The ICO market is full of exciting projects that sound like they are going to be the next big thing. Nevertheless, most fail. Those that succeed, are truly remarkable, but it is hard to tell those that have immense potential from those that will succeed. That is exactly what Vertex aims to do. Based on its vetting mechanism, Vertex is launching an ICO aftermarket that will allow people to buy into the ICOs that have the best chance of succeeding. We caught up with Alessandro Pecorelli to see how exactly the project is planning to do this through its platform and the use of its own Vertex coin.
The Vertex OTC Market
Bitcoin Chaser:“Vertex.market is an OTC platform and will offer tokens before they are listed on exchanges, the moment an ICO is over” what does this mean? Does it mean they buy a % of all ICO tokens and sell at a higher rate to make a profit before they are exchange listed?
Alessandro Pecorelli: Vertex invests money (tokens, fiat, VTEX) into new projects that are planning to conduct an ICO. Vertex has an after ICO sales agreement that we are the first to receive tokens and will launch the sale the moment their ICO is over. Basically, their countdown ends, our starts.
We buy for example for 600’000 USD worth tokens at a price that is extensively lower than the public price. Same way as an angel investor buys a share of a company for 20 cents if he invests during the “in mama’s garage” time, while once its listed on NYSE, it costs 20 USD.
BC: “to vet ICOs” what is the selection criteria? Are there any absolute ‘NO’ criteria?
AP: There is no such thing as THE CRITERIA LIST, but we have a 6-step plan. The more detailed criteria are based on experience in Venture and angel investments and highly experienced investors and their teams will evaluate those ICOs very detailed and we do for example have to meet the team in person. Without, no investment. For sure we won’t touch gambling, alcohol and tobacco related investments or anything that is from a shady business sector such as prostitution/escort etc.
BC: If the USP is that we have vetted the ICOs by professional investors; who are the investors? why should a potential client believe in their ability to review ICOs over their own or what they read online?
AP: Some of the investors are visible on our website (vertex-capital) while some are not. The potential average ICO investor is not a fulltime investor and has not the team nor the experience in evaluating businesses. For example: a great project that is amazing and could change the world, but while running it through 2 legal offices, both say it’s not going to work on a big scale (for whatever legal reasons). We don’t invest. Maybe we talk to the team and see how to make it work legally. The average investor would have without realizing invested into a project without a future. There is so many great ideas around. They have been before. But an idea and a product are 2 complete different things. A major part of our evaluation goes to stress the team and owners of an ICO and see how they react to changes of environment. As Darwin said, the ones that adopt the fastest win. Not the strongest. That’s a very good philosophy in company evaluation.
Token Storage on the Platform
BC: When users buy the tokens, they own them – does vertex have a wallet for storage or is this at the buyer’s discretion?
AP: There is many great erc20 token wallets around that can handle 90% of ICO tokens. We will develop a wallet throughout the next year, but our wallet has more the focus on having usability and token evaluation and news embedded in the wallet than just facilitating your private keys.
If the question is to see if we have a web wallet embedded in our website. The answer is NO. we do never hold the user’s private keys. Also, the VTEX Wallet that will be deployed in 2019 won’t have the keys somewhere on a vertex server but always locally and just accessible for the user.
BC: In a normal process, you say a potential buyer must create a profile and go through KYC for EACH specific ICO they wish to invest in. This implies that VERTEX stores the information in their VERTEX profile and enables people to buy into multiple ICOs going through the KYC process once. How does this work?
AP: A user goes through KYC with us 1 time. Since we own the tokens we resell, we have 0 obligations and the KYC of the underlying ICO we are selling does not matter AT ALL but only the rules and regulations of the jurisdiction we are in count. So, User A creates a profile with us and gets KYC approved, means the user can buy every single ICO we ever sell without any further KYC approval.
Buying Tokens Before They Hit the Market
BC: Vertex will also sell ICO tokens which have not gone to public sale, is this correct?
AP: This is the long term (in crypto world 1.5y) goal. We have as of now quite some ideas on the table that are coming, and we will invest into those. If we see a chance that we can fund them by ourselves (does not always make sense), we fund the owners 100% and will bring tokens public solely through vertex.market. I want to mention, that for most projects, that would not be good since you need a userbase / community but with security tokens probably overtaking utility tokens, most sales will be held private since companies don’t want many investors at the early stage. Having a security token sale is a complete different scenario since you can launch your app complete separately from the token since it has no relation whatsoever and is just a piece of ownership. For example, a company launching a security token ICO, might have 2 different utility tokens airdropped to users for free since they won’t need funds for their specific app but just for the business itself. That is how the world of investments works kind of now.
ICO Pricing on the Vertex Platform
BC: VERTEX mention that customers will get preferential prices for users, even better than the original ICO price in some cases. How does VERTEX achieve this?
AP: We buy in low and sell higher. Our business model is simple: instead of gambling on tokens shooting through the roof to 20/30x the initial value. We rather make 40-50% on a token but systematically. This is also due to the “non-gambling” nature of our investors. In some cases, Vertex will also be able to buy tokens below market price, at which point, users on the platform will be able to enjoy some of the discount.
No Listing on Vertex
BC: ICOs deemed adequate get a VERTEX seal of approval, and free listing on the platform. Is there any revenue gain to be anticipated here? Is there any cost to the ICOs for listing on Vertex?
AP: No one gets listed on vertex.market, this is the best part of the system. You can’t buy a listing. The only way your ICO ends up on our platform is because you passed our evaluation criteria, got let’s say 1mio USD in funding and now we help you push your ICO.
The average investor can see that if vertex invests, someone at least has done its due diligence. If we put 1mio USD, why would you not put 100 USD? Most ratings now can be somehow bought and honestly, they just tell you how great things are but do they themselves take the risk? How can you trust a rating of which the person that rates it and gives it 5 starts, does not invest himself?
BC: Vertex states that it will ‘help fund projects with higher likelihood of success, producing returns on investment’ does this mean its only motives are financial or does it assess the quality of a project and ability to incur change? even if it is perhaps NFP?
AP: We are a profit driven company with investors that want to make money. However, the willingness to commit fraud and risk their reputation is extremely low so in general, vertex is on the social side of the spectrum. Not a single of our investors is so hungry for money that we would ever breach our ethical values and the believe in the crypto market. We definitely want to help the community. Increasing the crypto space and making it work is the absolute target of Vertex, but we would not do it if it would mean spending 2 million dollar every year without any return. So, if I can put it in numbers, vertex is like 30% profit, 70% community motivation driven. Our eyes are definitely not just on how to make the most money in the shortest time. This is completely against our philosophy. We wouldn’t create a platform that gives everyone fair access and we reduce our profits by a potential 1000% if we wouldn’t have the work for the community in our minds. Remember, we could just hodl the great tokens we land and sell them on the exchange for much more than on our platform. But we don’t! we won’t ever do that. Not a single token owned by vertex will be sold on an exchange.
BC: Vertex says it will use fiat, do you need to buy Vertex with Fiat then buy ICO’s with Vertex? Is there really a need for the Vertex Coin? If so what? What’s to stop someone looking at what is listed on their site and buying the tokens elsewhere (assuming they are available elsewhere)
AP: VTEX can be bought on multiple exchanges. Where you buy them and for what price is the buyers business. We sell ICOs for a fixed amount of VTEX during the entire offering. So, we remove volatility from an offering. So, people who want to invest into ICOs, are far better of doing so with VTEX than with any other currency. There will be other platforms who sell the same tokens as ours even though we don’t know of any so far and ICOs we will work with we will discuss such competition, but we are not against it. We sell for a fair price and I think this will be reason enough to buy from us.
BC: Vertex states that users will keep their funds in their own wallets; which wallet? one you designed or are you partnered with another wallet and if so which?
AP: Any ERC20 compatible wallet can hold any ERC20 token. MyEtherWallet.com can hold VTEX tokens. You can use any wallet you have (ledger, Trezor, Metamask, etc.) and keep your VTEX tokens there along with all your other altcoins and Ethereum tokens. To buy tokens from our platform, you don’t have to send a certain number of tokens to us prior to purchase but just during the purchase order, you send like 100 VTEX to us and you get right away the token you want to buy.
Minimum Investment in ICOs
BC: Vertex will invest a minimum of 500K USD; is this in all ICOS it takes on board or is this the net value of investments?
AP: That is per ICO. But it’s something we might be more flexible. For example, I know a great ICO coming that just needs 2.5 mio funding and it needs the public in it. So why would we buy 20% of tokens? That’s bad for the economy. 1 investor (not matter if crypto or stocks) would not own more than 3-5% of anything. That is a huge risk for the company and puts a lot of power in a few hands. We don’t want to create this with our underlying ICOs.
A Democratic Platform
BC: Vertex say they will not allow ‘huge orders that would place all the tokens in the hands of a few users’ – what does this mean? what is the maximum a user can buy?
AP: This is not defined yet, but we will use common sense. I think as a rule of thumb we could say 1 user cannot buy more than 1% of our stock. So at least, we distribute our 1 investment into 100 smaller ones. That is also great for the ICO. Again, one of the worst things is having 1 person having too many tokens. If 1 person sells 2% of tokens on an exchange at once, that is enough to drop prices by 90% and in an early stage of a listing, it’s the end of the project. Tanked stocks / tokens barely make it back.
BC: Which jurisdictions is Vertex looking at for ICOs it will buy into?
AP: If a company is located in Switzerland, we ensure that proper legal work has been done before investing in Switzerland itself. That the ICO has done its work in making sure, that there won’t be any legal problems. Then there is the general legitimacy of things. If someone creates a token with which you can buy heroin, we won’t talk to them nor invest in their token.
Vertex Product Development
BC: How far along is the actual product?
AP: Product is right now in development. I like this question because it is extremely important.
We plan to have an alpha version of our platform running on test net during the public offering (beginning of it). At the end of our ITS, we expect it to be ready for some minor usage and 2-3 months after ITS is finished, it should be fully running with its core functionalities.
The reason we still need millions to develop it is because a software usually costs around 10 times more to run for 5 years what it cost to initially develop. That’s even conservative.
Having a solid product being used by 1 million users is a massive challenge in software architecture as well as hosting. So, a software that we are now launching during the ITS will have to go through multiple improvements to become a state of the art secure platform as for example some crypto exchanges are now.
As an example: setting up Binance exchange for sure didn’t cost more than 100k USD. Its 3 developers working for 3 months and you have the first exchange up and going. Making it what it is now, with all the interfaces, admin dashboards etc. costs for sure per year 3-5 million USD if not even much more.
On top of that, we also will develop new features like the wallet and an online voting platform for our Vertex Premium token we launch in 1 year for our partners. This software could technically be sold to other companies and could become a second business of vertex but since it is unrelated to VTEX token, we leave deeper explanations for now.
Vertex Performance Fee
BC: What is the 20% performance fee? who pays this? 20% of what?
AP: That is related to the fund and this is paid by investors of the fund. A fund management has to be paid. Most funds charge management fee (2%) + performance fee of 20%. So, if you have a 1 million dollar investment into the fund with 10% profit. Your fees are 20K (management fee) + 20k (performance fee). We just charge performance fee (as per now) and management fee can be waived if you have VTEX tokens in your wallet.
Vertex Wallet Development
BC: Vertex state aims to develop a mobile and desktop wallet so who are you recommending in the short term?
AP: MyEtherWallet.com or Metamask combined with a Ledger device. Not every ICO needs its own wallet. Don’t forget, almost every wallet is a piece of software and can be easily hacked and it happened many times in the past. I would NEVER use a third-party wallet that is not supported by a major software development community and has a strong security track record. So, our wallet will be most likely more of a combination of myetherwallet.com with our own software around that does not open doors to ever get the private keys since they will be stored separately.