Today in WTF: Alternet Systems’ (ALYI.OTC) ridiculous ICO to raise money for self-driving cars in Sub-Saharan Africa

Alternet Systems (ALYI.OTC) entered into a partnership with Interwave, an organization involved in an initial coin offering (ICO) to launch a cryptocurrency dedicated to funding electric mobility projects in Sub Saharan Africa.

The cryptocurrency will be based on the ethereum blockchain, and has the overall goal of raising $100 million. It’s been partitioned on the Ethereum blockchain, and a marketing plan for the ICO is being floated to potential investors. A regulatory review is presently underway, and the timing of the ICO isn’t yet predictable, so the company doesn’t have a release date.

This is a peculiar step because the sub saharan region of Africa isn’t exactly known for being affluent, and there are some serious questions about the return on investment. But the company states that the ROI is definitely there because of the low adoption of automobile ownership, which is only 2%. The company is banking on the notion that a cryptocurrency investment strategy could democratize the ROI opportunity, giving anyone with internet access a way in to the ICO.

Let’s be real for a moment

First, let’s split some hairs. The notion of sub-saharan Africa is a geopolitical fiction invented by the United Nations to establish a field of economic and political disparity. As an economic grouping it doesn’t make much sense: Nigeria is much different economic entity than Kenya and Burkina Faso and Sierra Leone, which is why the statistic touted by Alternet that automobile adoption is only 2% in Sub-Saharan Africa doesn’t make much sense.

Consider this gem:

“The inevitable transportation productivity improvements coming in Africa are unlikely to include any resemblance to the individual automobile ownership model underlying the transportation infrastructure in the U.S. and Europe. Africa is ripe for the technology leapfrog rollout of electric powered, self-driving, connected autonomous vehicles (CAVs) delivering individualized transportation solutions via a shared ride model. With over one billion people living in Sub Sahara Africa, the implementation of an individualized electric powered transportation solution presents a highly exponential growth opportunity.”

Basically, rideshare in some of the poorest places on earth using expensive, autonomously driven cars. Most of the people living in the region need food security, not self-driving Tesla-taxis. This is what’s wrong with the ICO crowd and the ridiculous ideas they come up with. They either don’t do their research or they’re outright scams.

Why an ICO?

Alternet Systems is in the electric car business. They entered into the electricity storage sector in the summer of 2017 by acquiring a patent portfolio of lithium battery tech. Since then they’ve adopted a strategy of exploring electricity storage applications for its portfolio, and build partnerships with other like-minded fellow traveller organizations that could benefit from ALYI’s tech portfolio.

ALYI management recognized the promise of concentrating business development efforts where:

• there was an opportunity for a new technology to leapfrog incumbent technology
• there was an opportunity for exponential growth from the implementation of a new technology.

Giving them the benefit of the doubt here, we can suggest that the company recognized a potential market in Africa, without looking at the specifics of the continent. Electric cars aren’t cheap and they’re far away from the mass adoption required to bring the price down, and that means they’re light years away from the price reduction required for the average person in Africa to afford them. The end result is no revenue and no adoption.

That’s being generous.

The reality is likely a bit more insidious.

Companies go to alternative fundraising mechanisms like ICO’s when there’s no money to be raised in traditional ways. No self-respecting above-board lender looks at Sub-Saharan Africa and the countries involved in it and sees a potential boom for a nascent electric car market, so ALYI is likely trying to crowd-fund their business venture. There’s nothing wrong with that in theory, but in practice it’s proven to be somewhat hazardous for investors as the recipients have this habit of running off with the money, which is why the SEC has been cracking down on ICOs as of late.

There’s nothing wrong with crowdfunding. Sometimes it’s the only way a project can get off the ground, but with all ventures of this nature you’ve got to do your due diligence and pay attention to the fine print and use some common sense.

—Joseph Morton