Episode 009 - Cryptocurrency Mining/Energy Operator Aurum Capital Ventures - (Revisit with John Paul Baric, Founder & CEO)

Introduction

• Welcome to Distilling Venture Capital. I am your host, Bill Griesinger
• Distilling VC is a visionary podcast that provides an insightful and informed view of the key trends affecting the VC and tech startup world. My mission is to cut through and go beyond the hype that tends to dominate the tech landscape. And provide you with information you can use.

Episode Introduction:

• Welcome back everyone. Well, today I have the pleasure of welcoming back to the program JP Baric, CEO and Founder at Aurum Capital Ventures, which is engaged in the crypto-mining business. JP thank you for coming back to join me on the show.
• So, the last time we did a program was in mid-May, about 5 months ago, and I introduced Aurum Capital Ventures then as a technology/energy company directly involved in multiple aspects of the crypto-mining industry – and we delved into the many interesting aspects of your business model. I have received a lot of positive feedback to that show – so glad you're here to do this again…
• Crypto-currency Mining involves sourcing and utilizing the most advanced equipment, for sure, which you guys provide, but also one of the key components that has a huge impact on the cost and viability of crypto-mining itself – is the cost and amount of energy consumed – and, therefore, the energy component and its costs have a huge impact on the industry and its success
• Aurum has developed a truly innovative vision and approach to this aspect (Energy) of the business. And I wanted to provide a platform here today for you to explore in-depth how you think about and approach the idea of generating, producing and sourcing energy at the core of
• Please introduce and present this in the way you think would be most helpful and useful for our listeners to appreciate the impact of this vision

Energy Utilization & Economics of Crypto-Mining:

• JP provides a deep-dive into the interrelated metrics and dynamics of Energy and Crypto-mining. Here is what you will learn:
• • Terahash Rate – core measure of energy usage in crypto-mining
  • Can predict and model the Terahash rate for mining equipment. USD per terahash – how much we make on a USD basis - the speed of how fast a mining machine runs.
  • Price per terahash dropped to 7.5 cents – when BTC crashed (March). Was 13 cents per terahash. Today, sitting at 8 cents per terahash with BTC at roughly $12,000 today.
  • Amount of new machines on the network has grown – at 8 cents per TH – betting that price of BTC will continue to rise…
  • Miners all over the world are thus, searching for most cost-effective energy costs. Cost/Mwh Rates in crypto-mining
  • Old machines vs. New machines and economics
  • Revisit the halving event from May 12, 2020 – when reward for mining was, by design, the reward went from 12.5 BTC to 6.25 BTC – Impact?
  • Inflation Rate of BTC (1.8% infl. Rate) compared to USD inflation…digital currency has a lower effective inflation rate than the fiat currency!
  • BTC price may be volatile but depends on what you compare it to
  • New equip. is coming online line as fast as the manufactures can produce them. Most are made in Taiwan and China
  • Coming into facilities that have power in the 4cent to 5 cent range
  • Mining Machines: The S-9s are the older; Newer are the Ant Miner S19 Pros are 30 Juuls per terahash.

Square Announces Purchase of $50MM BTC for its Balance Sheet

• Here's a perhaps diversion from our main topic related to mining & energy, but it's related to Bitcoin and the larger ecosystem. So, here's some industry news I wanted to get your opinion on re Square – We all know them as the POS payment company.
• not only does Square have the retail app and footprint now, but they've also got a lot of very granular, small business merchant data.
• They've turned that into Square Capital and the small business lending business. And the data on the consumer side, the spending side, the merchant acquiring side, and visibility into SMB finances to drive the business forward, creates a pretty tight loop, closed ecosystem.
• Square just recently announced – put out a press release actually – that they had purchased around $50MM of Bitcoin…Now other major financial services companies have bought substantial sums of BTC too, but didn't necessarily announce it by press release – What's going on here in your view?

This from another podcast I listen to called ReBank. Their comments regarding Square purchase of BTC

• Will Beeson (ReBank): "It's like investing in treasury assets, and you use them to run your business. It's about 1% of Square's assets. And I think the bigger question is, is this Square, or is this a representation of broader investment theory? Like is Bitcoin now something of an asset class that institutional investors and traditional institutional investors are taking more seriously and are viewing either as an inflation hedge or an option on potential future upside."
• Lex Sokolin (ReBank/Consensys): "All you have to do is look at venture investments and Andreessen Horowitz with hundreds of millions of dollars in dedicated crypto funds and that being true for the long tail of Silicon Valley players as well. And so when people who want to be like Square and want to have that same outcome, or like Twitter or venture funds that want to be like Andreessen, which is by the way, 100% of anyone who is an entrepreneurship, when they see these actions being taken, they're both symbolic, but they're also inspirational."
• Then, if that weren't innovative enough, Aurum Capital Ventures is also focused on leading efforts to bring much needed liquidity and financing to the mining and cryptocurrency markets themselves…Can you elaborate on why this is important and what you are doing to facilitate attracting mainstream forms of capital to the industry?

Other Learnings from Today's Episode:

• Define Cryptocurrency-Mining & How it Works
• The Future of Crypto-Mining
• Crypto-Currency and Crypto-Mining are Fully Transparent Markets, by Design
• The Search for the Best Equipment and Cheapest Source of Energy
• How Aurum Capital Ventures is Changing the Game and Mindset Regarding Crypto-Mining and the Production of Energy
• Aurum is Both a Buyer and Seller of Energy
• Aurum is Redefining How Energy is Consumed and Transmitted
• Aurum is Creating Unique Investment Vehicles to bring needed liquidity – both debt and equity capital – to the Crypto-Mining and Crypto-Currency
• How Crypto-Miners are Rewarded
• What is a Halving Event and What does it Mean for Cryptocurrency Mining?
• And Much More…

Business Model Characteristics

• Your Bus. Model has Multiple Revenue Sources:

1. Turnkey Mining Equip Deployments & hosting services;

• Speed & Efficiency through repeatable process of Power procurement, infrastructure deployment, and remote management

1. Running your own Mining servers
2. Managed Services
3. Selling used equipment to established network

Competitive Advantages

• Modular, mobile equipment deployment – more efficient
• Rapid Payback/Utilization of "Stranded Energy" - Aurum's mobile mining deployments profitably monetize any type of stranded energy anywhere in the world
• Situation where the value of the underlying collateral (mining equipment) can increase in value during life of the equip. and related financing, due to a halving event of Bitcoin
• Allows you to build inventory of equipment for deployment now, in advance of halving event that you know occurs approx. every four years
• JP Baric explains Aurum's business model advantages relative to competitors such as Genesis Mining

Closing Remarks
Contact Information for Aurum Capital Ventures

• Those seeking additional information and wishing to learn more about Aurum Capital Ventures:
• • JP's Twitter Account – @JPBaric
  • Email: jp@aurumventures.com
  • Sign up for Investor Newsletter at: Aurumcapitalventures.com
  • Launching new podcast called "Digital Gold"

Thank you for joining me for this edition of DVC. I hope you found our discussion today with JP Baric and Aurum Capital Ventures interesting and useful.

Stay tuned for my next Episode, where I will have a very special guest of a high-profile company getting lots of buzz, that just went public via a SPAC in just the last few weeks. Think electric truck technology – like big, 18-wheeler truck – industry. That's all I'm giving you for now. Stay tuned… Thank you again and I look forward to joining you for my next Episode of Distilling VC.