Tech & More
TruStory, a new startup, just raised $3 million to identify ICO scams before they happen
Investing in initial coin offerings, or ICOs, is a minefield. This isn’t just true for people with absolutely no technical background but also for many investors who may be well-versed in tech but still struggle to understand many projects’ white papers.
Enter TruStory, a platform for users to research and validate claims that people make online, whether in a blog post, white paper, website, or social media post. The young company’s aim is to “bring authenticity back into the digital and decentralized world.”
It’s a huge and growing opportunity. Though regulators around the world are cracking down on cryptocurrency fraud, the number of of ICOs has skyrocketed and the funds raised through the mechanism are increasing. According to data collected last month by CoinDesk, ICOs raised $6.3 billion in the first three months of 2018; that’s 118 percent more than projects managed to raise by way of ICOs in all of 2017.
It’s not just blockchain-startups that are carrying out ICOs, either. Many other types of companies are trying to use them — and many of them are frauds. In fact, just last week, the Wall Street Journal published analysis of 1,450 cryptocurrency offerings, in which the outlet found “271 with red flags that include plagiarized investor documents, promises of guaranteed returns and missing or fake executive teams.”
Separating the wheat from the chaff is a tall order, but investors are willing to bet that TruStory can do the sorting. The outfit just raised $3 million in seed funding led by True Ventures with participation from Pantera Capital, Kindred Ventures, Homebrew, Coinbase Ventures, Wonder Ventures, Abstract Ventures, former TechCrunch co-editor Alexia Tsotsis through her new fund Dream Machine, and others.
The round also attracted checks from numerous notable individual investors, including Coinbase cofounder Fred Ehrsam, entrepreneur and investor Scott Belsky, and former Twitter M&A executive Jessica Verrilli, who recently joined GV as a general partner.
All are betting on TruStory’s founder, Preethi Kasireddy, and it’s easy to imagine why, given her trajectory so far. A USC grad who’d studied industrial and systems engineering, Kasireddy took a job as a banking analyst with Goldman Sachs after graduating, learning how tech company financials work. After less than a year, Kasireddy was searching out a new role as an engineer but that a cold call from Andreessen Horowitz led instead to a role on its deals group, where she learned from the firm’s general partners, as well as developed a fascination with everything blockchain related.
In fact, several years after Andreessen Horowitz wrote an early check to Coinbase, Kasireddy left the firm to work for the digital currency exchange herself as a self-taught software engineer. There, she says, she architected and implemented the front-end interfaces and APIs required for the integration of Ethereum onto the Coinbase brokerage platform — among other things.
Then she left, again. “I just started to teach myself how to write code that runs on Ethereum. I was contributing to different blockchain projects and just listening, and learning, and observing.” She was also taking noting of the growing amount of false claims people were making — and who were raising millions of dollars in the process.
How TruStory manages to verify the veracity of these claims isn’t something that Kasireddy is interested in discussing publicly in great detail. (“The space is rampant with people copying other people’s ideas.”) What she can say is that it will use the wisdom of crowds — including scientists and researchers who she is currently lining up — to evaluate whether a project or person is legitimate. When someone successfully validate a claim, or else identifies aspects of an offering that doesn’t make sense, she or he will “earn tokens and reputation and influence” for their efforts, she explains. If they’re dishonest, they’ll lose on all three fronts. (The tokens are generated using the protocol itself, she says.)
Eventually, says Kasireddy, the platform will be used to validate far more than white papers. “We’re starting with crypto market and claims being made in white papers and websites and building a network to help investors and researchers who need this information make the right decisions.” But there are “other ways to use the same incentive design to validate other claims,” she says.
There will also be opportunities for people to buy tokens to have project vetted, she adds, saying to “think about Facebook or Twitter” where there are plenty of claims of dubious origin that stakeholders might want to see either validated or debunked.
Asked when TruStory will actively start reviewing what’s out there, Kasireddy suggests it’s not ready for prime time quite yet. TruStory is currently made up of Kasireddy, who is in the process of bringing aboard a couple of operations people and a few key engineers. But she says she’s that unlike many other founders in today’s market — including those who’ve raised venture capital — she’s not interested in orchestrating an ICO to fast fuel her company.
“We’ll fund ourselves through the development of our tokens, and we expect the tokens eventually to fund the business. It’s about getting those token economics to work,” she says. “And then the engine starts up.”