Melbourne-based blockchain startup Shping has successfully closed a $US3 million ($3.7 million) initial coin offering pre-sale ahead of its public sale later this month, when it will be hoping to raise more than $40 million via the sale of its cryptocurrency.

Shping started its life in 2012 as a startup called AuthenticateIt, which aimed to use barcodes to allow both consumers and brands to verify the authenticity of products and provide more information about them across all stages of the supply chain.

Then 18 months ago, the company began a pivot to blockchain, alongside changing its name and developing a broader approach to the data shared with customers. Although product authentication is still an aspect of the platform, Shping now promotes itself as a rewards-based and marketing-oriented service.

“Our mission is to make shopping smarter and more rewarding, which is a very grandiose vision,” Shping’s chief marketing officer Tony Lee tells StartupSmart.

Lee is one of the founding members of Shping, having worked with other founders Gennady Volchek and Andrei Kucherov intermittently during the AuthenticateIt days and then joining the startup full time when it became Shping.

Shping consumers download an app and then scan a product’s barcode to see a cache of information in addition to what’s shown on the packaging. Lee says this includes things like a full list of ingredients and their origins, along with other materials such as videos and facts sheets, which could be provided by brands.

“We’re looking to make a paradigm shift in terms of what we enable marketers to do. We’re building the biggest product database available through both the app and on the blockchain, which can be used to help encourage purchase decisions at the point of sale,” he says.

Having consumers interact with the application via uploading reviews or watching videos is where the startup’s cryptocurrency aspect comes into play, with brands rewarding users for engaging with the product. Lee says this is not only a way to encourage users to engage with the platform, but for companies to receive feedback on their products. There will only be 10 billions tokens issued by the company and 50% of those will be reserved for companies to purchase in order to fuel the liquidity of the rewards model. The remaining 5 billion tokens will be available for purchase as part of the ICO.

The company’s app is currently available as a working beta, with Lee saying there are a “few more tweaks” to be done until it’s in full operation.

Pre-sale beyond expectations

The startup’s ICO pre-sale ran throughout January and was set to finish on January 31. However, it ended five days earlier after hitting its hard cap of $US3 million early. It’s a result Lee describes as “a bit of a surprise”.

“In terms of the pre-sale our expectations were exceeded, and we’ve had lots of inquiries in terms of the next phase of our token sale so we’re hopeful for that,” he says.

The company’s public token sale will commence on February 22 and run for a month. Lee and the founders are confident about the interest for the Shping tokens, estimating a total value of approximately $US37 million ($46 million) when all tokens are sold and token bonuses are taken into account.

Comparing the scale of the token sale with other local ICO success stories, such as PowerLedger or Canya, Lee believes that with “how the traction is playing out currently”, Shping is on track to be either the largest or second largest ICO in Australia.

“For that amount of funds we’ve got ambitious expansion plans for offices in Australia, New Zealand, China, Russia, India, and the UK,” Lee says.

“We know that if Shping is going to be that paradigm shifting platform it will require a lot of promotion to get customers and brands onboarded.”

That level of funding would also mean the company would consider developing a model for companies such as restaurants, cafes, and hotels to allow their customers to see details about how meals were prepared and sourced.

Crypto crash worrying, but not deterring

However, all these estimations are based on the current price of cryptocurrencies, which have seen a market-wide crash over the last month, with poster-child Bitcoin careening from a high of $26,000 to a current price of $10,000.

Lee admits it would be worrying if this downward trend continues, but says it would be so for “anyone in the midst of an ICO”. He says he’s buoyed by the well-defined goals for Shping and the company’s already-existing product, along with the company’s significant partnerships with barcode verification company GS1 and IBM-backed blockchain company Everledger.

“There’s a lot of fear in the marketplace at the moment because of what’s happening with some of the biggest and most well-known cryptocurrencies, but because the entry point for the Shping ICO is quite small, we’re hoping people see it as a small risk with a lot of long-term opportunity,” he says.

The startup is also “absolutely concerned” with potential future regulation against token sales, which lead to the company implementing “bank-level” know-your-customer identification to comply with anti-fraud and money laundering regulations.

“We’ve taken all our material through so much legal rigour — we’re futureproofing as much as we can,” Lee says.

“I do hope there will be a bit more scrutiny on ICOs as it would bode well for the industry and innovators like us. When you hear about token sales designed to scam people it becomes an incongruent position to be involved in.”