Interview with Markus Hartmann, Co-Founder and President, www.alethena.com
If you are an ICO investor you know how challenging it can be to pick a winner. What you may not know is, that the very same situation took place back in 1984 when Investment Analyst Joe Mansueto was searching for the best mutual funds.
Now an American Billionaire, Mansueto founded an investment research firm out of his one-room Chicago apartment called Morningstar. Launched with only US $80K, it’s now the gold standard for investment research with a net income over $161 million. Markus Hartmann is the Co-Founder and President of the first-rate Swiss startup called Alethena that aims to do the same thing for the ICO and blockchain-asset industry.
Markus’ firm is the first Swiss ICO and Blockchain-Asset rating agency to bridge the gap between blockchain investors and ICOs. In this interview he told me what motivated him to create Alethena, how his proven due diligence method works, and what trends ICO investors should know about.
Why Did You Create Alethena?
“We originally started our firm back in 2016 when we noticed that the number of ICOs was gradually increasing. At that time an investor could read three to five white papers on a weekend, know where to invest and then easily track a project afterwards.
But in early to mid-2017 there was a dramatic increase in the supply of ICOs. Suddenly from week to week it got harder to know where to invest and where to stay invested. Before the ICO there’d be lots of noise from places like Telegram, but post-ICO you could hardly track the project at all. Since there was no convenient tool for doing this, we started developing our own.
We found it was critical to uncover and measure ICO KPIs that showed their true quality and scalability. We started clustering and rearranging the KPIs we found, and mid-2017 wrote down our due diligence method in a white paper. Alethena was formed in August 2017 here in Switzerland and went live in December.
Bankers looking at ICOs would never base an investment decision on the opinions of YouTubers or bloggers.
We were convinced our approach to due diligence had value because we were investors ourselves. Being aware of the red flags and risks that are out there, we tested our system on our own ICO. It made us better and stronger and our post-ICO tracking now sets us apart from similar services.
Since everyone on our team comes from either a banking, hedge fund, or consulting background, we started with very simple due diligence method right from the beginning. And I can honestly say I haven’t yet invested in a single scam project. If you have a traditional financial industry background it’s not hard to see the enormous potential, either.
Client advisors or bankers looking at ICOs would never base an investment decision on the opinions of YouTubers or bloggers. They want fact based due diligence and that’s exactly what we’re offering. We’re already in contact with banks and independent asset managers here in Switzerland and abroad. And we believe the demand for this will steadily increase.”
How Does Alethena Work?
“We offer no advisory services at all. Our policy is to remain purely objective by giving ratings only. Each firm pays the same rating fee, too. The alternative would lead to conflicts of interest like we saw with Enron and the financial crisis. That’s why we explicitly don’t do consulting, only assessment and due diligence.
Our assessment is structured like a pyramid. The final rating is based on four dimensions; technical, business, legal, and governance. Beneath these are 17 clusters such as technical sustainability in the technical category, funding transparency in the governance area, or the legal setup in the legal dimension. These are again broken down into 62 total factors. The final result is a number between one and 10.
At first, we considered using a grading system like AAA, B-, B+, but found it too complicated. A rating from one to five stars is also difficult, so we decided on a rating between one to 10 because it properly reflects what we’re assessing.
There’s lot of scams out there and growing talk of regulation.
Number 10 is the highest score you can get, and seven is the breaking point between an average and great investment. The ICOs we are currently assessing are mostly all still in startup stage, so you’d be lucky to find a 10. We also assess established companies with lots of financial history and a lower risk to fail. These are easier to evaluate and more likely to have higher scores.
We don’t say an ICO must be a 10 out of 10 to be a great investment. It’s not realistic to expect an ICO two or three months out of the gate to have a rating of 9.5 or 10. The idea behind our post-ICO tracking is that their rating can improve as the project reaches its’ milestones. For example, SwissRealCoin is our highest rated ICO at a 7.7. That’s now being re-evaluated after they made some updates.
Our institutionalised service is ideal for banks, asset managers, and traditional clients because it bridges the gap between the old world and the new. We can rate every kind of token whether it’s a payment, utility, or asset token.
What Are the Latest ICO Trends?
“Like I mentioned, there’s lot of scams out there and growing talk of regulation. Everyone is looking for the best ICO investment advice. But the industry is far from mature since most tokens are still utilities. For example, in Asia it’s around 99.9%. What they should have are security tokens or at least have them set up as securities.
In my opinion there’ll soon be a big movement towards genuine security tokens. Bringing classic equity to blockchains will be a huge step forward for the industry. It’ll allow smaller companies to create liquidity for their shares and give investors rights and claims over something that’s regulated and mitigated. At Alethena we’re a big supporter of this trend.”
What’s Next for Alethena?
“We officially went live in 2017 and we’re releasing our full product in December 2018. The token sale has ended but we’re continuing to look at new avenues of funding. We plan on enhancing our system with AI and we’re in talks and negotiations with institutional investors.
While our ICO has enabled us to walk our talk, we have learned a great deal about the challenges of holding an ICO. For example, our market timing wasn’t ideal. The market is still hesitant to recognise the value of security tokens. Many investors have held off because they’re unsure about the effect securities regulations will have on the industry.
Moreover, we’ve just announced a new partnership with the Crypto Finance Conference which is using Alethena as its official rating provider. This will allow us to generate revenues. In parallel, we’re working on post-ICO tracking with a startup in Toronto, Canada that is developing a prototype Telegram-based solution for us that will significantly improve the post-ICO tracking phase. We also have room in our ratings pipeline for new clients, so any ICO interested in being rated is welcome to contact us via firstname.lastname@example.org.
The state of the market right now is quite interesting. Investment has slowed down a bit, but we’re still a long way from a mature ICO market. Things could change at any moment and investors could still make massive gains.
We have a lot of work ahead of us, but we’re more convinced than ever that now is the right time to set up a clear and proper due diligence rating agency. We’re ready to help ICOs smart enough to position themselves as the best choice for investors.” Visit the Alethena Website.