Neufund token valuation
By: Kacper Wikieł
Tags: Protocol Tokens, Securities Law, Blockchain

Neufund is a community-owned investment ecosystem. Neufund is an ecosystem of smart contracts operating on the Ethereum blockchain. The blockchain-based platform creates a new type of ownership that is neither money nor stock, but crypto tokens which represent equity and at the same time are as liquid as a currency. Such tokens have an intrinsic value to the network, but at the same time they also represent value of the business operating in the real — off-chain — world.

https://www.linkedin.com/company/neufund/

Usually one cannot come up with the valuation for the token unless it’s representing some kind of asset directly (that way one can just compute Net Asset Value + premium and call it a day)

But for others it’s just not possible. Can you create valuation model for say zinc or copper? It’s demand / supply play.

Difference between ICO and ETO

The value of any business, centralized or not, is the value of services it provides to its end user. But that does not necessarily mean that the business captures that value. The best equity investments both create and capture the most value.

You create a tech company, then you make either software or hardware that’s sold to customers. Because you got VC equity funding you were able to scale the business and finally make your company public: reaping the rewards of many years of work.

That’s VC story —invest in best startups that have chance of winning big with large exit via IPO or acquisition. VC moat seemed steady until 2017 where cumulative ICO investments overtook. Why even talk to those guys if you can launch a token, raise money and sell it for retail investors that are users of your product as well?

Well, the ICO market worked for some brief time but there were cracks.

Howey test

It is an investment of money ✔

There is an expectation of profits from the investment: ✔

The investment of money is in a common enterprise ✔

Any profit comes from the efforts of a promoter or third party ✔

Currently if you will go to any Telegram group for specific token community the people won’t tell you that this token will increase in value

(if they do they may be liable to offering a security via expectation of profits from common enterprise! )

So you can sell tokens ( called utility tokens ) to public without giving them any legal right to revenue from the project or basically anything.

No “Rights, Uses, Purpose, or Features”

That was exact terms used by EOS token sale, well one call call tokens an artistic performance…

Exchanges not listing de-facto security tokens

The number of token ICO is growing

But the average amount of ETH collected by ICO is collapsing

So that was the end of “utility token story”

Security tokens to the rescue! How Nefund works (tldr)

Tokens are minted via investing in equity tokens

Create some assumptions about money raised via platforms and dividends

Basic calculus required

Neufund lifecycle

Nefund is like VC fund with loyalty points for investing, and those loyalty points are giving you % from each successful issuance on the platform, so the earlier you invest and more you invest the more % of whole platform you may own.

Important notice: In regular VC fund (LP — Limited Partners) are not actively managing the funds, in Neufund you as LP have to decide on each possible equity investment, you are not giving you money to everybody else to manage

Important note: you are not investing by buying NEU tokens but by participating in equity crowdfunding rounds.

The rewards are distributed based on issuance curve that’s quickly becomes saturated: 100 mln invested early gives you 35% ownership while 100 mln invested late gives you only 3% — similar to regular startup investing when early round gives you significant ownership stake with a solid discount.

Excerpt from white-paper

With each successful ETO, a small fee is deducted from the invested amount. This platform fee is then distributed to Neumark holders in proportion to amount of Neumarks they own (“pro rata” ).

Within the same ETO, a small fee in form of company equity tokens is deducted from the total number of tokens that were acquired. This token participation fee is added to a platform portfolio of all companies ever to conduct a token sale on the platform

How to value such token?

There are two approaches:

Final Saturation

Assume that invested capital -> issuance curve saturation (1 bln euro )

Valuation = (1 bln * % fee ) + DCF from following investments / token quantity

(1 bln * % fee ) + DCF from following investments: unbounded

token quantity: fixed (1 500 000 000 tokens)

This approach yield possibly very high valuation of whole project (total marketcap)

Valuation lower bound: at least 30M euro (with 3% fee)

Value per NEU token: 0.02 euro ( assuming 1 bln euro investment and value captured at 3% rate)

Assuming that value will be captured at 10% (fee + future value + dividends)

Valuation per token: ~ 0.06 euro

Not-equlibrium rate

Between 0 and 1 bln euro of invested money via platform:

Example

1000 euro investment

reward: 3077.53NEU (value 1543 euro)

equity reward: 1000 euro minus risk of secondary market (can be priced)

total reward: 2543 euro

reward ratio: 154%

“Realistic” assumptions about token liquidity:

Say one can sell tokens immediately with 20% loss on secondary market

1000 euro investment

reward: 3077.53 NEU (value X euro)

equity reward: 800 euro

reward ratio: slightly above 100%: 800 euro + X ~ 1000 euro

So reward would be in ~200 euro range with single coin with about 0.064 euro.

Current valuation: 0.501707 euro per token

Thoughts?