I've stumbled across this thread before, but I hadn't made a concerted effort to dig into the content.
It seems my recent postings breaking down and analyzing other up-and-coming funds has garnered a bit of attention, both on and off the forums. Why? I don’t know. I've always assumed I was just asking basic questions, and I don’t consider myself an expert by any means. Regardless of this, it seems quite a few people have found my postings to be helpful.
Smidge contacted me directly to ask if I’d take a look at his business plan and to provide honest feedback. What you’ll read below is the result.
And before anyone asks (as I’m sure someone would), no, I did not receive compensation (of any kind) for my efforts, nor do I plan on receiving anything in the future. The questions and comments written below were done on my own accord and represent my opinions.
I've noticed that Smidge mostly points everyone to look at his business plan and website for answers to various questions. As such, this post will be a breakdown of the plan (aside from basic definitions of phrases on his website, everything just points back to the plan anyway).
Another note on this, I’m focusing my questions
just on the business plan for the moment. Questions I've asked may have already been answered or hinted to with the thread, and for that I apologize.
By now I’m sure most of you have seen this disclaimer, so I might as well keep with the trend. Yes, this will be an extensive post and I apologize. As a forewarning, my responses may sound rude and/or condescending, but I assure you I don’t mean them that way. I imagine it as if you and I are sitting at a table and I’m asking these questions with more of an upbeat attitude.
Generally speaking, the willingness of the OP to thoroughly answer any and all questions can be indicative of the effort they’re willing to put into their business.
I suppose we’ll start off here. Typical mix-up since they’re similar, but this isn't a business plan, this is a prospectus.
A business plan lays out the goals of the company and how you want to (reasonably) attain them, as well as disclosing the company management structure and the company financials (income/balance/cash flow statements).
A prospectus, on the other hand, is typically used in securities offerings. It provides detailed information about the security that will be offered, tying in details about the company’s current business, financial statements, etc.
Purpose
[unneeded marketing jargon]
The purpose of Smidge.Com (“the fund”) is to allow investors to participate, in an overly proportional manner, in a diverse number of assets that exist in the crypto currency space, managed by experienced investors.
Can you describe how your operation is able to invest in an “overly proportional” manner? The phrasing in this situation is a bit unusual…but that may just be discrepancies in language, leading to confusion.
‘Experienced’. I’ve seen that word (and/or its synonyms) pop up a number of times during my reading, yet I haven’t seen any indication of past performance (either here or on your website). In your post history, you've made mention of investing in ASICMiner and some domain names, but not much else than that.
The fund holds assets in Bitcoin (BTC), Litecoin (LTC) and, to some extent, alternative crypto currencies (Altcoins). The fund may be supplemented by other assets, like hardware (not planned at launch). The Fund's portfolio will be public to show proof of ownership of underlying assets.
Are you considering building out a plan for adding mining hardware in the near future? If so, what hardware would you have in mind?
Smidge.Com aims to become the largest BTC investment fund by market capitalization, building trust for investors, start-ups looking for capital and the digital currency community as a whole.
That’s an
extremely lofty goal for someone relatively new to the forums and without any provable Bitcoin trading experience prior to starting the fund. I’m not saying it isn't possible; what I am saying is to focus on building a solid foundation for your company first, growth comes later.
Strategy
The fund will primarily invest in BTC, LTC and, to a certain extent, Altcoin, assets. This is done in order to maximize returns and issue those as dividends to investors on a regular basis.
So, your business strategy is to “invest in securities and make a return”. That is
not a strategy, that is a purpose; that’s what your company is
supposed to do.
The strategy is being executed by applying the expertise of the management team in the fund’s day-to-day operations. Additional activities that are difficult or not at all possible for the small scale investor will include:
- Participating in bulk offers (auctions) of discounted shares
- Approaching and participating in start-up operations pre-IPO (as venture capitalist and advisor)
- Approaching individual shareholders for large, uncomplicated buyouts of private shares at a discount (avoiding auctions)
- Expand influence in the assets by becoming major shareholders, occupying board seats and other positions with greater influence
- Investing in direct shares, avoiding fees completely
- Becoming a trusted entity and a contact point for advice- and capital-seeking start-ups in the crypto currency world
Phew, you are dreaming quite large right now. This list doesn't seem to correlate to any particular strategy since these are just [
super] long term goals. I get the feeling you’re planning as if you’re going to get
BTC1,000 tomorrow and you’re trying to figure out how to invest it.
Unfortunately for you, I've been in this
exact position before. I
know that rush when entering the Bitcoin markets; where constraints are loosened and you feel as if you can create anything from the ground and up; to be a part of something still in its infancy and the urge to help it grow.
But I’m here to help provide a reality check. You’re
not going to get the funding you’re looking for, and to get even a tenth of that amount would require a substantial amount of time and effort. As you read this (and continue through the other points), my hope is you’ll understand why.
The combination of the fund’s efforts is expected to lead to an asset valuation that, in mid and long term, significantly outperforms the market.
How do you outperform a securities market that has no statistical/averaging data and has only been around for about a year and half? A line must be drawn in order for you to “outperform” it, so where/what is that line?
If you’re referring to the Bitcoin currency market, how do you plan on beating a performance of 1000% (over the past 12 months, and only taking into account last year’s price and today’s price, not the $265 high)?
The fund will initially be launched as “Smidge.Com A”, A hereby classifying the first tranche. Other tranches of the fund might be launched by the management team in the future, classified as “Smidge.Com B”, “Smidge.Com C” etc. with different areas of operation, strategies, assets and/or splitting of shares. Shareholders of the previous tranches will be offered discounted shares in advance. The management team will disclose the processes after successful IPO of “Smidge.Com A” and after new tranches are deemed necessary.
“Might” be launched, or will be launched? I can see the purpose of various tranches over time, but that’s not something to focus on.
And speaking of these tranches…
Structure
The fund is a virtual identity held by investors of Smidge.Com, a company in the course of incorporation [1]. at the time of release of this document.
The shareholders of the fund “Smidge.Com A” will hold 765,000.00 shares, while Smidge.Com shareholders will hold 135,000.00 shares. Each of the funds’ shares always equals to 1/900,000 [2] of the total profits and voting power of the summed value from both the fund and Smidge.Com.
[1] – How far through the incorporation process are you, and what is your official company name?
[2] – Based on what I've read so far (and what I’ll get into more thoroughly below), each tranche (A, B, C, etc) will have 900,000 shares with it?
Speaking to just the 900,000 in “A”, you've determined that you’ll hold 15% (135,000) of it because…
why?
Tying into this part is:
Raising Expansion Capital & IPO
After accepting pre-IPO investments from individual investors (private offering) for a limited time [1], the fund will be offering shares of stock to the general public through an IPO on one or several virtual security exchanges, as soon as negotiations are concluded [2]. Any listing fees will be paid by the company Smidge.Com, not the fund’s cash reserve or assets.
Details of the “Smidge.Com A” private offering:
- Number of shares available: 315,000.00
- Pre-IPO share price: 0.02 BTC [3]
- Shares can be acquired in packages consisting of 250 shares (5.00 BTC per package)
[1] – Ah, the deadly sin of any up and coming business: making sure the purchases are “limited time” offerings. It’s a fantastic way to look like a Ponzi, or other ill-intentioned scheme, regardless of your intentions. I know the purpose of a private offering in normal fiat markets, but here in Bitcoin they typically don’t bode well. The “Get in Now” attitude has a negative stigma around here.
[2] – What Exchanges are you looking to host on? I've seen mention of BTCT, but are there others? The problem with not being listed on an Exchange is
liquidity. Transferable shares are great if people
actually want to buy into your asset, but that takes a substantial established company to make happen (like ASICMiner).
[3] – Good god man, you’re valuating your Smidge “A” shares at
BTC18,000 for the 900,000 total shares? Not only that, you've granted yourself
BTC2,700 of the total (equaling 135,000 shares) for no other reason than “management”?
To that end, why 315,000 shares? What happened to the remaining 450,000?
You’re sights are set
WAY too high (hence why I said “you’re not going to get the funding you’re looking for” above). On top of that, you don’t have anything to back up the valuation.
In order to participate, please visit the page “SMIDGE.COM A DIRECT SHARES” on
www.smidge.com . You can then use the contact form or contact username “Smidge” on bitcointalk.org.
Shares can be transferred owner-to-owner at any time by involving the fund’s management team. For more information, please visit the page “SMIDGE.COM A DIRECT SHARES” on
www.smidge.com or PM username “Smidge” on bitcointalk.org.
You seem to be repeating yourself here…
Other than that, for what reason should investors purchase private shares? As a third party, this is incredibly sketchy. You’re asking for us to send money to a privately generated address with the promise of getting some virtual transferable shares (and all completely off an exchange). So if tomorrow you decide to up and leave, that’s it; the coins are gone.
Am I one of the few that sees a problem with this?
Management team and personal commitment
Management team currently consists of Smidge as CEO, through whom most of the communication will be done. There are two shareholders of Smidge.Com [1] consulting him in operations and finance, who have access to documents assuring the continuity of the fund in case Smidge catches a cold, gets hit by a bus etc.
Smidge’s ID, E-Mail and phone number have been verified with Mt.Gox [2].
The management team/consultants personally know each other since several years and have worked and invested together on multiple occasions. They are obliged to each other and Smidge.Com through a legal binding contract. [3]
[1] – Any chance of divulging this information, or will they just be silent partners that we’ll never know? If the latter, then what’s the point of revealing this information at all?
[2] – So what? Mt. Gox has absolutely nothing to do with your business. The object here should be to verify your identity with any Exchange operators you’re looking to be hosted on. And if you’re looking for more transparency, then verify with your Investors as well. It makes it easier than doing a WhoIs on your website and tracking names through any social media accounts.
[3] – Similar to my statement on Sandstorm, both this and #1 are just “words on paper” with nothing to back up your claims. If you’re looking for transparency (which we’ll touch on momentarily), then information on partners and contracts involved is almost necessary.
The management team transferred an initial investment of 24.6349 BTC [1] into the fund on July 21st, 2013. These assets, as well as any profits generated through them, will be part of the fund at its announcement date (July 21st, 2013). More physical and virtual assets (BTC, LTC, Altcoins, mining equipment…) are planned to be brought into the fund or it’s tranches at a later time as donation [2], for additional value without dilution of existing shares.
[1] – Just so I have this straight, you and your team have committed nearly
BTC25 to your company, yet you've granted yourself a
BTC2,700 holding out of your proposed market cap of
BTC18,000 with no existing revenue streams? As some internet users would say, “lolwut?”.
[2] – I’m not sure how this makes any sense. You’re going to conjure assets from somewhere, and then just give them to your fund as a “donation”?
In short, don’t do this. Keep your company holdings and financials separate from your own, because if the time comes to cash out, there will be nothing but trouble as you go “oh, I let my company use
my shares and
my mining equipment, so I’ll take them back now”.
TransparencyThe fund seeks maximum transparency by
- fully disclosing all assets held in the fund regularly
- disclosing all dividends accrued and paid
- disclosing all management fees
- operating a website at
www.smidge.com for public information
This is a start, but certainly not enough.
We know nothing about
you and your history, and before April 2013 you didn't exist. There’s more to transparency than disclosing what you invest in. There’s the matter of management biographies, company financial statements, risk management strategies, and the like.
Underlying assets of the fund
The management team will buy and sell previously mentioned asset classes in the best interest of the fund in its day-to-day operations in order to maximize returns. Shareholders can bring forward motions to add or remove assets to or from the fund at any time.
As if you wouldn’t act in the best interest of the fund? I’m not sure why this sort of phrasing is needed. If I’m putting money with an investment management company, I automatically presume I’m investing in people who have the fund in their best interests.
Dividends
Dividends will be paid from earnings accrued from the underlying assets of the fund. Additional dividends might be paid from earnings out of trading activities. A portion of earnings might be reinvested into assets.
Dividends will be paid weekly, usually every Sunday. Additional dividends might be paid at any time if deemed necessary.
Why pay weekly if you’re intention is to be a long term investment vehicle? I'm really just curious if there's any reasoning behind it, as compared to bi-weekly, monthly, etc.
Risk to shareholders
The fund's market cap and NAV rely on the value of the underlying assets and the share price decided upon by the market. If the underlying asset value decreases, the entire fund's market cap and NAV will also decrease. Additional risks to assets include the price of BTC, losses related to trading activities as well as other risks. The fund does not hedge against all of these risks. Each shareholder must understand these risks before investing.
So much for a long term investment…
Are there any strategies you've currently implemented to hedge against at least some risks? If so, what sort of risk management is at work? It's a hard question to answer, but let’s see if you can describe anything other than Sandstorm’s “Simple risk management” phrasing.
Legal aspects
The fund is a virtual identity. As with all digital currency funds and securities, everything is virtual, which to the best of our knowledge is perfectly legal. Please do your homework and read this document thoroughly before investing.
This notion is rapidly changing. Here in the States, I have a feeling the SEC will begin to move against existing virtual securities and adjust the federal regulations accordingly. Germany (and other EU countries) will undoubtedly feel pressure from the US on these matters. As Bitcoin grows, there’s no reason to think regulatory committees won’t start pushing.
When the time comes, what will you do in the face of regulation? What laws and regulations do you think could apply to your company, and do you feel you can aptly adapt them?
Fund Closure
Management reserves the right to close this fund for any reason giving 30 days’ notice. All assets in the fund, will be liquidated on the respective markets. Distribution to shareholders will be done according to a public, defined timeline and action plan.
Why would the fund ever be closed down? And isn't the object of having multiple partners to limit the chance of this happening?
In any case, I presume by
all assets this includes currency holdings (including any company fiat), stocks, bonds, and physical hardware (mining equipment if any)?
--------------------------
Alright! I suppose that’s all I can manage for now, though I do look forward to the responses. To the other posters in this thread, some of you may recognize your questions reworded as to cite examples from the business plan. This wasn't an accident as I noticed Smidge wasn't answering a few questions all that thoroughly. Maybe I’ll somehow be an exception given I was
asked to respond?
To: Smidge –
Here’s the honest reality check.
You are not experienced in Bitcoin securities trading (based on the information you've provided us).
You are looking for a massive company valuation based on essentially nothing.
You are not trusted (it’s earned over time, not just given out).
You are a new forum member and you are new to Bitcoin overall (so far as I've been able to determine).
Combined together, you’re nearly in the same situation as the Sandstorm security, which seems to be your primary competition (though I’m sure there’s more, and anyone please feel free to enlighten me on this).
That said, why should investors put any money with you over Sandstorm? After all, Sandstorm is at least being actively traded on an exchange (which makes purchases and sales
vastly easier overall, even if the IPO
was terrible), and its owner currently holds 40% of the total asset. By reading the business plans for each company, the distinction should be obvious, but unfortunately this isn’t something I can say is true.
In the end, no one is perfect and I don't expect them to be. For many people, this is quite a learning experience when starting out (I know it was for me). Let's see if we can work through this!