How to properly evaluate your Bitcoin startup

This week we’re doing something different, when I was in Malta for the SiGMA gambling conference, I asked a good friend and all-round keen businessman to pinch for me. John Goldberg is both a successful investor and entrepreneur who has invested in and founded multiple companies – most recently Pixel, an on-chain identity service based on the Bitcoin SV blockchain.

The question I asked John was one that most start-ups have: “How do I rate my business?”

In our Ayre Ventures pitches, I’ve seen ratings that were so out of the box that this creates some concern when considering the original proposal. The startup had valued their work and company, I should say they valued their idea in the millions, but it still hadn’t gotten past the napkin stage we talked about in previous articles. I’ve also seen startups ask for such a low number that it wouldn’t cover the costs of a good lawyer, it was like being scared or feeling guilty about asking for investments.

John Goldberg was kind enough to share his method of evaluating his new startups with me and we believe you will find this useful.

This is how you evaluate your startup correctly

When evaluating your startup, you need a few important things: capital requirements, target network, target market, forecast volume and forecast sales chart (1-3 years with different scenarios).

Capital requirement

You need to move beyond the initial investments and funds you raise and look at the long-term picture for your business. Most venture capital (VC) firms aim for a return in 3-5 years or sooner and expect a substantial return. Just like loans, VC fills the void so you can fund the project and grow your business and make it profitable.

10% 25,000
20% 50000
30% 75000
40% 100,000
50% 125000
60% 150000
70% 175000
80% 200,000
90% 225000
100% 250000
value 250,000

If you want to raise $ 100,000 for 40% of your business, it means you are currently valuing your business at $ 250,000.

Always take these costs into account

  1. office
  2. Electric
  3. water
  4. Internet
  5. Salary – Keep your personal salary small. At Pixel Wallet, we pay each other $ 1.00 per year. We choose to put the rest of the money in the company as we can live on personal savings and other investments
  6. hardware

Target network

Write a small paragraph about what you think makes your product better and more effective than others.

For example, if you are a wallet, explain why your wallet is better than the many other wallets on the market and show what features it offers that make it unique and desirable.

If you are a wallet, you are also showing how it makes money. This is critical for a VC to invest in your business.

Will you charge a fee or contract with miners to get a discount on hosting to you? These are all things that you need to consider in order to rate your business positively.

Target market

Spend time analyzing the target network; This is critical to your business valuation. See how your product fits into the global structure like a piece of the puzzle in the world.

If there is a product similar to yours, study it and develop a strategy for how you will surpass it.

Do a cost analysis where your product dominates and is more profitable than this.

Create a simple one to two year chart in Excel, study the cost of using them, and then lay out your product to optimize your product to make it more efficient.

Think GDP, the dominance of cell phones, bankless, internet access and the environmental impact.

Projected volume

How many users do you see using your new product?

Create a simple flowchart and break it down over three years to show long-term expectations. Every successful startup has to think about the future. Your VC will look at where you will be in 3-5 years or even later.

Even if you think your numbers might be more meaningful for this chart, it is best to keep your head clear and keep the projections lower. Better to use smaller amounts and get bigger than not being able to meet expectations.

1 year 2 years 3 years
Scenario A 5,000 users 10,000 users 20,000 users
Scenario B 25,000 users 50,000 users 100,000 users
Scenario C 125,000 users 250,000 users 500,000 users

You should project and try to double your numbers annually if possible. For a startup, these are just forecasts, so keep your feet on the ground, don’t try to grow from 1,000 users to 500 million users in six months. When your projections are so unrealistic, most VCs will pass your project on for showing them that you have no logical way to run a business. Remember, it is important to keep it simple and effective.

expected sales

Show how much each user will generate based on your forecast volumes. For example, if each user makes an average of 50 cents a month, $ 1 a month, and so on, then you can find the cost of day-to-day operations and find the lowest possible average. (Cost base not according to the highest costs)

Do a lowest reasonable average cost breakdown so you can be realistic and also see how much your business will bring in to show if it is profitable in the worst case scenario.

It is advisable to do the same with an A, B, C sales scenario. Don’t worry if, in the worst case scenario, the numbers are low as you have to be realistic with your rating. Show a VC what you’ve put on – that way they can see the numbers as this will help assess whether they want to invest in themselves and your product.

Finally, speak the VC language

They may be excellent at coding, but when you talk to a VC they are excellent at numbers so you need to speak their language. So, take the time, as you built your project, to review your numbers, and ask people you trust to review them as well. These steps can help you appreciate your business and show what it’s worth.

Are you interested in your pitch? Learn from the likes of Ivy Dang from CityonChain, who presented their projects to an investor group at the first Bitcoin Association Pitch Day in Seoul. Check out all of the Pitch Day videos on The BSV Pitch’s YouTube playlist.

Check out this section for more information on the next Pitch Day at CoinGeek Conference London in February. When you think your company is ready to invest, you can send your business plan and pitch deck to Ventures@AyreMedia.com.

New to Bitcoin? Check out CoinGeek’s Bitcoin For Beginners section, the ultimate resource guide, to learn more about Bitcoin – as originally envisioned by Satoshi Nakamoto – and blockchain.

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