Risks and Compensation for Investors:The object here is for me to pay my investors first. They put their hard earned (or mined) money with me, so the least I can do is pay them back in the most efficient manner.
Profits – Investors receive the first cut of any profits. Substantial profits as a result of the equipment will result in increased Buyback and Coupon Rate percentages.
Adjustments – The financial state of the company will be adjusted in the event that our Monetary Goal is not reached for the purchase of Five [5] BFL SC “Mini-Rigs”. Meaning, if I can’t afford 5, then I’ll buy as many as I can that still results in a stable financial sheet over the course of 15 months (October 1st, 2012 to December 31st, 2013).
Fund Failure – In the event that not enough money is raised for any purchases [or if the IPO is no longer feasible given extraordinary circumstances], I plan on buying back Notes at a rate 1.005x the Par Value (initial purchase price).
Transparency – All investors will have access to financial statements and documents regarding the progress of the Parent Company and Notes over the course of the asset’s lifetime.
Risk – All investors, whether in the actual New York Stock Exchange or the guy lending you $20, assume a certain degree of risk. As proprietor of the Notes, it is my job to try and minimize risk. As the investor, it is your job to understand the risks you take.
QA:I freely admit that I am basing these questions off of Friedcat’s post (
https://bitcointalk.org/index.php?topic=99497.0). I thought they were well written and addressed many of the questions a typical investor might have, so why not use them as well
Q: Wait, what? What’s a “Note”?A: A Note is similar to a Bond in that they both pertain to taking on debt for company purchases. A Bond is typically used to finance a large corporate purchase, has a maturity date of over 10 years, and is typically underwritten by an investment bank.
A Note, on the other hand, has a maturity date greater than one year but less than 10, does not need to be underwritten when under $1.5 million in requested funding, and does not need to be registered by the SEC (here in the US) when designed as a Secured Promissory Note. For this reason, a Note is much more aptly applied to my fund compared to a Bond or a Bill (secured debt with a maturity date established for less than one year).
Q: Really? Another Mining Equipment Note? Why…A: I’m not entirely sure why there is so much resentment towards these sort of Notes. A stock is issued to help grow a company; a Note is issued to help with purchases for said company, particularly for equipment.
In all honestly, mining equipment is the easiest way for me to build capital for my firm. Though my revenue stream would be based around block difficulty and BTC/USD value, it will still prove to be relatively stable over the coming year or two. I wrote an analysis on the feasibility of ASIC devices after a mass switch from FPGA, difficulty spike, and reward split, and as it turns out my idea is still quite profitable.
Remember, I’m not trying to be a “one trick pony” here. The object is to build my firm. Once that is set, profits from mining will be folded over into dividends for stock holders.
Q: An investment firm, eh? What do you plan on investing in?A: There are actually a ton of ideas flowing through my head when asked this. My favorite investments are in technology, clean energy, and property/land. I plan on creating various investment portfolios over time that deal with all of these. I plan on creating portfolios that deal with things like microfinance (through companies such as Kiva [kiva.org], or Lending Club [lendingclub.com]). You name it, if it looks like a solid long term investment, then I will consider it.
In other words, the ‘Too Long; Didn’t Read’ version is:
• Portfolio Management
• Venture Capital
• Microfinance
• Property Management
Q: Is your company actually real?A: As a matter of fact, all of the paperwork has been filed and approved, so
Korb and Co. Investments, LLC is quite real!
To that end, I am also currently abiding by all United States Federal and Vermont State laws (where I live). I have also spoken to a public finance lawyer and a business attorney regarding my plans. In short, there
shouldn’t be any issue with gathering virtual funds to cover mining equipment costs. This is because
A) I’m working 100% in bitcoins (which do not meet the SEC’s definition of a security under current government regulations),
B) I’m creating a secured Note to finance the company equipment, and
C) my total funds are under $1.5 million. As a result, I
shouldn’t run into any problems with the SEC or FINRA because a Secured Note at this value does not need to be registered by the SEC or underwritten by an investment bank.
Q: What about a Securities and Exchange Commission crackdown and regulation change? How would your company and fund react?A: In the event of a SEC crackdown, I would have a 30 day grace period (soon to be extended under the JOBS Act) to file for a
Regulation A exemption. To qualify as an Investment Company, I would need to have more than just “Investments” in my company name. I would also need an investment business plan and I would need to file regulation paperwork to the SEC and to FINRA. If I don’t qualify for
Regulation A, I would need to file for a
Regulation D.504 exemption instead, which would allow for my existing fund to continue because of its small size.
Q: Any other company owners?A: Nope! I’m the sole owner. This means I have the flexibility to make all of the decisions. If any investors have a particular idea or request, I’d be happy to hear them out!
Q: Why should I trust you?A: Trust isn’t given, it’s earned. I hope that by letting my investors in on the entire business plan, letting them know who I am, and letting them see what I am doing, they’ll see that is in an actual investment. I want to establish myself as a reputable Financial Manager, and I can’t do that if I go around scamming people
Q: Are you qualified to run a fund?A: Technically anyone can run a fund, regardless of experience. I’d like to think I’m a bit ahead of the curve because of my investing background and business familiarity.
Q: Why start your fund before ASICs are on the market and tested?A: The object is to have funds available and preorders in before the devices are released to market. This way, we can get our Rigs and start mining earlier than others. Otherwise, the Buyback period would need to be extended to compensate for the later delivery dates.
As for whether or not the ASIC Rigs will perform as promised, I trust that they would. Butterfly Labs has proven with their FPGA devices that the specs promised were also delivered. I don’t see why they would lie about their new ASIC products. Plus, imagine the outrage when $150,000 of equipment doesn’t do what it was promised to do!
Q: Why not look toward borrowing money for this venture?A: I’m pretty sure most lenders would laugh at me while I described making money through mining bitcoins
..Not to mention the extensive process, fees, and APR would lead to an infeasible project…and all the process of explaining what a “Bitcoin” is!
Q: What is your fundraising target?A: In USD, it would be around $375,000, which is equal to raising all 50,000 Notes at a market rate of $7.50. This would more than cover the cost of equipment and electricity, pay initial Coupon Rates until mining is fully underway, and have enough left over for Buybacks before the March 2013 ‘official’ buyback period.
Q: Why 50,000 Notes at 1BTC each?A: Sort of an arbitrary number I suppose, but I knew that I wanted more than enough funds by the end of the sale to cover all costs. Not to mention I like working with Integers, so 1BTC each kept things steady.
Q: $150,000 in ASIC assets is quite substantial. How will you secure it?A: One of the perks of working as a SysAdmin is getting to know people who work in datacenters. The equipment would be run and stored in the center for a monthly price (to be determined, since I'm still shopping around). Under most datacenters, equipment is insured against theft, fires, floods, and/or any other destruction. If anything happens, the insurance would cover the cost of replacing the equipment.
Q: So for each 1BTC I invest, what sort of return am I looking at?A: That all depends if your Notes are bought back 100% before the initial Buyback period, or if you make it all the way to December 31st, 2013.
Minimum: You’re looking at Five [5] months of 1% coupon earnings before the Initial Buyback, plus the 1.10BTC March buyback. So that would leave you a return of 15% (1.15BTC on a 1BTC investment…remember, this isn’t compounding so the math is pretty straightforward).
Maximum: For a 15 month holding, you will have received Five [5] months of 1% coupons, Seven [7] months of 2% coupons, Two [2] months of 4% coupons, One [1] month of 6% coupons, and a final buyback of 1.20BTC. This would mean a 53% return, or 1.53BTC per 1BTC invested.
Average: For the average investor, you have a 50% chance of making between the minimum (15%) and 19% (by April 2013 or so 30,155BTCs will be bought back out of the 50,000), which is still relatively substantial. The largest investors will undoubted last the longest.
It is key to remember, however, that this is all calculated under the best circumstances. If Butterfly Labs isn’t able to deliver their products (or is substantially late like the FPGAs), then I will modify the Buyback timeframe to reflect such instances. The same goes for Coupon Rates and actual hashing rates. If the difficulty absolutely skyrockets past even my predicted ‘worst case scenario’, then the Coupon Rate and Buyback costs will reflect as much.
I will work my financials to ensure that both my investors and I are in a mutual ‘win-win’ situation. The object is for everyone to make money, especially those who invested with me. I strive to take care of them first.
Q: How can I contact you with questions?A: Either via my email [
ASICInvestments@gmail.com], through the forum PM system, or directly on this thread.
