The Ghost Advisors of the Blockchain
Or a guide for management teams on how to choose your advisors
Six months before Mr X. was barely known, he might not even know about the Blockchain. And now he is proudly broadcasted in major rating websites as one of the top ten best advisor of the sector. He is one of the ghost advisors of the Blockchain… They work for private multinational companies as employees or middle managers, more than 10 hours per day, they are often family men with many kids, and end up as advisors of more than 30 projects in less than 3 months (one might ask where they find the time). With credential related to their new positions, they are asking high upfront and percentages on ICOs. But, once you have dealt with them and send them your tokens… You will hardly heard of them (or just when it is time to cash in).
This is the new obscur face of the Blockchain. A new kind of financial vampires who is only here to suck the workforce of ICO team members and benefits of token holders. They have no genuine passion or vocation for the Blockchain technology and this amazing paradigm shift. With no real experience as CEO or real operational job in the Blockchain, they nonetheless, position themselves as the utmost experts.
For the last 3 years, Initial Coin Offerings has set up a new kind of company financing for companies using the Blockchain Technology. The technology application is still at an early stage, and changes occur at fast pace. The need for advisors to guide in each development section of the project has become vital for a project to succeed.
Surfing on this wave, a new kind of opportunists people have emerged far from the legitimate and genuine advisors. Entrepreneurs entering the sector must really be aware of the new practices settled by some unscrupulous advisors asking for shockingly huge compensation schemes.
In this context, it is sometimes difficult for CEOs and Blockchain project founders to find the right experts to assist and consult to develop the project. But there are solutions. And bear in mind that it is not the “best” advisor meaning the one with the most hyped reputation that will push your ICO to the next level, but the hard working and committed person that loves your project. I have being talking with many CEOs and experts as have been confronted with those Ghost Advisors over the last year. Here are few hints that will avoid traps and save you time.
If you are a CEO like I do and you get propositions from those people (and trust me if you have a legitimate project with growing reputation, they will come to you to propose their services). Hiring those persons is the worse things an Entrepreneur may do. They will suck the ressources needed to develop your project without tangible worked done in exchange. At Fieldcoin, in collaboration with our CLO and the management team we have seen this from the early beginnings. In order to avoid the traps, we have put a series of safeguards to protect the project and get the most of our Advisory team.
Signs that you are in front of a ghost advisor
High percentages of the ICO allocated to Advisors Some CEO’s are tempted to allocate high percentages of the ICO to Advisors. If you see an ICO with more than 3% allocated to its advisors it is one of the sign you may be in front of a weak ICO who push for a marketing hype rather than implementing its project. Advisors are not team member, they should be paid correctly but in any case should never work regularly and many hours for the project. High compensation for advisors is a red flag.
Bulk messages. the person only send you pre-formatted messages with in bulk messages stating the scope service which is not adapted to your project or your need, followed by upfront and high percentage compensation scheme.
Acts only as an intermediary. He won’t participate in any event with you and you will never see this person physically, not even on a skype call. He will call some friends to pretend they will do some work for you and the ghost advisor we ultimately take credits once the ICO is over and successful.
The person want you to sign his contract. The person has already made model of contracts that will give him full freedom to do what he wants, so far as to steal information from your project and sell it to another ICO.
Ask a series of simple questions to the Advisor. Usually if the Advisor is not willing to work for you, he or she will not answer your messages asking for an interview or answering your questions about the project. They are more interesting in a marketing hype, in the upfront and to sell once the tokens have hit the exchange rather than hold and follow the project.
Provide a contract with a release of the tokens on the long run, a part before and after the ICO on a monthly basis. Make an obligation for the Advisor to keep his token for a certain period after the ICO.
Avoid by any means upfront payments. This is also one of the worst thing you would do as a Entrepreneur on the Blockchain. The upfront has to reflect a certain cost. They should not be given without a real need behind such as financing a meet-up or a marketing campaign. Advisors only in rare cases should pay for those. The CEO is in charge of paying the bills.
Make a clear scope of work/services even on hourly basis. In order to clarify things, especially if you need an Advisor just for few hours, it can be better to put it in writing on the agreement. It is also a relief for the Advisor who won’t have to justify more than the hours he has agreed on.
Choose someone with a real experience inside a project. Do not hire an advisor who hasn’t worked before in a project at an operational or managerial level. It sounds obvious but too many so-called advertised top advisors haven’t. Moreover, the person should have the specific skills that you need for your project.
Obligations of results. One could also provide a high percentage to your Advisor in case the person has achieved outstanding results. This is the case for instance when an advisor has leveraged your ICO campaign by finding the right financial partners. In any cases, an advisor should be paid for his work. A good monitoring system based on time spent and tasks achieved reflecting the work done by the advisors should be implemented.
Reactivity. One week for answering an email. When you have this kind of issue, it is a sign your Advisor might not be committed but not always. Because it could simply be that the person is overwhelmingly busy. This happens for the best people of the Blockchain. However, is it better to have someone with high reputation but not available or someone available and with less reputation? That’s another question.
If the person is advising more than 5 projects at the same time it is usually a red flag. Well, this also depends. If you have somebody working 15 hours a day with no other jobs than advising, the person could really do the job for 10 projects. This has to be reviewed case by case.
And finally use common sense and intuition…
These people are far from the Blockchain spirit of decentralization, do not mix with them.
Always keep in mind that even if legally speaking the use of ICO fundraising is not legally binding (you only have an obligation of mean and not results), it will however harm your reputation and the one of your organization at early stages if you not bind to some kind of rules regarding your Tokenomics.
In fact, CEOs with good business manners and practices are accountable towards their token holders. They should spot those ghost advisors and in any case never use this system that might give a slight bump to their ICO but on the mid term and long term harm the project.
Those Ghost Advisors are creating shadows around the most interesting projects investing in smart and productive workforce. As long as CEOs won’t take a step towards a real accountability of their finances, the ghost advisor system could prevail. However, token holders due diligences are becoming more and more sharp and decision-makers will have to adapt accordingly.