Southern technology startups tend to play it safe.
Investors here don't have much of an appetite to wait for companies to start making money, so tech entrepreneurs tend to focus hard on pulling in revenue. They usually look for a core group of paying customers, not a massive block of users. They gravitate toward robust business plans, not moonshot ideas.
So while Silicon Valley has fallen hard for companies selling virtual currencies, South Carolina has sat on the sidelines.
That's starting to change.
The state's growing software sector is testing the market for so-called initial coin offerings — the sale of digital currencies — to finance their operations.
The first out of the chute was Greenville-based ShipChain, It raised $30 million by selling a virtual coin in January. The company, which is now in a legal fight with the state Attorney General's office, says it's trying to change the way shippers track their cargo.
Another, Mount Pleasant-based Narrative, raised somewhere between $6 million and $13 million by releasing a virtual coin this spring. The actual sum varies: It traded its currency for another cryptocurrency that's prone to big swings.
Already, more are following in their path. Commit Good, a Charleston-based startup, plans to walk into the cryptocurrency market this month. It's aiming to pull in $10 million.
Those are serious sums of money for young companies in a state where startups often struggle to land big checks. They easily land among the largest rounds of investments in Charleston's tech sector this year.
But these investments act differently. Cryptocurrency buyers don't own a piece of the startups, but they’re betting on their success all the same.
Take Narrative, for example. The company is building what amounts to a blogging platform merged with a social network — the publishing capabilities of a site like Medium shoehorned into something like Reddit, where users share posts and vote on whether they like posts by others.
Narrative's big idea is that users should share in the advertising revenue its site generates. It’s letting people buy portions of the website, and writers whose posts get lots of interest will get paid, too — in Narrative's currency.
The bet by investors is that the website will do well — that lots of people will start using Narrative's digital coin and its price will rise.
Narrative's bet, on the other hand, is that by the time it's used up its investors' cash, it will have a stream of ad revenue flowing in.
Of course, it's also betting that the cryptocurrency market will hang on. Along with all the challenges of starting a business, it has to contend with the possibility of new regulations in an otherwise murky market and the prospect of investors getting spooked by virtual currencies altogether.
But in the tradition of Southern tech companies, it's also playing it safe.
Narrative's founders say they've taken care to adhere to the regulations that exist around cryptocurrency sales, and they insist they're different than lots of new cryptocurrency companies: Their coin is a financing mechanism, not a moonshot plan to replace the dollar.
"The underlying business need is not something that's going away," said Rosemary O'Neill, who co-founded the business with husband Ted. "The need for people to express themselves, the need for people to be rewarded for their work and the need for people to be in control of their own content and their own identity — those are things that have nothing to do with crypto. Those are things that are rock solid."
That's the tack Commit Good is taking, too. Clay Braswell, the company's founder, says his plan is to retool a company he already runs, rather than start something new from scratch.
His company's plan is to create a digital currency called the Good Token to nudge people toward volunteering and donating to charity.
The idea is that people could earn Good Tokens for volunteering their time or making in-kind donations. Part of Braswell's aim is to build a virtual thrift store, letting people sell their stuff online and send the proceeds to charity, whether or not it can afford a retail presence.
Narrative and Commit Good make up only a tiny portion of the emerging market for new cryptocurrencies. The cryptocurrency-tracking website Coindesk says initial coin offerings have generated nearly $13 billion — and most of that money has rolled in over the past year.
The size of the market in South Carolina is trickier to pin down, in part because the state doesn't track cryptocurrencies. The Attorney General's office, which doubles as the state's investment cop, says it doesn't follow initial coin offerings unless they're marketed as securities.
But regulators are wading in deeper. The U.S. Securities and Exchange Commission appears to be stepping up its enforcement, and it has gone so far as to create a fake coin offering to draw attention to the hallmarks of a scam.
States are jumping in too. Some 40 states and Canadian provinces announced last month that they were running an enforcement push called "Operation Cryptosweep." They targeted potential scams and companies that hadn't followed securities laws.
South Carolina issued one cease-and-desist order — against ShipChain, the Greenville cargo-tracking company. The state says ShipChain was selling a security that it hadn't registered with regulators.
The company says it will contest the Attorney General's order, opening a potentially precedent-setting case for the state's cryptocurrency businesses. ShipChain says it doesn't consider its virtual coin a security, and it says it didn't sell any to South Carolinians. It also limited sales to wealthy "accredited" investors who can take riskier positions.
ShipChain said in a statement that CEO John Monarch "and the young company are excited to build a globally impactful business in the Palmetto State, bringing high-tech employment in logistics to Greenville."
The company doesn't plan to sell any of its coins in the meantime.