Become a Mini Angel Investor
ByteNite has already raised $500k in private investments, but it’s time to take the power to the people. We have distributed computing, so why not distributed funding?
ByteNite’s WeFunder Page is now live and open for contributions.
For as little as $100, anyone can become an angel investor. Of course, like at any startup, there are perks for being an early adopter. The first $100k in crowdfunded investments will receive a Simple Agreement for Future Equity (SAFE) with a $6 million valuation cap. In layman’s terms: receive ByteNite stock at a major discount before VC firms get a chance.
Update: as of October 4, 2022, ByteNite has reached nearly half of their WeFunder goal with special terms ($40,400).
What is Crowdfunding (Distributed Investing)
Crowdfunding became popular in the late 2000’s with websites like GoFundMe, Kickstarter, and IndieGoGo. A large number of users donate small amounts, which can add up to become massive funds overall. The convenience of fundraising remotely means that companies, people, and causes can receive contributions from all over the world.
ByteNite’s platform, WeFunder is the most popular crowdfunding site for startups. According to We Funder founder Nick Tommarello, the company’s goal is to “fill the funding gap between angel investors and that first major round of capital.” Before 2012, all investors were legally required to be accredited and donate at least $1,000 to receive equity in a business. The US Government’s Jumpstart Our Business Startup Act (JOBS Act) lifted many of these restrictions, clearing the way for startups to raise money through crowdfunding. Current US law sets $100 as the new minimum investment for equity, with no accreditation requirements. Now doctors, teachers, bus drivers, lawyers, and even hair stylists can all become investors in a startup.
Early Perks Specific to ByteNite
Entering into a SAFE agreement with ByteNite is a financial investment, but like any crowdfunded project, there are some fun perks early donors can receive in addition to equity.
- $100 or more moves you to the top of the waitlist for the ByteNite app and customer platform
- $500 or more will get you 5,000 ByteChips (the currency of ByteNite) in advance
- $1,000 or more will earn you ByteNite swag (a brand new T-shirt and hat created specifically for early stage donors)
The perks are cumulative, meaning that anyone investing at a higher level will get all the prizes below that level.
Investing – The Seed Round
ByteNite is currently in its “seed round”. This is the final stage a startup enters before a formal series A, B, C, or D round with venture capital (VC) firms. At this point, ByteNite is close to testing their product, but hasn’t started generating revenue. The major advantage of investing in a startup before they receive major fundraising from a venture capital firm is the opportunity to receive steeply discounted stock.
The Perks of Joining ByteNite Early
The first $100k in crowdfunded investments for ByteNite will receive a Simple Agreement for Future Equity (SAFE). A SAFE is a legal agreement made popular by the startup incubator Y-Combinator in 2013. This document is quickly becoming the standard way for new businesses to raise money in seed rounds. Essentially, a SAFE is a promise to early investors that they will receive equity (otherwise known as ownership or stock) when certain conditions called “triggering events” are met. If the triggering events don’t happen, early investors are not eligible to receive benefits.
The triggering event is when an early investment in a startup pays off. The two most common triggering events are qualified financing from a venture capital firm (otherwise known as a Series A round), or the sale of the company. The specific terms of SAFEs vary from startup to startup, and some SAFEs may be triggered if a company is acquired or merges with another business. Any triggering event releases equity to early investors, and the equity that an investor receives is based on the valuation cap.
What is a Valuation Cap?
A valuation cap is the most important term of a SAFE agreement. It is a rough estimate of a company’s worth, calculated before Series A funding. Valuation caps protect early investors from the risk of having their shares “watered down” by future financing. The lower the valuation cap, the more an early investor will gain. Most valuation caps for startups range from $2 million to $20 million. The terms of ByteNite’s SAFE set the valuation cap at $6 million.
Lower Valuation Caps Are Good For Investors
A lower valuation cap combined with a higher VC round valuation is the best deal for early investors. For example, consider a seed investor who spends $10,000 to enter into a SAFE with a company whose valuation cap is $5 million. A few months later, in a series A round, a VC firm sets the valuation of the company at $10 million. This funding round qualifies as a “triggering event”, and the early investor receives equity that is now worth twice what they originally paid. The venture capital firm would have to spend $20,000 to own as many shares of preferred stock as the early investor.
Valuation in Future Rounds
ByteNite’s $6 million valuation cap is only the temporary value of the company. Venture Capital firms that fund ByteNite in series A, B, or C rounds will assess ByteNite and assign it a valuation. Common methods VC firms use to estimate the value of a start up are:
- Scorecard Valuation Methodology
- Venture Capital Valuation Method
- Dave Berkus Valuation Method
- The Risk-Factor Summation Model
As a startup goes through rounds of funding and its valuation potentially increases, early investors continue to benefit from the initial valuation cap. The more a startup grows, the more valuable the early stock becomes.
Room for Growth
ByteNite plans to move on with Graphics Rendering (a current market size of $2.6B) and Computer Vision ($12B) as soon as they’ve reached a product market fit with Video Transcoding. They’re not going after niche customers – indeed, the joint valuation of the global video transcoding, 3D rendering and computer vision markets is currently $16.38B (2022) and is set to grow 17% year over year. If only 5% of customers are open to switch cloud providers, they’ll be serving a billionaire market by 2027.