- March 6, 2019
- Posted by: Ajene Watson
- Category: Blog
On February 27th, in a press release (Digital Asset Monetary Network Estimates More Than a 15x Increase in Equity Portfolio) we announced that DigitalAMN had conducted a comparative valuation analysis on one of its primary investments. The results concluded, that more than an estimated 15x increase in the value of this particular investment, occurred within our equity portfolio. And there is still more to come!
As a specialized accelerator, our business model incorporates a mix of disciplines, which contribute to the overall methodology of our PAI (Public Accelerator-Incubator) ecosystem. Our model incorporates four phases: (i) Accelerate, (ii) Incubate, (iii) Acquire and, (iv) Spinout. We utilize each phase to help build startups and development stage companies that are part of our PAI program.
Most companies that join our PAI program begin as Client-Companies. This is typically at the ‘accelerator’ level. As with traditional accelerators, we look to invest money into the companies that join our PAI program almost immediately. However, one of the major hurdles that traditional accelerators typically have had to overcome, is an angel investor’s lack of liquidity when investing in an accelerator. This makes traditional accelerators like TechStars hard pressed to continuously raise money in order to make their initial investments into new startups. So, we looked to take a different approach.
We thought… what if we were able to eliminate that aspect of the accelerator process [raising capital for our initial investments]. Yet, still have the ability to deliver the usual $25k to $150k that startups generally receive when joining an accelerator, all while being able to (i) test the market acceptance of that startup, (ii) raise startups and development stage companies potentially between 6x to 40x+ more money in initial investment capital, (iii) reduce our risk of cash outlay upfront, and, (iv) better curate the investments we hold in our equity portfolio. This, all while adhering to our mandate of helping to reduce the inequitable divide between the socioeconomic classes, by making investment opportunities into high-value, fast-growth startup and development stage companies available to everyday people. Imagine… Just imagine how valuable that would be to our business model and our long-term shareholders.
Well, we did just that! However, we cannot take all the credit. With absolutely no intention of being political, we must thank President Obama as he laid the groundwork in his presentation of The JOBS Act (Jumpstart Our Business Startups Act). In particular, Title III of the act, also known as the CROWDFUND Act.
We immediately recognized that Title III of the JOBS Act would be the key to how we would be able achieve what we were setting out to do. However, we were in no position to reinvent the wheel, nor even produce the wheel to start with. So, we did the only appropriate and logical thing to do… We invested in a wheel maker – one of the best around!
Welcome TruCrowd, Inc. (“TruCrowd”), one of 53 equity crowdfunding companies registered with FINRA, to own and operate an equity crowdfunding portal in the United States, under the JOBS Act. TruCrowd was one of the few companies DigitalAMN made investments in, between 2017 and 2018. Unlike most DATI investments however, which generally begin as ‘client-companies’, TruCrowd entered the PAI program as an equity-portfolio company.
Furthermore, TruCrowd was targeted as a pivotal component of our PAI ecosystem. This is the primary reason we sought to secure the maximum amount of ownership we could logistically obtain – 19.9% (plus Warrants exercisable into an additional 19.99%). This, in turn, made TruCrowd the single largest and most important investment within our equity portfolio. Thus, the most important investment for us to review in depth.
TruCrowd is the owner and operator of a family of equity crowdfunding portals. These portals currently include truCrowd.com (https://us.trucrowd.com/), the only cannabis focused portal operating – Fundanna.com (https://www.fundanna.com/), and TruCrowd’s newly launched portal CryptoLaunch, which caters to those startups and development stage companies building business within the cryptocurrency and blockchain industries.
During 2018, TruCrowd was considered to be a formidable competitor within the equity crowdfunding space, as noted in VentureBeat’s article, Today’s Best Crowdfunding Platforms – By The Numbers (https://bit.ly/2LYRnDB). According to VentureBeat.com, of the 10 top-rated companies reviewed, TruCrowd excelled in the “average amount of capital raised” per company on an equity crowdfunding portal. In this category, TruCrowd even beat top tier portals such as StartEngine (currently estimating its value at well over $100M) and Republic.
Overall, it’s estimated that TruCrowd, Inc. experienced a 3000% increase in its enterprise value since joining our PAI program in 2018. How was this value determined? See THE VALUATION – Arriving At An Enterprise Value for TruCrowd & The Future of PAI. ‘By The Numbers’, to borrow the phrase from VentureBeat, and what this means for DATI shareholders is quite simple. If based on just this single investment, our equity portfolio has grown 15x.
Aside from the fact that this 15x increase to DigitalAMN’s investment in TruCrowd implies that the value of our equity portfolio is arguably of greater value than DATI’s entire market cap [How Much Greater? Look Out For Our Upcoming Announcement: Digital Asset Monetary Network’s Equity Portfolio Surpasses Total Market Value], the bigger inference is, the growth of TruCrowd is in part, related to the company being part of DigitalAMN’s PAI program. Moreover, if TruCrowd is growing in value, that would imply that its overall visibility and viability is increasing. In the big picture for us, this means that it is likely that DigitalAMN can achieve the goal set for each of its client-companies:
- Testing market acceptance (while expanding customer/user base);
- Potentially raising between 6x to 40x+ more money in initial investment capital than that of typical accelerator programs;
- Significantly reducing DigitalAMN’s risk of upfront cash outlay; and,
- Curation of viable investments for the equity portfolio.
Considering that a big part of TruCrowd’s value is rooted in the value of its user base, which grew just over 100% in 2018, each client-company DigitalAMN onboards into the PAI ecosystem could potentially see a success, much like that of the last issuer TruCrowd onboarded onto Fundanna.com (Transatlantic Real Estate, LLC), which raised $1,070,000 [the legal maximum in one calendar year]. We believe that TruCrowd’s growth has an even greater intrinsic value to DATI’s shareholder’s, than just the value of our equity portfolio.
TruCrowd’s growth directly impacts the viability of the acceleration aspect of our four-phase business model. And, to that end, it also supports DigitalAMN’s front-end revenue model. The more client-companies we onboard into PAI’s ecosystem, which have successful raises on TruCrowd, not only will our equity portfolio value dually increase, but our revenues should significantly increase as well.
Therefore, if TruCrowd’s value increased partly based on (i) the growth of its user base, (ii) the average amount of capital raised per company, and the increase of viable companies onboarded onto its family of equity crowdfunding portals, then with the 60 anticipated startups DigitalAMN believes it will onboard into the PAI ecosystem this year. This, along with an expected market push to expand TruCrowd’s user base, DigitalAMN’s equity portfolio value and revenues could see a significant increase in 2019. We believe that DATI’s shareholders, and the general marketplace for that matter, do not fully understand DigitalAMN’s business nor its four-phase model. We also believe that this lack of understanding speaks heavily to the likelihood that DigitalAMN is currently undervalued.
That’s ok… Long-term shareholders understand what we are building here. They get it. But we also firmly believe that soon, as we take steps to improve the understanding of the PAI ecosystem, the general market will begin to understand it as well. Once that happens, it is only a matter of time before the disconnect corrects itself and there becomes a full and excited appreciation for what it means when one of our most important investments and components of our PAI ecosystem, experiences a 3000% growth in its enterprise value… on our watch.