It has now been over seven months since the People’s Bank of China released a public statement banning companies from using initial coin offerings (“ICOs”) to raise funds from Chinese investors. The PBoC’s statement immediately sent shockwaves through the global cryptocurrency markets, causing them to crash almost 20% in the two days following its release. Although some early commentators suggested that China’s ICO ban might only be temporary, those who were more familiar with Chinese financial regulatory policy believed that the ban would be permanent.
It was therefore something of a surprise when Hong Kong-based PTP International announced that it would be hosting the Global Fintech & Blockchain China Summit 2018 (“GFBC”) in Shanghai on April 12, 2018. Most interesting was the fact that the heavily-publicized event explicitly listed several ICO-funded projects as sponsors and presenters. Although that by itself wouldn’t necessarily violate the law, if any of those same sponsors or presenters tried to solicit GFBC attendees for the purpose of getting contributions to their ICO, it almost certainly would constitute a crime. Although the details are still sketchy, it has been alleged that is exactly what happened.
Amirsan Roberto, a serial entrepreneur and ICO advisor who has lived in China and embedded himself in its startup ecosystem for the past five years, was one of the attendees at the GFBC. According to Roberto, Shanghai police interrupted the event right around noon, the organizers asked everyone to leave, and the crowds subsequently dispersed quickly and quietly.
Asked if this incident should discourage ICO-funded startups from looking to China for potential contributors, Roberto answered unequivocally in the negative, adding that
The harshness of the ICO ban has not turned away investors. Individuals with an appetite for crypto assets have been using neighboring Macau, Hong Kong and Singapore to pursue investments in full.
Roberto does feel, however, that the ICO ban has made it more difficult for Chinese investors to connect with ICOs, and given the current environment, using ham-fisted impersonal outreach strategies (like those allegedly employed at GFBC) is not only counterproductive, but could land you or the investor you’re trying to attract in jail. It turns out that the best approach, according to Roberto, is the same one that he has been developing and perfecting for the past five years in China, namely, building a trusted network of personal and professional connections and then leveraging those connections to gain trust-level access to potential investors.
As any successful entrepreneur will attest to, this also happens to be the most effective strategy for raising venture capital or angel investment, but, according to Roberto, it’s even more important in China. That’s because the entire Chinese culture values interpersonal relationships to a far greater degree than in the West.
When asked if he had any advice for startups/ICOs interested in connecting with potential investors in China, Roberto offered the following:
- Developing the types of relationships necessary to gain access to legitimate Chinese investors takes time, so the sooner you start, the better;
- Given the status of ICOs in China, it is incredibly important to be discreet in your communications with potential investors. This includes all electronic communications, since every social media and communication platforms in China is monitored by the government.
- Negotiating with Chinese companies and investors can be very frustrating if you have never done it before, and it is highly recommended that you prepare with someone who is familiar with the process;
- Face-to-face meetings with potential Chinese investors are vital to build trust, so unless you’re able to travel to China at the drop of a hat, it’s a good idea to have someone on the ground there who can schedule and attend meetings on your behalf (although you should still travel to meet any investor personally at least once prior to closing the deal); and
5. If you have any other questions you can email Roberto at [email protected] or find him on LinkedIn.