So you're asking for 1.4 million (2400 BTC * $600 per coin) for a company that had 450k in sales and grossed 75k in profit last year?
Have you lost your mind, son?
I hope you do well because I live about an hour from you and have a 25TH (and growing) mining operation, and it would be nice to have a bitcoin mining hardware supplier close by, but that valuation is absurd.
Also, I urge you to focus on the most profitable parts of your business and not try to expand in too many different directions at once.
Developing your own chip is crazy talk and a great way to go broke in a hurry. Multiple companies already have chips with similar specs (Bitmain, Spondoolies, Knc, Bitfury, and ASICMiner), so it's pretty clear that we're reaching current technological performance limits, so investing millions to try to re-invent the wheel is probably not the best idea.
Do you really need 1.4 million dollars of other peoples money to expand your business? Again, why can you just focus on the most profitable parts of your business and grow the business organically without putting a large amount of other peoples money at risk?
Please note that $450k was last year. We grossed about $400k in the first half of 2014 alone (again, P&L is forthcoming). We think that this justifies the valuation. Yes, its aggressive, but unlike every other company trying to promote itself on Havelock/ect, we have an actual track record of sales and deliveries.
Developing a chip IS crazy talk. We are not going to deal with that at any point in the near future - that is, maybe, a 3-4yr goal *if* we felt like we had enough contacts to charter our own chip. A more likely scenario would be working with the major chip fabricators to do a line of products, which is much less capital-intensive (e.g. what RockMiner has done - we already have good relationships with a few fabricators. But the cost to develop your own line of miners is about $300,000-500,000 if you want to do enough product volume to get a reasonable price on chips and components).
On organic growth - the problem that we have is a lack of capital. Lets say we have $50,000 in liquid capital that we can allocate to purchasing products. It takes us 2 weeks to acquire products from the factories (BitMain, RockMiner, ect), then another month to turn 100% of the inventory for a 20% return on the spent capital, or $10,000 in 6 weeks. Once you factor in overhead - lease, utilities, staff payments, ect, that $10,000 dwindles down sizably. This assumes you can turn 100% of the inventory in a month, which may or may not be true (we have some products like risers that have been sitting for months).
Compare that to the alternative scenario of having $500,000 in liquid capital available for product purchases. In this scenario, we spend the $500,000, get the products in two weeks, turn the products in 5 weeks (lets add an extra week in for safety's sake), and make the same 20% return. We have made about $100,000, but still have the same fixed costs of staffing, leasing, and other overhead.
So in one scenario, we see a net profit of $3,000 - $4,000 in 6 weeks. In the other, we see a net profit of $75,000 in 7 weeks. Which scenario do you think we want to pursue?
On profitability, our focus is on the following:
- Bitcoin ASICs (10-20% margin, very high volume)
- Litecoin ASICs (10-20% margin, lower volume)
- Custom-fabricated cables & components (50-300% margin, low volume, but very consistent)
- New R&D products (We'd like to work with a fabricator to create a turnkey PSU solution to reduce mining power solution costs considerably. Margins would be 30-50% and likely a sizable volume of sales, but we need about $50,000 USD to get this line started)
- Misc. accessories such as hubs/switches/cables (50-500% margin, highly variable volume).
Additionally, we do not need $1.4 million. Technically, we need nothing. We already have about $100,000 in inventory + liquid assets. But given everything I've done this year, I've run into dozens of times to where we could have made hundreds of thousands of dollars if we simply had more money in the bank. Even if we sell the first tranche, I will consider the IPO successful, as it should be enough to get a few of the contracts we have stewing in the works.
Here's some data from Amazon.com back in February to explain a sales scenario: (actually: Jan 20th through Feb 20th):
http://imgur.com/DMVR2OrThe highlight here is that we made $54,000 USD in a month. The vast majority of that was between Jan 25th and February 10th, so in about two weeks, we made money hand over fist. Additionally, we paid about $5 USD/ea for the risers, with most being resold between $10 and $25 (!)
The problem? We had no more money in which to purchase risers for some time, due to how Amazon holds funds on their system (they pay out every 2 weeks). By the time we got the ~$30,000 from the risers, the factories had closed in China, and they generally did not open back up until ate February for production runs. By this time, the GPU/Riser market was in its sunset, and most Chinese factories saw the demand and started doing direct sales, along with threatening every Amazon seller on the market.
If we had an extra $25,000 or $50,000, we could have likely profited close to $200,000 or so, because we were the only seller of risers as we had anticipated demand during CNY, and purchased what we could before the Chinese holidays.
I can give you more examples of this. Most recently being AntMiner U2, S1, and S3 sales. On the AntMiner U2, we purchased 1,000 USBs from the factory. We sold approximately 600 on Amazon, 300 to Micro Center, and 100 to Cryptobase in the UK. The problem? They sold out and do not make them any more. If we had more capital, we could have purchased, say, 2,500 devices and essentially cornered the market upon them selling out. On the S3, I have request for orders for 300+ devices that I cannot fill, because I do not have $150,000 in the bank to wire BitMain.
This is why we're seeking capital. We've been selling products for a year now, and we always sell out. But we're not big enough to be able to grow the company because we're at that strange point that there's just enough profits to pay staff and pay dividends, and cannot invest a significant amount of capital back into new products (although we are trying to do that as fast as possible).
Even if we get $250,000 during the IPO, that will help skyrocket our business. Additionally, we have deals with Micro Center that are more or less contingent on us getting more capital. Again, I know that $1.4m is asking a lot, but I truly believe by the end of the year, that $1.4 million will look like a pittance compared to our position within the US distributor/reseller marketplace.
Finally, if you're an hour away, I suggest taking a small road trip and visiting if you are interested in investing. I can show you what we have in stock, and show you our order fulfillment systems / Amazon/BAH accounts to give you a better understanding of how we're turning products, and why the capital will be so useful for us. I am not sure which direction you're in, but Circleville is pretty equi-distant from a lot of places in Ohio, and we're about 2 miles from S.R. 23.
Having more capital to place large hardware orders can cut both ways. Many resellers of ASICMiner block erupters placed large orders last year and we're not able to sell through their inventory before ASICMiner really undercut them on price. Some of these resellers took a really large financial hit as a result.
There are way too many unanswered questions associated with this offering.
1.) Why does a US based company need a partnership with a Hong Kong investment company (BTCI) unless you are having issues complying with US securities law? This association simply seems like a legal gray area that could get you into a lot of trouble in the future.
2.) I don't see anything in the offering that provides any details about how new shareholders will get their money back. I also don't see any reason why the current owners of the business could not simply take any money raised during this IPO, use it for their own purposes (whatever they may be), pay out very low dividends, and dilute existing shares until they are almost worthless. The current valuation alone makes any shares sold during this IPO almost worthless.
3.) How many existing owners are in the business, and how much of the company do they own?
4.) If your business needs capital, why not follow a more traditional route and go to a bank with a solid business plan and try to get a loan? Have you checked into
They help small tech businesses get up and running.
5.) If you do treat new shareholders fairly and pay out decent dividends, it will also be hard to grow the business because you will be saddled with new liabilities to your new shareholders. The only way to get around this is to stiff shareholders.
