LakeDiamond is a company founded in 2015 in Yverdon, close to Geneva, in Switzerland. Its goal was to leverage an industrialized method of producing high-purity diamonds through a process called “micro-wave chemical vapor deposition” (CVD).
Such diamonds are much purer than diamonds obtained through mining, allowing for novel industrial uses for diamonds, such as in watchmaking or in developing military applications. An initial funding round allowed LakeDiamond to demonstrate its ability to grow such diamonds in an industrial reactor.
In 2017, LakeDiamond’s founder Pascal Gallo started seeking new funding to scale up the operation. At the same time, the hype around blockchains had started to drive a surge in startup funding through Initial Coin Offerings (ICO). As Gallo was reluctant to dilute his ownership and control over the venture, he decided to raise the money needed for LakeDiamond’s expansion through an ICO.
Despite significant press coverage regarding blockchains, ICOs remained at the time relatively niche investments. Therefore, to target a wider base of investors, Gallo partnered with Swissquote, a prominent Swiss online bank that was at the forefront in offering to layman investors access to crypto-currencies. The ICO did raise sufficient funds for new reactors to be purchases and production to start. However, LakeDiamond’s sales never really picked up afterwards and by early 2020 the company was filing for bankruptcy.
Framed from the perspective of a small investor assessing the opportunity of investing in LakeDiamond’s ICO, the case is based on publicly released information by the company, and especially on its ICO. Extensive interviews with ICO experts who assessed the LakeDiamond fundraising at the time were also conducted.
This case showcases business issues such as:
- Understanding what blockchains are.
- Assessing the characteristics of an ICO.
- Choosing between traditional VC funding and alternative funding routes.
- Balancing founders’ efforts between raising funds and ensuring product-market-fit