company, TenX, has already developed a Visa/Mastercard backed credit card that allows you to pay with Bitcoins or Ethereum. In Japan, Bitcoin is recognized as legal tender. Recently, the Singapore government just concluded Project Ubin, where they put SGD onto the blockchain,” Ser says.
Ser believes that we are “at the cusp of a digital revolution” and that FYN is well positioned to take advantage of this trend to be the global leader in crowdfunding, namely by providing a one-stop for projects seeking funding and talented helpers.
The duo faced many early challenges. “Lack of funding, people don't believe in you and cryptocurrency in general. It was only in 2017 that crypto crowdfunding really took off. There were many doubts from our family members who thought that cryptocurrency was a scam job and we also questioned whether it was the right path to take for us initially when crypto crowdfunding was relatively new,” Ser recalls.
What was their biggest surprise? “We were very surprised at how supportive the Ethereum community has been to us so far. The community is like a big family that welcomes new entrants into the space with open arms. We were very fortunate that they have been willing to help newcomers and provide guidance when asked.”
How the platform works
According to Ser, the FYN platform allows entrepreneurs to issue digital FYN tokens which can be bought by backers using virtual currencies such as Ethereum. The FYN tokens entitles project backers to rewards such as profit sharing, or non-monetary rewards such as exclusive access to use the entrepreneurs’ facilities, exclusive skins for games etc. With the token model, it's up to the entrepreneurs to come up with creative ways of rewarding their backers depending on their product.
“Our FYN platform also allows entrepreneurs/project creators to build up a global community of loyal backers who have a vested interest in making their idea a reality. They can get immediate and useful feedback from their fans of their product early, allowing them to avoid costly mistakes at a later stage,” Ser explains.
What about their revenue model? “Our platform charges a listing fee for each project. In additional we will also set up an investment fund to support projects on the FYN platform. Profits from the selling of the project tokens gained from the investment fund will also be used to sustain the platform.”
Tan points out that FYN doesn’t only allow idea creators/entrepreneurs to go the initial coin offering (ICO) route, they also allow fund-raising via traditional crowdfunding, which uses the donation model, albeit with cryptocurrencies instead of cash.
“We realise that not everyone needs US$100 million or US$10 million. Some people really only need the US$5000 or US$10,000 needed to get their project up and running. We’re actually targeting the audience from both spectrums. We want to bridge the gap between mainstream guys and the crypto guys.”
An alternative to VC funding
Commenting on how FYN is superior to venture capitalist (VC) funding, Ser says: “We wholeheartedly believe we offer improvements to VC funding in four ways. Firstly, we put control back in the hands of the entrepreneur by opening the route to equitable funding terms.
Secondly, FYN is a one-stop funding shop that shortens the pitching and funding process, making it more efficient. “No more endless meetings pitching your idea to dozens of VCs and working to their timeline.”
“Thirdly (and this becomes really valuable after the successful launch of the venture) the fact that we facilitate cryptocurrency crowdfunding per project offers all investors a way to trade the tokens on external cryptocurrency exchanges,” he explains
Finally, Ser notes that their set-up is powered by the wisdom of crowds. “An investor no longer has to rely on research reports issued by banks or opinion pieces written by bloggers. As they say, money talks. And on FYN every investor observes directly which projects his or her peers are investing in.”
Next page: A break from tradition
Better than traditional crowdfunding
One may wonder why an entrepreneur would prefer to raise funds via crypto crowdfunding versus traditional crowdfunding platforms such as Kickstarter and Indiegogo.
According to Ser, among the shortcomings of traditional crowdfunding platforms are:
a) Lack of control once crowdfunded money is disbursed
In traditional crowdfunding, project backers have very little control over the project as the money is disbursed to the project creators at the end of the crowdfunding effort. When a project fails, most of the backers do not get anything back.
It would be beneficial to have a milestone based funding system, powered by bitcoin and ETH smart contracts that come with a system where users can vote to delay, or stop further milestone payments in the event that project promises are not met, so that backers are protected partially. On the project creator side, they will need to deliver on their agreed milestone deliverables to get further funding.
b) Lack of support/mentors
Many good crowdfunding projects also get put on hold or fail to get the required funding due to a lack of marketing support. Let’s face it, most project creators are not full-time marketers with expert design knowledge. Key marketing items such as creation of a product logo, website, marketing video and business plans all involve significant time and money.
A supportive crowdfunding platform should help to remove as many hurdles as possible by allowing project creators to seek project help from the community for their existing ideas/projects. Project helpers can be rewarded with Bounty credits, which can be exchanged for project tokens, created during the project crowdfunding place.
Project Tokens can be made tradable through an internal crypto currency exchange, so helpers can eventually convert their tokens to virtual currency and eventually actual cash if they wish to. This is similar to the Bounty programs that the recent initial coin offering (ICO) projects have run, where the ICO tokens were given to reward helpers for their effort.
c) High transaction costs
Traditional crowdfunding platforms suffer from high payment transaction fees. Typical online donations costs between anywhere between 3% to 5% of the total donated amount, plus a fixed flat fee e.g. 0.30 for PayPal. A project creator on Kickstarter would typically have to pay up to 9% to Kickstarter after including the transfer fees (3-5%) and listing fees (5%).
However, transfer fees for virtual currencies are typically a flat fee which is around 10 cents or less. This means that FYN project creators will receive more funding when they crowdfund through virtual currencies. This also makes milestone-based payment smart contracts more practical, since the cost of processing the refunds, especially for small donations, is greatly reduced.
Ser shares that their goal for FYN to create an entire ecosystem that will revolutionise how crowdfunding is done today, by bringing together the project creatives, people with specialised skillsets and backers excited about being involved in new ideas/concepts/projects.
“The platform is designed to make it simple for all our stakeholders – to be involved in bringing a brilliant project idea from concept to reality. In addition, we have also incorporated a milestone funding model that gives backers more accountability and a peace of mind.”
Ser explains the model further. “We have milestone payments coded into a smart contract. So idea creators are only reimbursed when they hit specific milestones. We encourage at least four, so at every milestone, investors have a right to actually to delay or stop payments because they feel the idea creators are not achieving the milestones as intended.
“I think this accountability factor will make the investors and project creators more inclined and more aligned to the same goal.”
Cryptocurrency demand on the rise
Despite Ser and Tan’s obvious enthusiasm for FYN, the fact remains that cryptocurrencies remain unregulated. Tan, however, is unconcerned.
“We see a huge uptake in cryptocurrency crowdfunding, even though it is unregulated. The reason is that it is very attractive for entrepreneurs to raise money this way. Crypto crowdfunding not only allows them to test out global supporters who can actually fund them, they also get to build a community at the same time. Most of them can do this without having to give up an equity stake in their company,” he points out.
According to Ser, future global demand from cryptocurrencies will come from Russia, followed by the US and China. He also sees Japan coming up in this area, as Bitcoin is legal tender in Japan now and also South Korea.
“And depending on how Singapore and the rest of the region start looking at it from a regulatory point of view, it could change,” he says.
Commenting on the interest of companies keen on raising funds, Ser believes that there’s going to be equal interest from outside and within Asia. To date, apart from those outside of Asia, FYN has received interest from companies in Malaysia, Japan, South Korea, Singapore, Vietnam and the Philippines.
Future plans for FYN
According to Ser, they are targeting a soft launch for the FYN platform in Q4 2017, with the first batch of projects being listed on the platform by October 2017. The four projects from the first batch are from Russia, Taiwan and Singapore.
“Development work will run in parallel with the soft launch. We target to officially launch the platform in Q1 2018.”
He shares that the FYN team has invested around US$200,000 into the project and that they have also received US$100,000 from angel investors.
“We have also raised US$1.5 million so far from our crowd sale which involved funding raising through selling our own FYN token to global investors.”
“We are planning for the next round of funding in the next one to two years. As we will be looking at expanding the platform to reach more users globally, we are targeting to raise funds in the range of US$10 to US$50 million. Most of the funding raised will be used on user acquisition campaigns and getting creators, backers and helpers on board,” Ser explains.
According to Tan, the market capitalisation of the global crypto environment is only slightly less than US$120 billion. “So this is really not much. It’s still at the early stage. So what we plan to do is that being a first mover in this space, we hope to bring more mainstream people into this and at the same time educate them.
“I look at us as playing a very important role, as a gatekeeper, via our milestone payment mechanism. So in future when people see our name, it lends a lot of credibility as a platform that has done its KYC [know your customer].”
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