Loan for ASICs

[mining4fun11]

I wanted to give a little bit of an update on this program.

1) Thanks for the well wishes in pm folks.  I'm back to (almost) full health now.

2) I'm considering some type of stair stepped % of interest the lender would earn to further reduce the risk/reward ratio.  This would be based on the amount of time it takes for the lender to make back his principal.  This would obviously shift more risk to me, but I feel if this can be done reasonably, it would be further incentive for more lenders to join me. 

3) bASIC announced today that they are getting close.  Per Tom aka cablepair at the BTCFPGA forums: "The chips will be on time, and the board design is coming along very nicely. Dare I say we are close to completion."  This gets me excited, and I hope if you'd like to invest in an ASIC, but for whatever reason (customs, electricity, shipping, space, etc.) you just don't have the ability to do it on your own, let's work together and make a little BTC 

We will have to see if there is any asics.  At this point everything at this point has just been empty promises.

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[Nolo]

We will have to see if there is any asics.  At this point everything at this point has just been empty promises.

I think the odds of there not being ANY ASICS are extremely low.  Now as far as the time period on when they are shipped, that's the million $ question. 

[gopher]

Hi Nolo,

I've read through this thereat as well as the other one where you publish the defamation and the ponzi articles.

Great work.

Although I don't have any spare BTC to send you (sorry, everything I mine, I save so I can buy myself a mini-rig or two!), may I offer you my opinion about the structure of your loan proposal.

I would not bother with a TL:DR trailer, as I am sure you enjoy reading stuff (like I do, lol)

My credentials: 14 year as a senior partner in a top 10, 32 year-old Private Equity firm - successfully raised two funds (total +/- $305M), one at the top of the IT bubble, one at the aftermath. Exited both funds successfully within the investment horizon. With the profits bought myself an airplane. Now struggling to keep-up with its running costs, bummer!

Here comes my analysis and opinion.

To structure this as a loan is wise.

Alternative would have been to offer an investment opportunity, your argument against that is self-explanatory.

But the loan structure will present its own challenges.

First question, are you securing the loan (not sure if the mining-rig is / can be held in escrow?). If you are, then you potential customers will fall into two categories - one that is looking to receive interest form the capital he/she has at hand and second, someone who has secured a credit line with his/hers bank at an interest rate lower to what you are offering and contemplating to do a back-to-back deal and profit from the interest arbitrage.

If you are not securing the loan, then I doubt that people will queue to offer you the loan - its just too unpalatable, the risk is too unbearable.

Looking at the parameters in your offer, I see another issue.

You are guaranteeing 1 x money back at unspecified Internal Rate of Return (IRR) + 10% interest in perpetuity after the 1 Time Money Back (TMB) period

You will agree, such offer is very different to what one would get from his/hers Bank. And if one cannot figure out what his/her deal would be, one would usually walk away from this opportunity, irrespective of how lucrative it may look.

So, here is my view, perhaps you may re-look your business-plan and come with more similar rather than different to the traditional lenders proposals

If I was you, I would re-structure the offer as follows:

1. Start by asking for an unspecified initial payment holiday period, subject to the ASIC-rig supplier supplying you with the equipment + 1 week setup time (this defines the initial risk - similar to what you have already stated). Bank agree on initial payment holidays all the time. You prospective lender will understand this as well.

2. Provide guarantees for the rig while at your possession - I am not sure how you would do that, but it will be a great thing if you manage to do. Banks rarely offer unsecured loans, and only if they can blend it with some other risk

3. Offer let's say 100% IRR with an option to increase the IRR as the market conditions allow - this in effect means that you are going to pay back the lender 100% of the loaned amount within the first 12 mounts (including the holiday period), or sooner if market conditions allow it. There is a certain risk for you in this initial period, but it does give you the flexibility to react if things do not go well for you - let's say in moth 9 you managed to re-pay 50% of the loan, then you will have 3 months to sell the equipment, even at loss, and re-pay the other 50% (providing the holding-of-security agreement allows it).  

4. After the 1 x money back grantee, then you must specify a return (interest if you like) per period of time. The actual percentage is irrelevant, as long as it is specified per commonly acceptable period - month, year. So when you stated 10%, it must be per month or per year - the prospective lenders will understand.

5. Then you have to stop somewhere - otherwise this is not a loan. I am sure you know the law, but a loan has a maturity date. State it. The the prospects can calculate their return on the money they "loaned" - either in terms of IRR or TMB, or both.

I'll shutup now.

[Nolo]

Hi Nolo,

I've read through this thereat as well as the other one where you publish the defamation and the ponzi articles.

Great work.

Although I don't have any spare BTC to send you (sorry, everything I mine, I save so I can buy myself a mini-rig or two!), may I offer you my opinion about the structure of your loan proposal.

I would not bother with a TL:DR trailer, as I am sure you enjoy reading stuff (like I do, lol)

My credentials: 14 year as a senior partner in a top 10, 32 year-old Private Equity firm - successfully raised two funds (total +/- $305M), one at the top of the IT bubble, one at the aftermath. Exited both funds successfully within the investment horizon. With the profits bought myself an airplane. Now struggling to keep-up with its running costs, bummer!

Here comes my analysis and opinion.

To structure this as a loan is wise.

Alternative would have been to offer an investment opportunity, your argument against that is self-explanatory.

But the loan structure will present its own challenges.

First question, are you securing the loan (not sure if the mining-rig is / can be held in escrow?). If you are, then you potential customers will fall into two categories - one that is looking to receive interest form the capital he/she has at hand and second, someone who has secured a credit line with his/hers bank at an interest rate lower to what you are offering and contemplating to do a back-to-back deal and profit from the interest arbitrage.

If you are not securing the loan, then I doubt that people will queue to offer you the loan - its just too unpalatable, the risk is too unbearable.

Looking at the parameters in your offer, I see another issue.

You are guaranteeing 1 x money back at unspecified Internal Rate of Return (IRR) + 10% interest in perpetuity after the 1 Time Money Back (TMB) period

You will agree, such offer is very different to what one would get from his/hers Bank. And if one cannot figure out what his/her deal would be, one would usually walk away from this opportunity, irrespective of how lucrative it may look.

So, here is my view, perhaps you may re-look your business-plan and come with more similar rather than different to the traditional lenders proposals

If I was you, I would re-structure the offer as follows:

1. Start by asking for an unspecified initial payment holiday period, subject to the ASIC-rig supplier supplying you with the equipment + 1 week setup time (this defines the initial risk - similar to what you have already stated). Bank agree on initial payment holidays all the time. You prospective lender will understand this as well.

2. Provide guarantees for the rig while at your possession - I am not sure how you would do that, but it will be a great thing if you manage to do. Banks rarely offer unsecured loans, and only if they can blend it with some other risk

3. Offer let's say 100% IRR with an option to increase the IRR as the market conditions allow - this in effect means that you are going to pay back the lender 100% of the loaned amount within the first 12 mounts (including the holiday period), or sooner if market conditions allow it. There is a certain risk for you in this initial period, but it does give you the flexibility to react if things do not go well for you - let's say in moth 9 you managed to re-pay 50% of the loan, then you will have 3 months to sell the equipment, even at loss, and re-pay the other 50% (providing the holding-of-security agreement allows it).  

4. After the 1 x money back grantee, then you must specify a return (interest if you like) per period of time. The actual percentage is irrelevant, as long as it is specified per commonly acceptable period - month, year. So when you stated 10%, it must be per month or per year - the prospective lenders will understand.

5. Then you have to stop somewhere - otherwise this is not a loan. I am sure you know the law, but a loan has a maturity date. State it. The the prospects can calculate their return on the money they "loaned" - either in terms of IRR or TMB, or both.

I'll shutup now.

Homerun of a post.  Thank you very much for your input.  After reviewing your suggestions, I will be implementing a version of them in all future contracts I enter into regarding this venture.  Thanks again.