While we are hearing more and more about the ICO, this way of raising money in cryptocurrencies can still seem nebulous and uncertain. This is because anything remotely linked to virtual currencies is subject to rather polarising debate. Will the ICO become a real way for companies to raise funds ?

Raising equity in the digital era

The Initial Coin Offering (ICO) is an alternative financing method which involves raising funds in digital currency in the startup phase of a company. Specifically, the company issues chips (i.e. digital assets known as tokens) on a dedicated platform and, in exchange, receives an amount in a cryptocurrency, whether this be Bitcoins, Ethereum or any other altcoin (the name given to the hundreds of cryptocurrencies in existence). The whole transaction is therefore based on blockchain technology.

Similar to crowdfunding

Comparable to an IPO (Initial Public Offering) - the operation which allows a company to list its shares on a stock exchange - the ICO is more similar to fundraising via a crowdfunding platform. In effect, it can be accessed by anyone who holds virtual currency and requires neither shares to be issued nor a stake to be acquired. This means that the investor is not subject to any potential dilution of the capital. The crypto investor therefore bets on a specific project and, in exchange, receives digital assets, access and use of the service being offered, plus part of the profits generated by the company.

Is it reserved for blockchain companies?

The phenomenon of raising funds via an ICO is taking on considerable proportions (in 2017, more than 4 billion dollars are believed to have been raised via ICO worldwide), but it is still primarily reserved for companies which have built a link to a blockchain technology into their project. This is because the operation tends to be quick, flexible and simple, requires no intermediary and, above all, is unregulated. This type of financing therefore primarily attracts blockchain startups looking for significant funds... From the crypto investor side, while some cryptocurrency billionaires say that they want to support blockchain projects, there is no doubt that their interest is based partly on the significant liquidity of the ICO, as well as on the quick returns on their investment, which are the result of the considerable price volatility.

Communicate well for a successful consultation

In most cases, this starts with the drafting of a white paper (equivalent to the prospectus for an IPO) in which the framework of the project, especially the underlying technology, is laid out in order to arouse market interest. Generally, the company puts forward its own cryptocurrency, then sets the terms of the ICO (duration etc.) and the value of its tokens - which will be purchased, for example, with Bitcoins or Ethereum - according to the amount required to complete its project. What follows is often a huge surge...within only a few minutes!

Growing appetite

12.5 million dollars in 15 minutes (for the decentralised predictive markets platform Gnosis in the Netherlands), 36 million dollars in 1 minute (for the startup Brave which is developing a new generation of web browser), 250 million dollars for Filecoin (the American company which offers a data storage solution based on blockchain)... There are tons of crazy fundraising examples. At the start of 2018, the encrypted messaging service Telegram reported that it wanted to create its own blockchain technology to house decentralised services, via the most significant ICO to date: over one billion dollars. "Old hands" are also embarking on the adventure: Kodak, for example, who announced a project to develop a blockchain specially dedicated to managing copyright.

What does the future hold for the ICO?

Clearly, the world of cryptocurrency must often navigate greed, excess and speculation. In this sense, both for companies and for crypto investors, the ICO does not just present advantages. Potential hazards include the lack of guarantees of the relevance, seriousness and quality of a project, and also the huge volatility of virtual currency prices. Many experts are also predicting that it will create a bubble which will indeed burst one day. But when ? It's too early to say! As with the dot-com bubble at the start of the century, this might give us a clearer picture and allow us to clean up the world of digital currencies. In any case, there is no doubt that the question of regulation and the framing of this kind of financing will also be one of the main challenges facing the ICO in future...

To prepare your international adventure properly, ask yourself the right questions and talk to people who have done it all before: partners, customers, fellow exporters and experts.

BNP Paribas Fortis listens to the questions asked by international entrepreneurs and offers reliable advice. "A lot of exporting companies ask for our help when it's too late", Frank Haak, Head of Sales Global Trade Solutions, says.

Entrepreneurs with little export experience are often unaware of the bigger financial picture. So what do they need to take into account when they set up a budget for their export plans?

Frank Haak: "Budgeting and pricing are affected by a lot of crucial factors: working capital, currency exchange risks and currency interest, prefinancing, profit margins, insurance, import duties and other local taxes, competitor pricing and so on. We always advise customers or prospects to start from a worst-case scenario. Quite a few companies are insufficiently prepared for their first international adventure: they see an opportunity and they grab it, but quite often disappointment and a financial hangover are not far away.

Our experts have years of export experience and the BNP Paribas Group has teams around the world. This means that we can give both general and country-specific tips. Let's say a machine builder wants to design and manufacture a custom-made machine. We recommend including the machine's reuse value in the budget: can this machine still be sold if the foreign customer suddenly no longer wishes to purchase it or if export to that country becomes impossible due to a trade embargo or emergency situation?"

What type of companies can contact BNP Paribas Fortis for advice?

Frank Haak: "All types! Entrepreneurs are often hesitant to ask for advice. Sometimes they are afraid that it will cost them money. However, the right advice can save them a lot of money in the long run. For example, we recommend a letter of credit or documentary credit to anyone exporting goods to a foreign buyer for the first time. This product is combined with a confirmation by BNP Paribas Fortis to offer the exporter the certainty that it will receive payment when it presents the right documents and to assure the buyer that its goods or services will be delivered correctly."

The consequences of not seeking advice: what can an exporter do in case of non-payment without documentary credit?

Frank Haak: "If you are not receiving payment for your invoices, the counterparty's bank can be contacted in the hope that it advances the payment on the customer's behalf. However, we shouldn't be too optimistic in that respect: the chances of resolving the issue without financial losses are very slim. Once you have left your goods with customs, you usually lose all control over them. Hence the importance of good preparation: listen to and follow the advice of your bank and organisations such as Flanders Investment and Trade (FIT). It will protect you against a whole host of export risks."

BNP Paribas Fortis

Source: Wereldwijs Magazine

A young Belgian company that installs biogas facilities on farms is growing fast. Here’s how BNP Paribas Fortis is helping its development.

Biolectric is the epitome of the sustainable do-economy: it manufactures and sells anaerobic digesters, which are installed on farms so as to produce ‘green’ energy based on the biogas released from the farm’s own manure.  The green heat and power generated from cow dung make the farm an energy-positive business.  No less important is the fact that this approach reduces emissions of the powerful greenhouse gas methane by up to 70%. The average Biolectric reduces greenhouse gas emission by an equivalent of 2.000 kilometers driven in an modern car.

The company, which started up in 2011 in the East Flanders municipality of Temse as a typical scale-up, nowadays sells anaerobic digesters to farmers all over Europe.

Biolectric is a fast-growing company. In 2019, in order enable further growth, the bank provided the firm with a series of credit facilities, mostly in the form of a ‘sustainable impact loan’.

Sustainability policy

Tom De Winter is Biolectric’s contact at BNP Paribas Fortis. He tells us: “The bank has been working with Biolectric since the very beginning, but the relationship has become much closer since 2017. In order to obtain a better grasp of their technology, I’ve visited the firm several times with expert from our Sustainable Business Competence Centre. It’s very important to be able to understand and evaluate the firm’s technical proposition. When Biolectric founder Philippe Jans and industrial investment company Ackermans & van Haaren (AvH) came to talk to us last year about the imminent onboarding of the company by AvH, and the subsequent creation of a new low-threshold business segment, namely the construction of a facility with its own anaerobic digesters so as to be able to sell electricity to farmers in Belgium, the Netherlands and France, we knew straight away that we ought to go along with them on the project.”

“We weren’t the only bank in the running, but the client had clearly chosen us. The coordinated approach of BNP Paribas Fortis and our clear policy of backing sustainable solutions played a big part in that decision,” explains Tom De Winter.

Biolectric

As a pioneer, Biolectric has independently developed compact anaerobic digesters, known as ‘pocket digesters’, specifically designed to turn cattle dung into electricity and heat. Today there are over 200 of the company’s installations operating all over the world. This technology provides Biolectric farmers with a very nice economical as well as ecological return on their investment.

In 2019 Ackermans & van Haaren, which is also a BNP Paribas Fortis client, acquired a 60% stake in the company from Taste Invest, with founder Philippe Jans retaining the remaining 40%. AvH brings its professional management experience to Biolectric, thus strongly boosting the firm’s growth potential.

The coronavirus crisis prompted the Belgian Treasury to issue additional debt securities. In just a few days, BNP Paribas Fortis and four other Primary Dealers launched a new government bond on the institutional investment market.

Treasury certificates and government bonds (known as OLOs) are an important source of financing for the Belgian State. They offer investors the possibility to lend money to the country in exchange for periodic interest. At the end of December last year, the Treasury assumed it would have to issue debt securities worth €30 billion in 2020. That would happen via an increase in the number of existing bonds, and through two new OLO transactions.

The corona crisis increased the country’s financial needs significantly. So, at the end of March, the Federal Debt Agency decided to issue additional tenders for the OLOs in circulation. It also immediately halted the repurchase of certain bonds, and raised the issuance target for Treasury certificates.

New OLO

An additional measure was the issue of a third new government bond: OLO91. “This is a medium-term loan,” says Jean Deboutte, director of the Treasury. “The maturation date is 22 October 2027. With a zero-percent coupon, this bond is neutral for our annual budget.

“We wanted to bring OLO91 to market as quickly as possible. That has happened in a period of just a few days. It is also the largest ever OLO issue: €8 billion. We have attracted investors from 31 different countries, and around one-fifth of the volume comes from non-European buyers. That confirms the worldwide popularity of Belgian government bonds.”

Primary Dealer

The fast launch of OLO91 is in part thanks to BNP Paribas Fortis. “As a Primary Dealer, we take care of the placement and promotion of the bond among institutional investors,” says Director Debt Capital Markets Stefaan Van Langendonck. “We also reinforce activity and generate liquidity of OLOs and treasury certificates on the secondary market.”

Belgium has 12 primary dealers. They drew up a contract with the Treasury based on the Code of Duties. “BNP Paribas Fortis can rightly consider itself one of the most important intermediaries for Belgian bonds,” says Mr Van Langendonck. “Each year, we are invariably among the top three most active Primary Dealers in the country. Often we are number one.”

Lasea conceives precision laser solutions for high-tech industry. Faced with the coronavirus crisis, the Liège enterprise revived an old project to decontaminate surgical masks – and respond to the shortage of face coverings.

The secret weapon of Lasea is the femtosecond laser. This has an accuracy of 0.2 micron, 200 times smaller than a hair. Lasea’s high-tech equipment is notably used in horology, electronics, medicine and pharmaceuticals. Given the shortage of surgical masks, the Liège enterprise revived an old project for decontaminating, as Lasea CEO Axel Kupisiewicz explains.

“We had tested laser decontamination 20 years ago. At the time, the project had no commercial outlets. With the coronavirus crisis, we proposed using it to decontaminate used surgical masks. That’s how we joined a consortium managed by the University of Liège to develop a decontamination chain. Usually, it takes many months, even years, to carry out the tests and obtain certification. Thanks to the collaboration between the university and the Walloon government, everything was done in a few weeks.”

Reinvention thanks to a crisis

Lasea proposed two decontamination techniques. “For the first, we used a laser device manufactured by Aseptic Technologies from Gembloux, which we adapted to meet local needs,” explains Mr Kupisiewicz. “For the second, we have entered into a partnership with Optec, in Mons. This latter solution makes it possible to treat three or four times as many masks each day.”

Lockdown has also generated a new dynamic within the business. “We launched a brainstorming session to refine the strategy for the coming years. The result: a new organisation after the move to our new building, financed by BNP Paribas Fortis. On the other hand, the widespread use of videoconferencing has created a new dynamic at the heart of the company. Previously, the Belgian team, who were gathered physically on site in Liège, were in a way privileged in meetings with their French, American or Swiss colleagues, present via videoconferencing. Now, everyone is on an equal footing because everyone is behind their screen by themselves. It’s one of the interesting aspects of lockdown that has created a global spirit in an international group.”

A relationship of trust

“BNP Paribas Fortis has been by our side since the beginning, 21 years ago,” recalls Mr Kupisiewicz. “First via the local branch in Sart-Tilman and now, for seven years, via Corporate Banking. Given Lasea’s developments, enlargement to several banks was necessary, but BNP Paribas Fortis remains the primary bank. I place huge importance on personal relationships and a climate of trust. Be it the branch manager or staff at Corporate, our relationship managers know our activities and our products. It’s important: they understand the issues we face and as a result they know our financial needs.”

“Since the beginning of the crisis, the bank has asked if we need support to develop this project of decontaminating masks. We have been able to implement these solutions by redeploying our teams and we have not needed a large injection of capital. We have, on the other hand, welcomed the moratorium on repayment of capital on all our investment credits.”