Investor Relations for Cryptoassets

In our last post, we examined the way that bad actors can take advantage of the round-the-clock trading of cryptoassets to mount an attack, and potentially ruin, a small token. In this post we will lay out a strategy for preventing that attack from gaining the momentum it needs to succeed. More broadly, we want to lay out the case that all companies issuing cryptoassets need to build an Investor Relations function, not only for defense but to help build the brand that a token needs to gain adoption.

The central point of this effort is that Investor Relations needs to be thought of a Communications function. It touches on finance, but it is really a way of managing communications with the financial audience. Companies backed by chains need to remember that they have to reach out to multiple groups. All too often, the company focuses solely on the users of the tokens – people who use the token for the stated purpose of the token – privacy, governance, rights management whatever the case may be. This is important for the business, but overlooks the reality that many people buy a token for financial purposes, and their behavior can affect all the other coin buyers.

We have spoken to many companies who have no answer for the question “How will you interact with token holders after the ICO?”. Some say they plan to do a newsletter or a regular blog posts, but in today’s world that is an anemic approach at best.

Instead someone at the company has to be given responsibility for managing the financial side of the token. This is true even for ‘utility’ tokens. This person or team, needs to monitor all mentions of the token in public sources including Slack and Telegram channels, blog posts and eventually the mainstream press. Then if they detect activity they can proactively respond. IR teams should have prepared scripts – posts, tweets, messages, FAQs, etc. – that they can deploy quickly and repeatedly.

Of course, as our last post pointed out, this is a 24-hour a day job. For companies with offices in multiple countries, this means having someone tasked with this role in remote offices. The importance of having scripts ahead of time will be important to support more junior employees in the event of a brewing crisis in their time zone. For those based in only one time zone, the company will need to build automation scripts that can alert IR teams in the middle of the night or work with outside advisers to minimize the team’s sleep deprivation.

At a more strategic level, the IR team will also want to carve out a set of communication channels including their own Telegram channels, real estate on the company’s website for blogs and background information, and more. To the extent possible, they will also want to keep a list of the coin’s major holders. This should be a proactive process, establishing contact with major players including the exchanges and the most active crypto traders and funds. The IR team will also need to work with the Marketing team to create a company voice on Twitter and other social streams to build the coin’s brand and reputation.

These are just the basics of an Investor Relations function. Done well, the IR team will have the ear of the company’s senior management team. They should keep abreast of the chain’s engineering team and their developments and know the details of the company’s business operations. The goal of this is be able to respond credibly to any report put out in the public domain. When the financial stakes are this high, nothing stays secret for long. Active investors will find out everything about companies in which they have a financial stake. The IR team’s goal is to never be surprised by any report. If the engineering team finds a critical bug, the IR team will want to be have an update on remediation measures already underway. If the company loses a major customer, the IR team will want to be able to point to progress that other customers or users are making, and thus change the narrative.

All of this is pretty straightforward Strategic Communications, but the 24-hour nature of crypto trading and the perpetual mill of rumor and conspiracy theories here make it all the more critical for blockchain projects to have a proactive team ready to respond and get the company’s message out there.

As simple as we make this sound, it surprises us greatly that no one is talking about it today. We have spoken with dozens of projects, and their view of the problem verges on wishful thinking, hoping that there will be no problem. Based on our experience in traditional capital markets, we can assert that this approach will not end well.

Too many companies look at Investor Relations as a one-time function – people who will help line up funds for the ICO. There are dozens of job postings for IR people out there, but if you read the job descriptions it is clear that these companies are just looking for help with the fundraising, and assume the IR team will go away afterwards.

So far, we have only met a single consulting agency that is trying to address this and help companies build an IR response. We can connect you with them when all of this sinks in.

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