November 13, 2017

How The ICO Hardcap Was Calculated, Fund Distribution, & Why There’s No ICO Pre-sale

In this short video Justas Šaltinis shares how the Debitum Network hardcap was calculated, how the team will distribute funds, and why the team decided against an ICO pre-sale.

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Transcription

James Downton:
Hello, Debitum followers, my name’s James Downton. I’m Marketing Advisor to Debitum Network and today I’m joined here with Justas. Justas is the co-founder and CFO of Debitum Network and-

Justas Saltinis:
Hi.

James Downton:
In this video, we’re going to be running through some questions around the finances and some questions around hard cap, soft cap and what’s going to be done with the funds raised during the token sale. So without further ado I think one of the first questions I’m dying to ask you, Justas, related to how the hard cap was actually calculated in the first place?

Justas Saltinis:
Thanks for having me here. Basically how we came up with the number of hard cap is we did the financial modelling, quite a detailed one, country by country based, yeah because different expense level, different inflation, other costs. But basically first we calculated how much we need for ecosystem management cost. How much we need for software development, to have it ready for deployment. And afterwards we calculated how many countries we’re going to expand, and based on the amounts raised we are able to move to five, ten, twenty, fifty, or other number of countries. How we see it, if you want to expand quickly, to use first mover advantage, we need to move quickly, we need to have a budget for it, and hard cap is set for it.

James Downton:
Okay. So just one thing to note on that I think, with the hard cap being what it is. The period of time, as well, so this is over what period of time?

Justas Saltinis:
For hard cap?

James Downton:
Yep.

Justas Saltinis:
If you’re very … It’s calculated for four years.

James Downton:
Four years, right.

Justas Saltinis:
Yeah, four years. So we calculated month by month all the expenses and we say, right in four years we can be operationally profitable, and we will not need any additional funds for that.

James Downton:
Okay cool. But the countries that you plan to expand into, how many of them are there?

Justas Saltinis:
Okay, let’s say for soft cap, we are planning to cover our home market, which is Europe, and if we are raising anything above, it shows that community trusted us and we are able to move faster and expand into more international, more broader, into more distant markets.

James Downton:
Okay, cool. One of the comments that we had from the community is around the amount … Oh, sorry the crowd … The crowd sale hard cap being quite high. Do you have any comments around that, as to why it is what it is? I mean you’ve already explained a little bit about the calculation that’s gone into it but-

Justas Saltinis:
Sure. How we go around this question is we have looked at the numbers, we did our analysis and we see which countries has the largest credit gaps, and according to these numbers we made our estimates, how many countries we need to expand to, and based on the amounts raised, we will be looking at the countries where there are the most profitable opportunities for the Debitum Network itself. So if we are not reaching hard cap, we will decrease a number of less prominent countries.

James Downton:
Got it. Okay. So if you do reach the hard cap, can you just sort of say exactly what that will ensure the team is able to do?

Justas Saltinis:
Yeah, so it ensures that we’re able to attract sufficient amount of counter-parties parties to have a fully sufficient, fully working ecosystem, where we wouldn’t need to do a thing. Ecosystem would work itself, and it would be operational in 60 more, 60 plus countries.

James Downton:
And one thing I think it’s quite important to note is that the distribution of the funds and how they’ve been allocated, so what are the largest proportions being distributed towards?

Justas Saltinis:
Okay, I would say that we could split the expenses or the budget into two parts. One is like ecosystem management costs which comprise around, depending on [crosstalk 00:04:15]

James Downton:
But that’s also, that’s like the development of it, or the management of it?

Justas Saltinis:
It includes, ecosystem management cost includes software development-

James Downton:
Okay.

Justas Saltinis:
Seasoned senior management team. Legal advisors, also business trips, office, and other miscellaneous costs.

James Downton:
And these costs-

Justas Saltinis:
And-

James Downton:
Sorry, but they’re not things that you’ve just kind of like got the opinion of from so-called experts or something like that. This actually based on your experience as well, right? You’re a professional team that have been working together for some time. This isn’t the first time you’ve worked together, right?

Justas Saltinis:
Yeah, that’s true. And we have another company, an invoice financing company, DEBIFO, which is running in Lithuania and we see how much is needed to run successful operations and we use some of the numbers to multiply to different countries and to see how much we will need. And of course we need to take into account that other countries are more expensive and we need a larger budget to achieve the same in different countries,

James Downton:
Okay. Makes sense. Final question I have for you, and it’s kind of a loaded question. So some of the community have mentioned that the hard cap is quite high. You’ve answered that I think very well, and it makes total sense to me at least, as an advisor. And the second question that’s come out, that we get quite often is around the, taking a staged approach. So it kind of relates to the hard cap being quite high, and some community members have said, wouldn’t it be better to raise a smaller amount first and then execute, and then raise another amount and execute. And a presale would sort of support that model most efficiently. Why is it that Debitum have decided not to go down the presale route?

Justas Saltinis:
Okay, first I would say that our team believes that presale is needed to raise the funds for the crowd sale itself.

James Downton:
Right.

Justas Saltinis:
Meaning to make a marketing make the PR and other things-

James Downton:
Marketing. Buy attention and things like that, right?

Justas Saltinis:
Exactly. And if we want to focus on business development and not raising round after round, it’s better to raise it, especially … It’s better to raise it at once, have a sufficient budget for the development and scale it quickly.

James Downton:
Cool.

Justas Saltinis:
Otherwise you would need to concentrate like, six months of development afterwards you see there is no funds left. You need to fundraise, you are stressed out. The software development team is looking, what’s next, and you lose focus.

James Downton:
Got it. That makes total sense. And that’s been great, Justas, thanks very much for your time. Any final closing words?

Justas Saltinis:
Crowd sale starts 30th November, and if you are interested in our project, please join our Telegram channel or subscribe for our newsletter to keep yourself updated with development from now til the crowd sale ends.

James Downton:
Cool. Well, I hope you found that helpful and like Justas said, don’t forget to subscribe to the newsletter, and join Telegram. See you soon. Bye bye.

Justas Saltinis:
See you.

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