As a crypto investor I read numerous white papers a week. In this unregulated space, massive hype and buckets of hot money have negated the need for many ICO’s to publish a quality white paper. As a lot of investors are new to analyzing companies, high platitudes and other trendy buzzwords can have a bigger impact than a solid business plan.
Today I was passed on from a friend the whitepaper for Benjacoin, and I have to hand it to them, they have produced an extremely well thought out and in depth Whitepaper.
Benjacoin is an extension of EPHE Corp., the creators of “an online e-commerce iOS application called benjamin… and also an online display advertising method for integration in social media feeds. Together, these products are publicly packaged as Benja, the merchandise ad network.”
As a two-year-old company, they have already achieved revenue rates of over 1 million USD a year and hopes to raise somewhere between 10-15 million from their ICO which will take place on August 1, 2017. The goal of the fundraise is to help the company develop and implement “The Benja Merchandise Ad Network,” which includes the previous business ventures with their new blockchain project.
As an ad company, they plan to use the blockchain to bring more transparency to advertising. By creating a distributed ledger of all ad purchases, it facilitates an open environment where advertisers can determine exact market rates for their ad buy and verify a fair price for traffic.
The specifics of how the ad system differs from current versions offered by companies such as Google can be found in their white paper. Without getting too deep into it, Benjacoin is paid by both the advertiser and the ad publisher. The former pays a rate for the ad, while the ad published pays a fractional amount to confirm the ad buy. This system ensures the proper deployment of all ads and records it on the blockchain ledger for public verification. Furthermore the ad “does not transmit the contents of the advertisement itself via the blockchain, and it only serves to collect data about the placement and performance of a given advertisement.”
Lastly, Benjacoins design allows for the ad publisher to be paid directly by the advertiser, cutting out any middle man, normally Google or Facebook, who take a % of each transaction.
These last two points are the main reason the company decided to have and ICO. According to founder Andrew Chapin, “we have, of course, been exploring traditional fundraising channels and that’s something we could do – but there is a product-side advantage to moving to blockchain…. these bid transparency and billing problems would not be easily addressed if we continued on our current path and raised traditional VC dollars. The ICO forces us to address those issues which will give us, a small ad network, a strong competitive advantage/value proposition and help us grow.”
So far Benja has received “$700,000 from equity partners and firms, earned $50,000 in prize money, and holds $25,000 in credit from BlueVine and Capital One.” Equity partners hold 43% of the company. In a first for all the white papers I have seen, they actually listed a financial history and forecast chart:
Benja is looking to raise roughly 12.5 million USD or 62k ETH, as per the forecast. This will help them accomplish two main goals. First, develop their blockchain technology, to which an additional 1.2 million will be spent. Second, approximately 8.5 millon will be spent on increased advertising, placements, and promotion.
With this ad spend, they plan to increase their sales revenue from impressions on the web by four fold and social by 8 fold. According to Chapin, this increase will come from “a partnership with pinterest to help power their buyable pin experience. You may know that they tried to do this themselves about 10 months ago, then rolled out shopify integration, but still wanted the big vendor deals so we’re getting the opportunity to display ours there.” Additional revenue will come from bigger companies such as GQ and Sports Illustrated, with whom Benja is negotiating with currently.
In order to hit net profits of 2.1 mln in 2018, Benja will have to increase their ad revenue to expense ratio to roughly 1.50, in comparison to 2016 and 2017 when their % was 1.30. If they were to continue into 2018 at this rate, they would breakeven, which for a small advertising startup is acceptable as they grow. As volumes grow, so to will the revenue %. What’s promising though is that unlike a lot of other ICOs which are just getting off the ground, they have a tested business model.
Addressing the 600k cash burn over the last 2 years Chapin said “we were a mobile app-first company for awhile (like many in silicon valley) before we found the thing that generates real revenue and profit. This semi-pivot to a multi-platform network involved a good amount of development and slow initial growth because we have been negotiating these placements brick by brick – website by website. We’re around profitability on a month to month basis now and we’re funneling our monthly net into more impressions.”
During the ICO, Benja will release 500,000,000 coins, half of the total created. Tokens will be offered at an exchange rate of 1 ETH to 8000 BNC. After the sale, no more coins will be created. Benja will hold 500 mln coins in order to facilitate liquidity for advertisers.
Each quarter, Benja will buy back tokens using 50% of total proceeds. This will ensure continuous liquidity and increase the token price as the company grows. Furthermore:
EPHE Corp. offers rights to benjaCoin token holders, as the organization recognizes token holders as key non-investor stakeholders. This means that token holders will, as a group, receive:
- Access to beta versions of blockchain-based products the organization produces.
- A seat on the Board of Directors. We will hold a closed election by external token holders in the first week of each year for a one-year appointment on our three person Board of Directors. The purpose of this process is to ensure that the token holder interests are represented in strategic company decisions. Tokens held by employees, Benja, EPHE Corp. do not have a vote in this process.
- Access to a quarterly update on business and technical operations, which will be published at http://benjacoin.com.
- Access to a quarterly live-stream by EPHE Corp. employees where we will offer a qualitative update and host a question and answer session.
The quarterly report will look something like a 10-K and will give info on current income levels, advertisement info and other pertinent facts.
Longer term, Benja plans to fully develop their platform and release it by Q3 2018, expand their company client list and provide for better operation of their ad system with their wallet.
Their capital raise is adequate in my opinion. Future growth is difficult to calculate, but if they can double sales for the next three years, from 12 to 48mln, while keeping their operating expenses at the same %, a company valuation at 5x earnings would be $50 mln. Additionally, the company would buy back $8 mln in tokens at these levels. This, however, is dependent on them increasing their revenue to expense ratio.
After speaking with Andrew at length in their Telegram channel, he answered all of my questions fully, provided more information than I needed and left me with all of my many questions answered. Benjacoin has very solid footing going forward and it could be one of the breakout ICO companies of 2017.
The benjaCoin token sale will commence on August 1, 2017 at 13:00 UTC and it will run for a period of 30 days or when the cap is reached, whichever occurs first. During this period, individuals can purchase tokens through the Orderbook.io exchange at https://orderbook.io.