If you read my post two weeks ago, you’ll know I was reading the whitepaper for CumRocket, a very early stage crypto project. Earlier this year, the team behind CumRocket issued a DeFi token called “CUMMIES” that anyone can buy, sell or invest in. 🤑
In this week’s newsletter, I’ll show you how I’d consider and analyse an early-stage Crypto investment by writing an investment memo for CumRocket and CUMMIES. 🚀
At the time of writing, the initial $250 I invested on Sunday 25 April has become $3,500. A 14X return. In only 10 days.
Whether it’s stocks or cryptocurrencies, there’s no exact science to investing. Instead, we have a vast array of tools and methodologies that can broadly be sorted into two categories: fundamental analysis (FA) and technical analysis (TA). Unfortunately, technical analysis requires an infatuation for the Pythagorean theorem that I can’t muster. I’ll therefore focus on fundamental analysis.
Fundamental analysis (FA) is an approach used by investors to establish the "intrinsic value" of an asset or business. By evaluating a number of internal and external factors, the goal is to determine whether an asset is overvalued or undervalued.
I previously worked as an equity analyst at a hedge fund where I often used fundamental indicators such as EPS or PB to determine how a prospective investment stood in relation to “comparable businesses”. I’d then incorporate this analysis into an investment memo to circulate with my team and help make a final investment decision.
How I use investment memos
I use invest memos to briefly summarise investment opportunities and focus on the key drivers of value behind an investment. They act as my initial research and hypothesis. If the investment opportunity passes this initial test I will conduct deeper due diligence and speak with relevant parties, such as start-up founders. You can find an example of this by reading my investment memo for Linen, a crypto app currently crowdfunding.
An early-stage crypto investment checklist
To produce an investment memo efficiently and effectively, I like to use an initial checklist that can later be built upon and adapted to specific opportunities. I like to think of early-stage crypto investing like venture capital that’s constantly marked to market. I therefore draw on elements of fundamental analysis from both public equity and venture capital investing in creating my checklist.
My crypto investment checklist
- Utility: What is the use case(s)? Is there a clear and well-analysed customer profile?
- Market: What is the addressable market? Is the timing right?
- Competition: What is the competitive landscape? Is it crowded? Do competitors have moats? What is the state of the legacy infrastructure?
- People: Are there at least two founders? Do they have the right mix of motivation, domain expertise, technical skills and social intelligence?
- Product: Is the product in the market?
- Traction: Is there 6 months of continuous user growth or revenue?
- Roadmap: What is the roadmap? Are there product upgrades or new features? Are there impending corporate partnerships?
- Technology: Can the team create breakthrough technology instead of incremental improvements? Is the technology open source?
- Investors: Are there notable investors?
- Unfair Advantage: Is there a unique opportunity or edge others don’t see?
- Tokenomics: How were funds initially distributed? Was it an ICO or IEO, or could users earn it by mining? If ICO/IEO, how much was kept for founders/team, and how much is available to investors? For the latter, is there evidence of premining?
- Ownership: How is ownership currently distributed?
- Supply: What is maximum supply? Circulating supply? What is the rate of inflation?
- Community: How is the developer community? GitHub, Telegram, Discord, Twitter - what do they look like and how much activity is there?
- Network: Does the project have its own network? If not, which network is it subordinate to? Ethereum? Binance? Solana? Etc.
To help answer these questions, I always begin by reading a project’s whitepaper. This is the technical document that gives us an overview of the cryptocurrency project and the network’s goals. To help me cross-reference information in the white paper and uncover any red flags, I explore community discussions of the project on platforms like Twitter, Discord and Telegram.
CumRocket is OnlyFans on the blockchain - a Non-Fungible-Token (NFT) marketplace for 18+ content.
Content creators are able to sell private content as well as charge monthly/yearly subscriptions, thereby helping them earn additional income. Users are able to buy, sell, swap and collect exclusive 18+ content. Paying in Crypto provides anonymity to buyers and creators while reducing handling fees.
OnlyFans, the platform for sex workers and celebrities to sell subscription content, saw $2.35bn transactions from 120M users this year.
CumRocket offers the same products as competitors like OnlyFans (content subscription) and PornHub (video-sharing).
The market is quite crowded, but CumRocket is operating in a specific niche in Crypto from which it could grow and disrupt incumbents by operating a decentralised infrastructure rather than a centralised one.
CumRocket has a young team of 6 people, 3 of whom have previous Crypto experience. The founder is a passionate content creator and was previously a Software Engineer who resigned to pursue CumRocket full-time.
I’d expect to see more in terms of Crypto experience and domain expertise in 18+ and NSFW at this valuation.
While there is no real traction, there are positive signals considering CumRocket is only two weeks old. The team has evidenced demand for its use-case.
They’ve collaborated with several 18+ creators to create and sell NFTs on a partner platform and receive a share of profits to fund marketing. The NFT collections, “CumRocket Babes” and “Chad Cards”, were designed by their in-house artist.
CumRocket has a realistic project roadmap. After the platform launches in Q2, they plan to list on exchanges in Q3 and develop their brand in Q4. They even include philanthropic contributions to help fight against child abuse and human trafficking.
Packy McCormick explains why Web3 and decentralisation will disrupt incumbents with breakthrough technology:
“Blockchains let you write code that makes strong commitments about how it will behave in the future. This means you don’t need central platforms to make or enforce rules. Instead, blockchain enables creators and consumers to share more of the profits that Aggregators and Platforms previously captured.
Web3 blurs the lines between creators, consumers, suppliers, and investors, and lets projects pay people to use them, whether directly or via tokens that might grow in value over time.”
Unfair Advantage: 2/3.
Potential to create a fully-integrated and decentralised 18+ ecosystem: marketplace (video, audio, GIFs, still pictures), video-sharing (PornHub), video chat (live cams), content subscription (OnlyFans).
There’s a total supply of 10B CUMMIES and the presale rate was 1 BNB for 20M CUMMIES. 10% of total supply was purchased before launch.
BSC Scan shows a very democratic and even distribution of tokens. The team wallet constitutes 2% of the total supply and 80% of tokens were burnt before launch.
The team’s liquidity is locked for 1 year, and the founder has performed a 3rd party KYC and plans to re-lock liquidity after the year is up.
CUMMIES is deflationary. There’s a 5% tax on every transaction (2.5% is burned automatically and 2.5% is redistributed to holders). This means it rewards holders and punishes sellers, encouraging a steadier price.
CumRocket has a healthy and active community. There’s a strong cohort of volunteers and admins, and the CumRocket team are professional and responsive across Twitter, Telegram and Discord. The community is involved in development and members are able to participate in discussion and submit ideas.
CUMMIES is a reflect token operating on the Binance Smart Chain (BSC). This means there are virtually no gas fees and almost instantaneous swaps. BSC supports notable DeFi protocols including Venus (XVS), PancakeSwap (CAKE) and Linear Finance (LINA).
What must go right for the project project to succeed?
- Launch platform and prove initial business model.
- Scale outreach to attract high-profile names in NSFW to initiate a 'flywheel' marketplace.
- Build a moat and 18+ ecosystem (live cams, video-sharing, decentralised exchange etc.).
What are the main risks?
- CumRocket is only 2 weeks old and its team are relatively young and inexperienced at scaling large-scale projects within Crypto or NSFW/18+.
- At the time of writing, CumRocket’s market cap is $270M which seems ridiculously overpriced considering the product is yet to properly be built or used.
- CumRocket’s branding and marketing are solid. The logo, colour scheme and overall style is clean and cohesive. But the pink may be too much for the broader male market. It may also be too adolescent for millions of people to take seriously.
CumRocket is OnlyFans on the blockchain. Starting with an 18+ NFT marketplace, the community-project aims to disrupt incumbents with a blockchain-powered NSFW experience. Beyond its NFT use case, the team is working on live-cams, decentralised exchanges, video-sharing and more.
The project has promising fundamentals. CUMMIES, its deflationary token, rewards holders and punishes sellers, encouraging a steadier price. The current distribution of tokens is very fairly split, and operating on BSC means there’s virtually no gas fees and almost instantaneous swaps.
The beauty of CumRocket is that it only takes a 15% commission from NFT sales to fund its marketing. This means the team profits only from the appreciation of the CUMMIES token, which can only take place with the project’s mass adoption. Incentives are therefore aligned.
Given its name and branding, people have recklessly labelled CumRocket as a "meme coin" or scam. The team’s tokens are, however, locked up for at least one year and they’ve made considerable progress in recent weeks by securing several high-profile partnerships and already launching a V1 version of their website.
While the project is young and incredibly risky, I won’t be exiting my position. They've got an innovative and ambitious team solving real world problems.
I’d love to hear from you
Have you invested in any early-stage crypto projects? What do you think of CumRocket? Do you think it can scale to reach mass adoption? Do you think it's fairly priced at $270M? Will you be investing?
- How To Buy CumRocket
- How to become a Liquidity Provider and Stake your CUMMIES
- CumRocket team’s “Ask Me Anything” on YouTube
- CumRocket Discord
- CumRocket Instagram
- CumRocket Telegram
- CumRocket Twitter
- Guide to Cryptocurrency Fundamental Analysis
- What is Fundamental Analysis
- How to Perform Crypto Fundamental Analysis
- Can Fundamental Analysis Be Relevant For Cryptocurrency?
- Crypto Asset Fundamental Analysis — 7 Indicators & Ratios to Watch
- (YouTube Video) How to DYOR: My Crypto Research Methods Revealed
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