M&A in the Age of the Crypto Bear Market
When iomob CTO, Josep Sanjuas and I first embarked on the journey of what would eventually become iomob, a decentralized mobility protocol for smart cities, crypto markets were really heating up and seemingly any idea (regardless of how bad it was, what team was building it or even if it had a strong business case for employing blockchain) could raise $20 million or more in an ICO.
It was June 2017 when we started this project. Ethereum was riding the wave and reached a peak a record (at that time) of $370 USD. Since then, as we all know too well, the markets had a decline and another peak with Ethereum reaching of $1400 in January of this year before a precipitous decline.
It has brought a lot of doom and gloom in the markets and put a fork into many aspiring blockchain projects including some led by friends and colleagues. (55% of all ICOs in Q2 2018 failed to raise more than $100,000 USD — up from 13% same time last year. Source: ICOrating.com) In this bear market, for promising blockchain projects to rise above doldrum, I believe a rethink is required.
Maybe going alone with an MVP when funding is in short supply and TGEs or ICOs make little sense (this kind of reminds me of when the IPO markets burst in recent bear markets in the old economy), is a bad idea. At least this is the conclusion we at iomob have come to.
In what would be a fortuitous, perhaps even ironic chain of events, one of the US pooled investor funds who wanted to invest in iomob, found themselves with a liquidity problem given the decline of the crypto markets, and they introduced us to a blockchain venture studio with whom they had previously co-invested. This studio is Centrality based in Asia Pacific. If you haven’t heard of them, you should take the time.
Centrality has over 100 employees and another 150 more in their ecosystem of invested projects. They are led by Aaron McDonald, a visionary technology entrepreneur in Auckland, who passionately pursues decentralization and, surprisingly in the blockchain space, real-world applications. In fact their dApp ecosystem already counts on more than 400,000 users. That is not much in the scope of global tech companies, but it is pretty massive at this nascent stage of the blockchain world.
So, as it turned out, Centrality had its own stealth mobility protocol project (called TRANZ) in early development. Like iomob, Centrality realized there was a big global market opportunity for a decentralized protocol to enable open mobility marketplaces in smart cities around the globe. They already have a few live mobility apps including uShare. Conversations quickly advanced to the point we realized there were two options: agree to collaborate, even integrate projects, or compete with each other on a global basis. We setup meetings at iomob’s Singapore offices, NPower, with Josep and I, Centrality’s VP of Business Development, Andy Higgs, and the leader of the TRANZ initiative, Phil Williams. (Not a fan of this pic, but, there we are in NPower/Longhash)
While early discussions were sometimes tense and more than once we thought the deal would be off, we were able to work through this complex arrangement and arrive to an elegant solution. Centrality would invest in iomob so we could continue to focus on building the world’s best mobility protocol, while Centrality would lead the creation of a joint venture, called Senta Mobility, to focus on gaining adoption of the iomob protocol and to support commercial opportunities on top of the protocol.
Returning to the current state of the market, and reflecting on the supposedly embedded values of collaboration in blockchain, why should Centrality and iomob allocate increasingly scarce funding to build most likely two inferior protocols when instead we could combine forces and create the world’s best (we hope)? I believe many promising projects are going to fall by the wayside in the current bear market and such a strategy of partnering with a more established blockchain player could result in a win-win even if it means declining ownership of the protocol.
Also, I believe the days of tech teams being holed up in their offices building a protocol in isolation of the real world are going to end too. I remember reading a post a few months ago that something like 95% of all protocols are not in use after the token event. So even when well-meaning teams build hopefully good tech, there is no guarantee anyone will use it. Blockchain investors are increasingly focusing on what efforts the team is making to ensure adoption of the protocol, and for good reason. This is something small tech teams are not always good at. This is another reason we at iomob are so excited about the collaboration with Centrality. Not only did we get investment and support for improving the protocol, but we got a world-class business development team committed to the success of the protocol.
I am on an Asia Pacific trip which commenced with discussions with the whole team at Centrality and in New Zealand, finishing with an exciting mini-retreat in Waiheke to build an ambitious vision for Senta Mobility.
We have developed an exciting plan to launch an open mobility as a service (oMaaS) leveraging the early parts of iomob’s stack that are ready while incorporating components of Centrality’s dApp ecosystem. This will ensure iomob gains valuable early feedback on our tech stack and enables early protocol adoption as we work to build out the complete protocol in the next year plus.
In my opinion, seeking partners with similar values and vision, and deeper pockets too, can be a great strategy for a promising blockchain project facing a bear market for fundraising. In a hot crypto market (we all know it is coming, the question is when) maybe going alone could still make sense, and of course some projects have significant VC or whale investors and maybe don’t feel the need to adopt this collaboration strategy. But for the 90%+ of blockchain projects not in that situation, maybe seeking a collaboration model like we have could be a viable strategy, to ensure your vision stays alive and, perhaps even improve the likelihood of adoption and impact of your protocol too!