[Havelock][KCIM] Korb Investments – Establishing my Investment Firm, part 1

[Korbman]

Updated my Network Analysis from August to incorporate new data released by BFL, Avalon, bASIC, and a new average of mining pool worker speeds. As I expected, there was nearly a 70TH/s increase from my original minimum of 150TH/s, up to 217TH/s now. As a result, I've updated my financials to reflect profitability at a rate of 350TH/s (I try to maintain over a 100TH/s difference to ensure profitability can be achieved at much higher difficulties).

Due to the increase, I've reduced my buyback percentage from 32% per month to 30%, which maintains a stable balance sheet. And yes, it is still profitable as I expected it to be

EDIT: October 24th, 2012 -- Updated my October Analysis to include the new data BFL posted for their preorders, including the "Mini Single".

Here's my latest October Analysis.
Here are my updated Company Financials.

[niko]

Very glad to see this kind of effort, and double glad to see it on Havelock. Unfortunately, most all of my play dough is already tied up in other investments, and almost half that is double-tied up in the GLBSE mess. All I can say at this point: good luck. We are in the BTC credit crunch, people's funds are either trapped, or cautiously stored under matresses for now. I'll keep watching this project for now.

[Korbman]

--Updates--
After discussing my options with Lightbox (Site Manager of Havelock Investments) and a few of the members on this forum, I have decided to take some advice and limit my Fund a bit. Due to current market conditions and the unease amongst the investing community, I have cut my current market cap from 50,000 to 10,000 Notes, which will allow for the purchase of 2 Mini Rigs. If market conditions improve and the Fund does well over the next two months, I will increase the market cap with another offering.

I have updated all contracts and financials accordingly. Financially, instead of buying back 30% of Notes per month when the time comes, it is actually more feasible to purchase 25% at a time. This means a greater return for investors as they won’t have as many of their Notes purchased back at a time, thus more interest on outstanding principal.

As of 12:00pm (noon) today (October 26th, 2012), my Fund will officially be live! The initial offering has been established for November 1st, 2012 at 9am. This offering will continue until 4pm on December 31st, 2012 or until all Notes are purchased. During this time, all Notes can be purchased for 1.0 BTC each. Interest will begin to be paid to holders on the last day of November.

The sooner investments are made, the sooner I can submit my orders for the mining equipment!


We are officially LIVE!! The initial offering has been established for November 1st at 9am and will continue until 4pm on December 31st. This should give enough time to accumulate funds, make purchases, and give the market some time to heal.

[SAC]

I have cut my current market cap from 50,000 to 10,000 Notes, which will allow for the purchase of 2 Mini Rigs.

10,000BTC @$10=$100,000
2x minirig $29,899=$59,798

Left over $40,202/cost of rigs*100=67.23% markup.

[Korbman]

I have cut my current market cap from 50,000 to 10,000 Notes, which will allow for the purchase of 2 Mini Rigs.

10,000BTC @$10=$100,000
2x minirig $29,899=$59,798

Left over $40,202/cost of rigs*100=67.23% markup.

This is called a Liquidity (Financial) Cushion.

[SAC]

I have cut my current market cap from 50,000 to 10,000 Notes, which will allow for the purchase of 2 Mini Rigs.

10,000BTC @$10=$100,000
2x minirig $29,899=$59,798

Left over $40,202/cost of rigs*100=67.23% markup.

This is called a Liquidity (Financial) Cushion.

Uh huh sure it is. Your plan here somehow produces two thirds as much money as is required to pay for two machines. The operating costs on these things even if you rent $800 a month space to place them in paying $200 on electricity giving you $1000 outlay this gives you a 40 month "cushion". Anyone who believes that load of BS can PM me I have bridge in Brooklyn for sale going so cheap I'm virtually giving it away.

[Korbman]

Uh huh sure it is. Your plan here somehow produces two thirds as much money as is required to pay for two machines. The operating costs on these things even if you rent $800 a month space to place them in paying $200 on electricity giving you $1000 outlay this gives you a 40 month "cushion". Anyone who believes that load of BS can PM me I have bridge in Brooklyn for sale going so cheap I'm virtually giving it away.

Given your conspiracy theories, I gather you may not have taken a look at my financials, the equations associated with them, or read through the company agreements as well. You may also message me for any required information, or download them off my website. After reading these documents, my hope is that you can gain a broad overview of information regarding:

• Overall Business Plan
• Company Overhead
• Income, Expenses, and what a Cushion means
• Note Maturity, types of Debt Securities and Debentures, and causes for short term debt
• Interest and Principal payments, the associated scheduling, and Profit Sharing
• Importance and Legality of Company Agreements

Based off the information I've already written up, you would understand that your argument isn't mathematically possible.

[Korbman]

We are officially LIVE, the offering as started!


There are currently a little over 9600 Notes left out of the 10,000 Note cap.



EDIT: To purchase the Notes during the Offering, select Browse IPOs from the main user menu. Then select the 'Buy Now' link to purchase the shares at a flat 1.0BTC rate, instead of the market rate you'd normally find on the Bid/Ask page.

[Yogafan00000]

Forgive me if this question is answered somewhere else in the thread.  I couldn't see it.

Can you explain in more detail how you will decide which buyback period any particular note will be bought back in?

I notice you made reference briefly to 'the largest noteholders' lasting the longest.  Does this mean the more notes you buy the longer you will have to wait for the larger return?  What if I want out in the first buyback period? or the last?  As a noteholder, will I have a choice?, or are you choosing randomly?

[Korbman]

Forgive me if this question is answered somewhere else in the thread.  I couldn't see it.

Can you explain in more detail how you will decide which buyback period any particular note will be bought back in?

I notice you made reference briefly to 'the largest noteholders' lasting the longest.  Does this mean the more notes you buy the longer you will have to wait for the larger return?  What if I want out in the first buyback period? or the last?  As a noteholder, will I have a choice?, or are you choosing randomly?

Not a problem, I'll answer as best I can

So, at the beginning of March I'm currently set to purchase back 25% of existing Notes. If all 10,000 Notes are in investor hands, that means 2,500 Notes will be bought back at that time (leaving 7,500 outstanding).

With that in mind, let's say you own 10 Notes and another investor owns 100.

During the first month, I would purchase back 3 Notes from you (since you can't do partial Notes, it has to be rounded up) and 25 Notes from the other investor. After that one month, you'll have 7 Notes remaining, and the other will have 75.
The next month is the same thing..except this time I purchase back 2 from you and 19 from the other, leaving you with 5 and them with 56. After that, it goes 2 from you and 14 from them (3 and 42 left respectively), then 1 from you and 11 from them (2 and 31 left) ...then 1 from you and 8 from them (1 and 23 left)..and finally your last Note is purchased back while 6 from the other investor, leaving them with 17 left.

In this example, the investor with 100 Notes outlasted you who only had 10, technically meaning they "lasted longer". I think I explained all that correctly haha 

That said, at this time, Havelock doesn't currently have a way for Fund Managers to force a buyback, though I am working with the Site Owner on various ways to implement this. Once a system is implemented, it may be that I can customize the way I purchase Notes back. So if, for example, you wanted to pull all your Notes out during a particular month I might be able to fulfill your request..but that largely depends on how many Notes you currently have (Pulling out 2000 Notes for one particular person might not work financially). I'm more than happy to work with Investors on their individual needs though!

Did that help?

[Yogafan00000]

If I understand you correctly,  starting in March, you will be buying back 25% of everyone notes, rounding up, every month until December. The rounding up part will 'shake-out' so to speak, those noteholders with a really low volume.  According to my calculations, I will need to purchase a minimum of 27 notes to make it to the Dec buyback.

Here's a chart illustrating the buyback month along with the number of notes required to make it to that buyback month.

Month	Notes Req,d	Monthly Return
March	1	2%
April	2	2%
May	3	2%
June	4	2%
July	6	2%
Aug	8	2%
Sept	11	4%
Oct	15	4%
Nov	20	4%
Dec	27	6%

My first 10 notes, I will only ever make 2%/month over 6 months plus buyback of 1.10/note.
My next 16 notes, I will only ever make 4%/month over 3 months plus buyback of 1.15/note.
My 27th and remaining notes, I will make 6%/month over 1 month plus buyback of 1.20/note.

That about right?

[SAC]

If I understand you correctly,  starting in March, you will be buying back 25% of everyone notes, rounding up, every month until December. The rounding up part will 'shake-out' so to speak, those noteholders with a really low volume.  According to my calculations, I will need to purchase a minimum of 27 notes to make it to the Dec buyback.

Here's a chart illustrating the buyback month along with the number of notes required to make it to that buyback month.

Month	Notes Req,d	Monthly Return
March	1	2%
April	2	2%
May	3	2%
June	4	2%
July	6	2%
Aug	8	2%
Sept	11	4%
Oct	15	4%
Nov	20	4%
Dec	27	6%

My first 10 notes, I will only ever make 2%/month over 6 months plus buyback of 1.10/note.
My next 16 notes, I will only ever make 4%/month over 3 months plus buyback of 1.15/note.
My 27th and remaining notes, I will make 6%/month over 1 month plus buyback of 1.20/note.

That about right?

Well that is handy to have all laid out like that. F'n socket puppet accounts, how many do you have BTW?

[Korbman]

If I understand you correctly,  starting in March, you will be buying back 25% of everyone notes, rounding up, every month until December. The rounding up part will 'shake-out' so to speak, those noteholders with a really low volume.  According to my calculations, I will need to purchase a minimum of 27 notes to make it to the Dec buyback.

Here's a chart illustrating the buyback month along with the number of notes required to make it to that buyback month.

Month	Notes Req,d	Monthly Return
March	1	2%
April	2	2%
May	3	2%
June	4	2%
July	6	2%
Aug	8	2%
Sept	11	4%
Oct	15	4%
Nov	20	4%
Dec	27	6%

My first 10 notes, I will only ever make 2%/month over 6 months plus buyback of 1.10/note.
My next 16 notes, I will only ever make 4%/month over 3 months plus buyback of 1.15/note.
My 27th and remaining notes, I will make 6%/month over 1 month plus buyback of 1.20/note.

That about right?

Exactly, you seem to be right on track and the math looks good. 

Remember, however, that the Fund is scaleable. Meaning if I only raise, say, 1,000 BTC by the end of December, the financials will look different than if 10,000 BTC are raised. This is because the buyback rate would fluctuate to maintain a stable "bottom line" (ensuring the account never goes negative). At the 10,000 BTC cap, a 25% buyback per month rate mathematically works flawlessly. At 1,000, however, the rate would need to be 15% instead to achieve the same stability.

The lower percentage is a direct result of revenue not being as high (with 1,000 BTC, I would be purchasing Singles instead of Rigs). At 1,000 BTC, it's quite a bit more financially feasible to purchase back 15% per month compared to 25%.
For example, at 25%, the bottom line looks like:



At 15%, on the other hand, the bottom line is:

[zapeta]

Something that I didn't see mentioned but may have missed...is there any risk due to BTC/USD price changes?  I'm assuming that BTC will have to be sold to purchase the rigs, so there is probably some risk there.  Will dividends then be paid using the BTC mined once the rigs are online?  I just want to make sure that there won't be a situation where you need to purchase BTC to make the interest payments or buybacks but can't because BTC prices have shot up to some crazy number like $50/BTC.  I think that sort of situation impacted some earlier mining companies when they planned on getting $2/BTC forever and then BTC jumped to $5/BTC.

Thanks!

[Korbman]

Something that I didn't see mentioned but may have missed...is there any risk due to BTC/USD price changes?  I'm assuming that BTC will have to be sold to purchase the rigs, so there is probably some risk there.  Will dividends then be paid using the BTC mined once the rigs are online?  I just want to make sure that there won't be a situation where you need to purchase BTC to make the interest payments or buybacks but can't because BTC prices have shot up to some crazy number like $50/BTC.  I think that sort of situation impacted some earlier mining companies when they planned on getting $2/BTC forever and then BTC jumped to $5/BTC.

Thanks!

Ah, yes this did actually come up before, but it was in my old thread. It's good that it was asked here as well!  

Thankfully, the Fund is solely in Bitcoins. Butterfly Labs allows for purchases through Bitcoins as well, which cuts out the exchanges and the need to transfer money back and forth. That said, technically there is still risk. Say I had 3,000 Bitcoins. At the price right now, I could buy a Mini Rig for around 2,800 BTC...but if the price suddenly plummets to $2 a coin, that BTC price goes up to 15,000. Of course, the opposite could also happen..say if the ratio went up to $30 a coin, I suddenly could buy a Rig with only 1,000 BTC instead.

Once the equipment is purchased, the price fluctuations shouldn't have much of an effect on overall revenues and mining operations. If there is ever a need for me to purchase more BTC to make payments, it means I'm not doing something right

[Aahzman]

So, based on the 27 units example above, estimated profit would be 5.7BTC? not counting possible bonuses/fluctuations?

[Aahzman]

Interest/Month      
November                 0.27000000   
December                 0.27000000   
January                 0.27000000   
February                 0.27000000   
March                 0.27000000   
Buyback                 7.70000000   
April                         0.40000000   
Buyback                 5.50000000   
May                         0.30000000   
Buyback                 4.40000000   
June                         0.22000000   
Buyback                 3.30000000   
July                         0.16000000   
Buyback                 2.20000000   
August                 0.08000000   
Buyback                 2.20000000   
September                0.06000000   
Buyback                 1.15000000   
October                 0.08000000   
Buyback                 1.15000000   
November                 0.04000000   
Buyback                 1.15000000   
December                 0.06000000   
Buyback                 1.20000000   
      
Buybacks Per month   Units Bought back   Units Left
March                                7                        20
April                                        5                      15
May                                        4                        11
June                                        3                        8
July                                        2                        6
August                                2                        4
September                                1                        3
October                                1                        2
November                                1                        1
December                                1                        0

[Korbman]

So, based on the 27 units example above, estimated profit would be 5.7BTC? not counting possible bonuses/fluctuations?

[....]

Oh no!! You seem to be exactly right. I created an excel sheet to calculate it out and I came up with the same answer, which has me a bit concerned given my previous statements. When I originally did my quick calculations, I did it on straight addition...meaning if you have 1 Note and you keep that 1 Note the entire time, then you'll have X% ROI because month #1 + 2 + 3 = whatever %% total.
The reality is that I needed to take a weighted average to get a proper ROI based on the current buyback program, which is [currently] a flat 25% from everyone at a time. If the program was more of a 'round robin' approach, then my original statement would still be somewhat valid.

Thank you for pointing out this huge flaw Aahzman. I will update my original projections and the update section accordingly, noting the differences.

[markm]

An investment professional who can't do accounting-math. Just what we need more of around here, congratulations.

What university was it you learned this stuff in, again?

-MarkM-

[Korbman]

An investment professional who can't do accounting-math. Just what we need more of around here, congratulations.

Everyone makes mistakes from time to time. I don't expect you to be perfect either. The important part is that I not only acknowledged the error, but corrected it as well

And for the record, I never made mention of myself as a professional..that would imply I do this for a living. I'm a well-versed amateur with a strong sense for business operations and a heavy background in tech