With a whiskey token, the collectors market should become more attractive for investors. But the million dollar project flopped. Founder Lasse Balzer tells what he learned from it.
Lasse Balzer and his co-founders have been working toward this day for months: On December 1, 2018, the crypto token they developed together will be offered for sale for the first time. It will be decided within a very short time whether the launch is a success – or whether your project will fail. If everything goes well, according to the plan of the founders, their token should make the exclusive whiskey collector’s market accessible to a wider audience for the first time.
When looking for a worthwhile investment, whiskey is probably not at the top of most people’s list – annual returns in the double-digit range beckon, and over several years even in the triple-digit range. The problem: Investments are extremely risky. “You have to be very knowledgeable as a collector and need a good network, similar to other niche markets such as vintage cars or sneakers,” says founder Lasse Balzer in an interview with Gründerszene. “Otherwise you can make a lot of bad investments.”
Together with four other whiskey lovers, he developed an idea intended to minimize the risk for investors: a whiskey portfolio put together by experts, in which customers can participate in the increase in value by investing just a few euros via a crypto token. Should the token fall below the value of the portfolio, a buyback mechanism is provided.
Founders rely on bootstrapping
“So you have a certain security with which we wanted to address people who are interested in the topic but are not fully involved in the matter,” says Balzer. In June 2018 he and his colleagues finally founded WhyToken GmbH. It is the first start-up for all five, four of them work on the project alongside their full-time job. And: You finance the startup entirely through bootstrapping, investing a total of six figures out of your own pocket.
The Initial Coin Offering (ICO) follows almost six months later – the moment of truth. Did the time, the money, the effort pay off? Things looked promising in the first few hours: “We got close to a million relatively quickly,” Balzer recalls. “But then it was just a mess.” The founders clearly missed their minimum target of two million euros.
As a result, further investments failed to materialize because confidence in the project was lost. “That’s why it was already clear to us after a month or two: If something extraordinary doesn’t happen, it won’t happen anymore,” says Balzer. A little later, the investors get their money back, in 2020 the GmbH will finally be liquidated – and the WhyToken project has officially failed. What remains is the question: What went wrong?
Launch at the wrong time
In the meantime, five years after the company was founded, Lasse Balzer has a clear answer. The timing of the ICO was a decisive factor. “We had to push back the planned date again because there was still a need for coordination with the Bafin. When we finally got the go, the crypto market was at its lowest point.” The founders decided to launch anyway because they consider their model to be crisis-proof thanks to the safety net.
The second mistake, according to Balzer, in retrospect: the marketing. The startup relies on organic growth and wants to establish itself on the market with a competent team of consultants through trustworthiness. Contrary to the advice of experts, the founders decide against putting money collected through the ICO into marketing and instead keep the investments in trust – a model Balzer would still stick to.
However, he would plan more budget for marketing today and approach potential investors before the first day of sale. “We said a bit naively: the money will come,” admits the founder. “We would have had to invest even more time and energy beforehand so that the ICO would only be a sure-fire success.”
Too many founders spoil the broth
After all, he took another lesson from the failed start-up: five founders are at least two too many. It is a great advantage to be able to spread the financial and time burden over several shoulders. “But I wouldn’t do it again,” says Balzer. In the WhyToken founding team, it quickly became apparent that not everyone thinks entrepreneurially and pushed the project forward with the same intensity.
He therefore deliberately started his second company, Barrel Beast, which produces its own whiskey, with just one co-founder. “The exchange is great, much faster than was the case with WhyToken before.” Balzer says in retrospect that he was able to take a lot with him from the failed project. “With the whiskey token, we tried to create a big bang. Our new business model, on the other hand, is more fragmented and the risk is more manageable.”
The founder still believes in the business with crypto products – despite the increasing criticism and negative personal experiences. “Excluding intermediaries makes sense in many places, simply for reasons of efficiency,” he says. “But it will certainly not have such a rapid and disruptive impact as we initially imagined.”