In the past few days there has been some commentary about and from people who were early supporters of the Fetch.AI project, and who purchased tokens in advance in the form of SAFT agreements that we sold during a pre-sale in April – June 2018.
Many of our pre-sale purchasers are supportive, but some have expressed some concerns publicly, so we wish to be transparent to all of our community members about the circumstances, and what we have done in good faith to repay the support our pre-sale purchasers showed to us in the face of very difficult circumstances in the “crypto-winter”.
Many of these concerns relate to the “ETH peg” – the conversion price that would be used to calculate the quantity of FET tokens.
Our very first pre-sale agreement was constructed in such a way that purchases were converted from whatever currency was sent to Fetch.AI into USD at the point of contract was signed and this would be credited with a ‘bonus’ of tokens against the public sale token price, denominated in USD, of between 33%, 25% or 18% depending on the round of purchase. Pre-sale purchases would have to have a three-month total lockup, then vesting monthly over the following 3 months.
During April, May and June last year, many believed that ETH was at the bottom of a bull run. Money from early investors would therefore be less valuable than money put in later, at a lower risk. Existing and potential purchasers begged us in the strongest terms for a ‘late ETH Peg’ so their contribution in ETH would be converted at just before the token sale. In this way, they could benefit to the maximum degree possible from the increase in the price of Ethereum between the pre-sale and the public sale, which at that time was tentatively scheduled to be held in September 2018 (though we had not publicly released that date).
We acceded to these requests and produced a pre-sale contract where the “ETH peg” would take place 72 hours before the token sale itself, with all other terms remaining the same. Every single existing investor re-signed this modified SAFT agreement as it benefited them from the rising price of ETH. New investors were delighted to see this advantage and we sold around $14m worth of ETH on the basis of these terms. Remember this was mid 2018, and many in the community believed the falls in Jan 2018 were a ‘blip’ and the bull run would soon be back again and so wanted to benefit from that in terms of the number of FET tokens their ETH would buy. However, this advantage provided no protection if the value of Ethereum fell, a fact that many did not appreciate.
Some pre-sale purchasers did not wish to take this currency exposure, and we received around $1m of pre-sale contracts denominated in USD for those purchasers who wished to lock in the value of their contribution at that time.
Hindsight is 20:20, but this currency risk on the part of our supporters was not successful. Unfortunately the bull run did not return and ETH continued to decline relative to Fiat currencies, so by the beginning of September it had fallen to around $230 USD.
We, as a team, take no pleasure at all with this decline, not least because it significantly reduced our operating runway and prevented us from deploying resources that the project required, but also because it has negatively impacted our early supporters.
In counterpoint, however, would these most vocal of purchasers have been concerned now if the price of 1 ETH was $2,000USD, and those early purchasers would now be receiving 3x more tokens than they had originally planned? That was a risk we all took at that time, and had that been the outcome, we would have honoured the agreement.
All the Fetch.AI pre-sale revenue was held in a multi-signature wallet into which the funds had been received. This wallet was secured with signatures from the management team, our advisors Tokenmarket and providers of the pre-sale funding platform. This was done, to demonstrate that these pre-sales revenues were being held securely, and also to give confidence to the community that we were operating completely openly and transparently. This is recommended practice during the time between a pre-sale and an ICO.
It was also held in ETH because as the public sale began to be delayed due to market sentiment, we needed to have the ETH in hand as we had commitments to the pre-sale purchasers to the value of that Ether. This is an often overlooked point; had ETH continued to increase in value relative to USD, or returned to growth, we would have needed to hold the ETH to benefit from the price appreciation that our tokens would be compensation for.
These funds were not touched until September 2018, when the continuing decline in the exchange rate meant that we became concerned about leaving those funds in escrow, and as the market was not conducive to a public offering at that time, we realised we needed to start liquidating to extend the runway.
Over the course of the sales of the ETH, the average total conversion price was $165.35 USD: ETH (as disclosed in the Binance research report), and this was the figure we have confirmed to private sale purchasers in the public sale.
Could we have started liquidating the ETH sooner? Well yes of course we could, but only hindsight allows us to see the depth of the winter. In June, July and August it was not at all clear that the sustained depressed exchange rate would continue for another six months.
During the course of the last 10 months, we have not only been diligently building the technology that we believe will have a tremendous impact on the world, but also doing our best to support our pre-sale purchasers. To that end we have:
We have also negotiated with Binance and offered all our private sale purchasers an extra protected allocation (at the public sale price) of 10% of their initial investment. Given the sale is likely to be oversubscribed on Binance Launchpad, we hope that this is being considered favourably by our pre-sale purchasers.
We understand that there has been a decrease in the number of FET tokens that the pre-sale purchasers will receive as part of the public sale compared to the USD value of the ETH at the time they contributed it, but that decrease is:
Finally, as part of our ongoing commitment to the project, we have been able to secure a partnership with Binance Launchpad, which will have a very positive impact on the project both now and in the future, which is the best outcome for all of our stakeholders, regardless of when they started supporting our project.
We have attempted throughout 10 months of very difficult circumstances to not only keep the project moving forward and delivering on our milestones, but also to do what is right by all our stakeholders. We are aware that some pre-sale buyers feel we could have done more, but we ask you to consider the decisions that both we and our pre-sale buyers made, not with the benefit of hindsight, but based on the information available at the time.
We have successfully steered our ship through challenging waters, while simultaneously bringing on board some major partners. In addition to Binance, we are also collaborating with commercial partners that will create value for the whole world for many years to come.