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Introducing the "Unbreakable Promise" As a Method Increasing Efficiencies and Decreasing Risk

Reggie Middleton's picture




 

Continuing on the margin compression theme originally laid out in Margin Compression Is Coming in the Payment Processing Space As $100 Million Pours Into Startups, I illustrate mathematically how the bit startups in the Bitcoin space will be forced to reach up the foodchain rungs faster than many think.

Valuation of BITPAY, COINBASE and CIRCLE

This is an exercise to arrive at valuation of three of the well-known Bitcoin applications that have recently been in news for funding from investors. Unlike high-level valuations assigned to these companies we analyzed revenues in much deeper detail, segregating value drivers and revenue streams and projecting them for the foreseeable future. This thus has enabled a more granular valuation than the high-level valuation that we see in the news for these companies in their recent funding rounds. 

Valuation Case 1- BITPAY

BITPAY revenue plan is based on monthly subscription model wherein the company charges $30, $300 and custom negotiated rates that are not published, under different subscription plans.  Currently, Bitpay claims ~30,000 subscribers.

For the purpose of calculating revenue from each plan, total subscribers (30,000) have been segregated under each plan based on their probability of occurrence (and put a nominal fee for ad hoc, a la carte and custom services on the higher ends of the range). Multiplying probable subscribers with subscription fee resulted in total revenue for the company. 

Table 1- Revenue Forecast, US$

 

Subscription Plans

2014F

2015F

2016F

 

     Plan 1

         10,260,000

         11,850,300

         13,310,257

 

     Plan 2

            4,320,000

            4,944,240

            5,501,950

 

     Plan 3

         10,260,000

         11,634,840

         12,826,248

 

     Plan 4

            5,400,000

            6,066,900

            6,625,055

 

Total Revenue

         30,240,000

         34,496,280

         38,263,510

 

As per the news for funding in Bitpay, its valuation is estimated at $160 million. If we apply multiple at which Coinbase and Circle are estimated to have been funded recently (using average revenue multiple of Coinbase and Circle), the valuation based on 2015 and 2016 revenues is as shown below:

  Table 2- Relative valuation

Particulars

2015F

2016F

Revenue ($)

         34,496,280

         38,263,510

Multiple Comparable- Coinbase and Circle

29.7x

25.3x

Valuation (US$mn)

                   1,023.47

                      968.13

Now, those of you who pay attention are likely to query, "Looks interesting... A billion dollar company within two years, but why is the valuation actually droppingin the 3rd year?". Well, this brings back to the article "Margin Compression Is Coming in the Payment Processing Space As $100 Million Pours Into Startups". You see, Bitpay and its contemporaries are growing like gangbusters (~6% to 10% per month!), but they are selling service with relatively low barriers to entry, and a lot of capital and competition climbing over the bow.

High competitionin a liquidiy bubble yields low, zero or negative (loss leader) margins. Valuations will follow suit, even as revenues and growth rates continue climb.

Bitpay revenue multiple forecast

If I am correct, then Bitpay (as well as contemporary start-up competitor Circle and Coinbase, in addition to more entrenched competitions Master Card, Visa, American Express and PayPal) will offer plain vanilla payment processing at negative margins in an attempt have it serve as a loss leader to rope merchants (etc.) into high margin, better defensible products and services. Cue...

Veritaseum Short public summary

 

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Fri, 06/06/2014 - 17:40 | 4831375 Fuh Querada
Fuh Querada's picture

Since when do valuations have any relevance for asset pricing?

Fri, 06/06/2014 - 16:01 | 4831104 Reggie Middleton
Reggie Middleton's picture

The state of the comment section on ZH is truly alarming. This used to be full of the smartest dudes in the room. Now it is a swarming place for trolls.

If any of you dudes don't like what I write, for any reason, why do you show up to read and comment? 

My venture is not a coin, it's method of creating "smart contracts" - unbreakable promises embedded into programmable money that replaces legal contracts and eliminates counterparty and credit risks.

The most successful venture capitalists in the world are dumping hundreds of millions of dollars into these startups, and one of the prescient fundamental analysts/investors in the media has dove in headfirst, yet the influential, smart and successful comment troll disagrees with them all to call the ventures scams, ponzis, etc.

Yeah, sounds about right...

My track record is still open for all to see. The trolls are all welcome to post theirs as well. Whoever fails to post thier track records, identities and accomplishments are urged to stop trolling! You're spoing the content of the site. I put significant fundamental analysis up here. Do the same BEFORE you comment!

1.  

Reggie Middleton Intro

2.  

How Reggie Middleton's Start-up
Patented The Future of Global Finance!

3.  

Reggie Middleton on Wikipedia

4.  

Who is Reggie Middleton?

5.  

Bitcoin is not
just digital currency. It's Napster for finance.

6.  

Reggie Middleton's UltraCoin @ NYC
CryptoCurrency Convention

 

7.  

Reggie Middleton Wins CNBC Stock
Draft for the 2nd time in a row - with the same stock

Fri, 06/06/2014 - 17:38 | 4831372 Exponere Mendaces
Exponere Mendaces's picture

Reggie, just post your articles and move on to the next item on the agenda. Most people here can't stand the fact that you examined Bitcoin and alt-coins and found them interesting enough to launch your own venture.

That's the core of it. These people are used to the usual "phyzz" rallying cry, and they aren't interested in new technologies. They'll take anything you post and relieve themselves on it, without even having read a word.

What you are working on is worthwhile, and it will, just like your other pursuits, produce yields you can be proud of in the future. Just accept that this place is a great dissemination point for financial/econ "scoops", but shit-poor in the distribution of trolls versus actual signal in the comments.

Take care, and don't let the barking seal-trolls get to you.

Fri, 06/06/2014 - 16:57 | 4831278 Toolshed
Toolshed's picture

Reggie, formerly, when you wrote articles filled with insightful financial analysis that were warmly received, ZH was "full of the smartest dudes in the room". Now that you post this ridiculous self promoting garbage that is widely ridiculed, ZH "is a swarming place for trolls". The only thing that has changed significantly, sadly, is you.

Fri, 06/06/2014 - 17:54 | 4831397 11b40
11b40's picture

No, plenty has changed, and Reggie is right.

I lose track of time, but it must have been about a year ago, we started getting a bunch of the Rushed Limbo dittoheads after he mentioned something about ZH on his show.  We were already losing a number of the really smart contributors as awareness that the "recovery" was not about fundamentals, but only about the FED.  This was where you came to get the real behind the scenes hapenings in the markets.

Now, the quality of the conversation has turned uglier, filled with drive by derogatory comments and profanity laced diatribes....too often inane drivel and hijacked threads by immature mental midgets.  

I come here primarily to learn.  It used to be that a lot of the posters had real insight gleaned from true market experience.  Now, not so much and fewer quality nuggets to savour.

Reggie has put up a lot of quality research that many of us appreciate, and he has been right on a lot if major trends.  I prefer him to much of what is here now.

Fri, 06/06/2014 - 16:29 | 4831188 zaphod
zaphod's picture

It's not just the comments, but the posts also have gone down hill.

There are still some worthwhile posts, but ZH has focused recently on high volume "filler" nonsense and it's definitely brought the blog down.

I think ZH would be much better if Tyler dropped back to just a few posts a day, and drop the filler (ex: drop the daily mark faber doom and gloom warning). 

Fri, 06/06/2014 - 17:19 | 4831313 crazytechnician
crazytechnician's picture

Agreed - and the Goldcore shit is wearing really thin. We need eyes on the future , all we get is gold this , silver that , boating accidents and freeze dried food and prepper shit. If that is the future of money then what is the fucking point ? May as well just bury it all in the fucking lake. Eyes to the future - digital , electronic - networks , global electronic is the future , Smart / Intelligent Contracts on a blockchain is nothing short of visionary , leave these ZH neanderthols to their freeze dried food , candles and diving gear.

Fri, 06/06/2014 - 22:44 | 4831853 williambanzai7
williambanzai7's picture

Why don't you go and start your own fucking blog if you dislike the readership here so much?

Just sayin.

Reggie,

I have spent a huge chunk of my time drafting offering materials in plain English so the dumbest moron at the SEC could understand what is being communicated to potential offerees. I think you have a great deal of work that needs to be done if you want people to understand how this works. To begin with, you need a jargon free explanation with concrete examples laid out in steps. A simple and extensive FAQ.

Moreover, constantly telling people you have applied for patents is not a very convincing tactic either. It reminds me of those morons who think they are going to bring down the TBTF banks with UCC filings.

There is no point in trying to communicate something unless it is coherent and accessible to the average reader. And you are doing your project a disservice by compensating with spectacle.

Finally, while I realise the SEC has liberalised the rules concerning placements and online solicitation and offering materials. I would think that any decent lawyer would be pulling his or her hair out looking at this stuff. The SEC has not eliminated the anti-fraud provisions and private action provisions. So whatever is promised in writing bears careful consideration.

If you want my opinion, you are beginning to sound like the derivative salesmen in Traders, Guns and Money. Not good...

If you want further input, you know how to reach me.

Best,

WB7

Sat, 06/07/2014 - 07:01 | 4832149 Reggie Middleton
Reggie Middleton's picture

I actually appreciate the input, thanks. This is the way all should comment on the posted content. As to the actual content, this is not a solicitiation or offer to buy anything, or a placement, so I'm not making the effort to explain what I do or how I do it. 

If that's the way this has come across then it failed in some form or fashion because it simply announces the company and states a few facts. I purposely avoided asking for money, discussing shares, offerings or anything else that would resemble me reaching out to the public as a securities sale because that's not what I'm doing.  I'm actually quite curious to know if anyone else gets that out of this communication because if more than one person sees it as a offering then someone else may as well - and that is far from my intention. 

It's a slippery slope when you have to state that your not selling something even when you didn't even say you were selling something, no?

Fri, 06/06/2014 - 14:34 | 4830762 oddjob
oddjob's picture

The food chain is a pyramid. A ladder has rungs.

Fri, 06/06/2014 - 15:44 | 4831035 gdpetti
gdpetti's picture

Not a pryamid, but a circle which operates as a cycle of increasing awareness which allows one to climb that ladder.

Reggie does some good work with seeing through alot of the corporate bs, same with Max Keiser, but both of them seem to have become addicted to this NWO digital SDR program of iCoinage.

IMO, the only point that matters is that conceptually speaking, every coin is the same and anyone and everyone can make up their own, thus all or equally worth everything or nothing.

That said, the difference between them then becomes promotion, which is usually done through control of the media and the message, and if all this fails, domination thru destruction.

A fiat is a fiat, and who does Mr. R think is really behind all of this alternative means of fiat creation? Hmmm?

This addiction of theirs has really affected their job performance and seems a bit pathetic, but then isn't that the way of an addict? Their friends and family shake their heads and can do nothing but pray for a quick collapse before any type of recovery can occur, same with our NWO style economies. We all know they can't last, and they aren't designed to, same with these coins, they serve as distraction devices to herd the stupid and ignoranct members of the herd into their pen for later consumption... taxes paid up front of course, and out of your account, which they really control, same as the ballot boxes, same as all the rest. The psychos are allowed to move in by their puppet masters who seek a bountiful harvest of negative energy. Thus the world we see today, one not needed for the future, thus the global police state for herd control and elimination, same as usual.

Fri, 06/06/2014 - 13:16 | 4830533 Toolshed
Toolshed's picture

stuff of nonsense

Fri, 06/06/2014 - 13:42 | 4830606 crazytechnician
crazytechnician's picture

If you dont have a clue why comment ?

This is obviously way above your intellect .

It's normal for the human to attack something they do not understand/ But instead of attacking why don't you do your homework and actually learn something ?

Fri, 06/06/2014 - 14:47 | 4830810 alien-IQ
alien-IQ's picture

If you haven't figured out that Reggie is nothing but a snake-oil salesman, then perhaps it is you that needs to learn something.

If you'll notice how few people here actually bother to post comments on shit Reggie scribbles, then you could begin to accurately conclude that those of us that have been here for more than three weeks are tired of his bullshit sales pitches.

If you feel a strong need to genuflect to him, perhaps you should consider becoming one of his paid suckers. I'm sure he'd love to get his hands on your checks.

Why ZH lets him continue to post his non-stop barrage of sales pitches here is a conundrum many of us wrestle with.

Fri, 06/06/2014 - 15:32 | 4830931 crazytechnician
crazytechnician's picture

I've been around here a lot longer than you think - every time I get one over on the ZH Flat Earth Society they go crying to mamma and my acc. gets shut down. Now , get back down into your damp bunker so you can open up another tin of your favourite long life tinned food - it is already 25 years old and it needs to be eaten before it goes out of date in 2040. You can fondle a few eagles at the same time as telling yourself they will be worth something soon , honest - really - it's only just a matter of time before the government shut down the power grid and internet - to stop bitcoin.

Fri, 06/06/2014 - 16:01 | 4831108 Toolshed
Toolshed's picture

"I've been around here a lot longer than you think - every time I get one over on the ZH Flat Earth Society they go crying to mamma and my acc. gets shut down."

And yet, you keep coming back! Seems like you are compulsively attracted to ZH, in spite of your derogatory remarks. This is a sign of a dangerously co-dependent personality disorder. I guess you have given up on women since, as we can all surmise from your comments, you have multiple restraining orders against you for repeated instances of stalking. I would recommend, that rather than evolve from physical stalking to cyber stalking, you borrow some money from your mommy and seek help from a local mental health professional. Please don't react in anger. I am just trying to help you. Good luck with your treatment.

Fri, 06/06/2014 - 17:04 | 4831282 crazytechnician
crazytechnician's picture

And Good Luck on your endeavours as well. But please - try not to wear any holes in those eagles as you tightly fondle them before you stash them in the bottom of the lake.

By the way anger is not really one of my things , usually what I suffer from is stomach cramps from laughing maybe a bit too much.  BTW the girls love it as well. Were you aware you can get any girls kecks off if you make her laugh hard enough ? Probably not , so you should really move along back into that shed of yours , it's empty space is lacking a Tool , plus there is a nice cold can of freeze dried long life prepper food waiting for you - it's just next to the tin foil hat and the instructions on what to do when the government switch off the internet. Don't forget to light your candle to see it ,and remember to keep those matches dry otherwise you will be waiting for daylight for a re-cap.

Fri, 06/06/2014 - 14:15 | 4830701 Toolshed
Toolshed's picture

Crazy, you should carefully re-read your own comment and then exercise a bit of introspection.

I realize that you may be incapable of understanding this recommendation, so allow me to translate, using small words, just for you:

You are a dumb ass. And now we all know it. Nice work......dumb ass.

 

Fri, 06/06/2014 - 15:18 | 4830944 crazytechnician
crazytechnician's picture

How many Tools in your shed ? Just you I suppose. Now , you too can either dump the Tin Foil Hat and move into the new paradigm , or continue to beleive that the Internet does not exist and that The Future of Money is a metallic substance which you hide in the bottom of some random lake with diving gear and a boat. Your Choice ...

Fri, 06/06/2014 - 12:59 | 4830492 Skin666
Skin666's picture

Bitcoin going from strength to strength Reggie : )

Do NOT follow this link or you will be banned from the site!