BusDev for Bitcoin Platforms

November 15,2013
Work should be attributed to Ryan Selkis
Founder, Inscrypto (www.inscrypto....
About the Author
Ryan Selkis is a former VC and current Bitcoin entrepreneur
working on two separate consumer Bitcoin vent...
Bitcoin Opportunity
Bitcoin is a tremendously exciting digital currency
option for consumers and businesses alike.
BUT
Lon...
Biggest Provider Challenges
Industry
1) Merchant adoption and promotion
2) Government over-regulation
3) Security, volatil...
Challenges to Adoption
Most bitcoin is held by speculators for investment. Transactions that
do take place occur in the bl...
Merchant Adoption Thesis
Start:

More large
merchants
adopt

Consumers
buy BTC for
utility

Pull

Excitement about wallet ...
Identifying Opportunities
Evaluate merchants based on five factors:
1) Is market a “white market”?
2) Are its consumers cu...
Summary of Best Opportunities

eCom Platforms
eSubscriptions
Online Jewelry
Social Enterprise
Gaming
HC: Personalized
HC: ...
eCommerce Integrations

Market: These platforms have a big footprint with online retailers and brick and mortar
merchants....
Subscription Services

Market: Disruptive companies that revolutionized their respective industries, ticked off the
establ...
Online Jewelry

Market: Multi-billion online market for jewelry, growing fast due to better comparison tools,
service/qual...
Online Social Enterprise

Market: Doesn’t get much more plain vanilla than supporting charities, but long-term could be a
...
In App Purchases (& Gaming)

Market: In app-purchases are growing fast. Especially interesting opportunity for paid news
c...
Healthcare: Personalized Care

Market: Personalized health management is huge for individuals who want to prepare for /
ma...
Healthcare: Cash Svcs

Market: Consumer-oriented chains with cash pay are among highest growth areas of HC. Could
focus on...
Healthcare: RCM Companies

Market: Healthcare providers are bad at billing because of the dysfunction in how healthcare
ac...
Client Acquisition Strategy
Start:

Inbound
Marketing
&
Direct Sales

More large
merchants
adopt

Consumers
buy BTC for
ut...
Brute Force (Direct) Sales
Personal Connections
1) Many companies highlighted above are ones with
which I have personal co...
Distributed (Content) Mkting
Tools (Hubspot)
1) Seed LinkedIn / Blogs with industry leading groups
2) Sponsor events / mee...
Other Ideas
Be proactive help people pay (avoid not evade?)
taxes on appreciation of BTC
1) Integrate with Turbotax or H&R...
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Bitcoin Market Opportunity - Excellent Early Merchant Targets

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I am a former VC, current Bitcoin entrepreneur and business development professional.

In this presentation, I outline a methodology for prioritizing merchant targets likely to embrace bitcoin in the near-term based on five criteria, and give some examples of target merchants. Some of these merchants have begun to accept bitcoin since I wrote this initial draft in November, including Shopify, Zynga and social enterprise, Watsi.

The presentation was prepared for several of the major Bitcoin merchant service and wallet providers, but it is my exclusive property. I am not affiliated with any major merchant services provider or wallet provider at this time. This is simply an overview of how I would tackle new merchant acquisition in order to continue to demonstrate Bitcoin's utility to merchants and mainstream consumers alike, and recommendations are based on my extensive finance & business development experience.

Please attribute work to "Ryan Selkis, Founder & CEO of Inscrypto (link: www.inscrypto.com)" in any citations.

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  • The most fundamental issue with the bitcoin currency is whether people can actually use it.
  • Solving #1 solves other problems-Rapid merchant adoption and utility of the currency will lower volatility, increase liquidity and possibly help with US gov’t dealings.-High-caliber founding team will inspire confidence with new prospects. This market is wide open and customer acquisition is a land grab.
  • White market:Want markets that are transparent & widelyaccepted socially.BTC demographics: Are the end buyers / users of the merchant closely similar to the existing buyers / users of BTC?US-based:Physical presence is important, and equally important if this market will help the US (taxes, jobs, etc.) while doing no evil.Incentives: There needs to be a compelling reason for both the merchant (differentiater, reasonable likelihood of use, money saver) and the consumer (money saver, major convenience). Market Size: Markets need to big enough to present exciting long-term opportunities, but individual merchants can’t be big enough where a flood of transactions would break the illiquid and volatile BTC market. (Assume AMZN would convert BTC purchases to USD, very quickly crushing the value of the currency.)
  • Blue Nile, Gemvara, Zales, Kaye, Tiffany’s, Custom Jewelers
  • Market: Headline risk associated with working with substance abuse centers and mental health providers? But also the inverse to the BTC-Silk Road image. Good marketing opportunity.Customer Base: Many clinics cater to white-collar Rx drug addicts. Cash pay from a significantly higher percentage of patients than elsewhere in the HC system.US-Favored: Large cash pay HC businesses always presents risks for regulation. Another challenge could be HIPAA compliance.Incentives: Exceptional privacy for patients that want to stay under the radar. Providers prefer cash / checks, up-front payments, so a good fit. Size of payments could present liquidity issues. Merchant Size: Largest providers could be be interesting, and possibly even individual clinics. $20 BN total market growing 5-7% per year.
  • -Inbound 2013 was incredible.-How to get companies to come to you as quickly as consumers are? Communicate utility of currency
  • Users may balk initially, but transparency will help with regulators and ensure that users have documentation necessary to pay cap gains or interest taxes on appreciated bitcoin. Hedges will be invaluable to users and merchants alike.Where are the women? They control the purse strings. Need to make this compelling to them.
  • Bitcoin Market Opportunity - Excellent Early Merchant Targets

    1. 1. BusDev for Bitcoin Platforms November 15,2013 Work should be attributed to Ryan Selkis Founder, Inscrypto (www.inscrypto.com) Founder, Good-Benefits (www.good-benefits.com) C: 518-542-1077 E: ryan@inscrypto.com
    2. 2. About the Author Ryan Selkis is a former VC and current Bitcoin entrepreneur working on two separate consumer Bitcoin ventures. • Good-Bits (fka: Good-Benefits) is the first charitable foundation denominated exclusively in cryptos. • Inscrypto is a service provider that helps consumers insure the USD value of their Bitcoin wallets. • Former banker (JPMorgan) and VC (Summit Partners) Ryan also blogs under the pseudonym The Two-Bit Idiot, where he publishes the “The Daily Bit” M-F and tweets regularly throughout the week. • Follow @twobitidiot on Twitter • Subscribe to the Daily Bit: +1 to 2bitidiot@gmail.com • Archive of TBI blogs: http://two-bit-idiot.tumblr.com
    3. 3. Bitcoin Opportunity Bitcoin is a tremendously exciting digital currency option for consumers and businesses alike. BUT Long-term viability depends on its gradual and successful migration from a speculative currency investment to a widely accepted (and promoted) alternative payment mechanism.
    4. 4. Biggest Provider Challenges Industry 1) Merchant adoption and promotion 2) Government over-regulation 3) Security, volatility, liquidity Company 1) Brand: Entice early adopter merchants 2) Security, security, security 3) Win the footrace vs. competition
    5. 5. Challenges to Adoption Most bitcoin is held by speculators for investment. Transactions that do take place occur in the black or grey markets. Some reasons: Consumers Merchants Fear of newness: Is this a bubble / illegal / unstable? Liquidity concerns: Given small mkt, could I lose $ converting to USD? “Up” Volatility: Why use for txns if it’s going to keep going up? Regulatory concerns: How can I ensure compliance with fed/state? “Down” Volatility: Isn’t there a risk this could go to zero? Accounting : How will I account for this (books, taxes, investors, etc.)? Limited current utility: Where can I actually use this? Customer Base: Will there be enough users to justify investments?
    6. 6. Merchant Adoption Thesis Start: More large merchants adopt Consumers buy BTC for utility Pull Excitement about wallet services: Merchant adoption will “pull” more consumers into the market, turning this speculative currency into an amazing, industry-changing utility. I want to help make this a reality. Sales Support Merchants understand benefits Direct Sales Higher transaction Content volume Greater inbound interest Mkt
    7. 7. Identifying Opportunities Evaluate merchants based on five factors: 1) Is market a “white market”? 2) Are its consumers current BTC users? Male, young, educated, libertarian, tech-savvy 3) How will the U.S. view BTC in this market? 4) Are there meaningful incentives for both merchants and their consumers to use BTC? 5) Are transactions at the merchant small enough to prevent large bid-ask spreads? Significant savings, broken pmt system?
    8. 8. Summary of Best Opportunities eCom Platforms eSubscriptions Online Jewelry Social Enterprise Gaming HC: Personalized HC: Cash Svcs HC: Copay Mgmt
    9. 9. eCommerce Integrations Market: These platforms have a big footprint with online retailers and brick and mortar merchants. Might require more intensive integration efforts than with one-off merchants. Customer Base: This is a land grab, tens of thousands of merchants, millions of users, many would use bitcoin over alternative payments. US-Favored: Can service provider make it easier for states to collect sales tax? Incentives: LevelUp is a natural partner as they make much more money when their customers link accounts to non-credit card. Clear pricing / rewards incentives for users to spend BTC. Txn Size: Most of the transactions at SMB merchants utilizing these platforms are small and can be processed off TBC. No apparent liquidity issues.
    10. 10. Subscription Services Market: Disruptive companies that revolutionized their respective industries, ticked off the establishment, overcame scrutiny with the help of a rabid customer base. Libertarian founders. Customer Base: Good user base, young, social, educated. Users have higher average disposable income. Recurring transactions could be great for BTC. More concerned about privacy. US-Favored: Make it easy for states to collect sales tax? These companies have a lot of enemies. Incentives: Large financial incentives for companies when it’s easy to accept bitcoin on a recurring basis. Large privacy incentive for consumers to cut down on companies storing their CC info. Consumers that believe in BTC’s long-term growth will save more money as currency appreciates. Txn Size: These large, rapidly growing companies would be growth partners, but small ticket for transactions would ensure liquidity for companies converting currency.
    11. 11. Online Jewelry Market: Multi-billion online market for jewelry, growing fast due to better comparison tools, service/quality guarantees and social acceptance. $10bn total market according to IBISWorld. Customer Base: Perfect user base, young, educated male BTC user base. For early BTC adopters, tons of disposable income for jewelry / engagement rings for the +1’s in their lives. Right? US-Favored: Blue Nile and other online vendors do the majority of their business in the U.S. Major sales tax opportunities for big ticket items. Incentives: Large incentives for customers to pay cash. Larger ticket items would be difficult for merchants to convert to dollars because of low BTC liquidity, but instant wire VERY ATTRACTIVE. Txn Size: Huge. Could put cap on txn size through bitcoin, or work only with jewelers willing to accept a certain degree of BTC currency risk.
    12. 12. Online Social Enterprise Market: Doesn’t get much more plain vanilla than supporting charities, but long-term could be a difficult task for US to determine tax-exempt donations. Customer Base: Good user base, young, social, educated. Especially interesting for donors to charities with strong peer-to-peer or “direct transfer” missions. US-Favored: Charities would win and tax payers wouldn’t be able to write off donations. Home run for the government in the near-term. Incentives: Large financial incentives for charities, especially those with an international focus, to accept bitcoin, however donations would not be tax deductible to donors – major drawback. Txn Size: Massive ($30 BN) and high-growth (15% per year) domestically, with most smaller online transactions coming from middle-income donors. Opportunities big and small (donor).
    13. 13. In App Purchases (& Gaming) Market: In app-purchases are growing fast. Especially interesting opportunity for paid news content (opportunity to integrate into paywall so people can easily pay per read?) Customer Base: Perfect user base, young, social, male, hackers. US-Favored: Regulations around in-app purchases (especially with children’s apps)? Incentives: Simple opportunity for gaming companies to save 2-3% given that most in-app purchases come via linked credit cards, and high relative proportion of gamers familiar with BTC. Opportunity to maintain privacy may also be important for certain games / PPV content. Txn Size: Small transactions/rewards are perfect for BTC.
    14. 14. Healthcare: Personalized Care Market: Personalized health management is huge for individuals who want to prepare for / manage chronic conditions, and payors who have an extraordinary need to lower costs post-ACA. Customer Base: Young, educated, higher-income user base. Razor-focused on healthcare privacy and expect to be in control of their healthcare finances. US-Favored: Absolutely, anything to contain costs. Incentives: Ability to earn micro-payments for each workout could help wellness companies incentivize healthy behaviors in populations (e.g. pay / workout vs. pay / gym membership). Consumers need privacy, especially with genomics companies like 23andMe. Txn Size: Small transactions/rewards are perfect for BTC.
    15. 15. Healthcare: Cash Svcs Market: Consumer-oriented chains with cash pay are among highest growth areas of HC. Could focus on urgent care (large uninsured base), SAMH trtmt (private pay), and dental (low insured) Customer Base: Young, suburban, privately insured (higher income) patients. Cash pay from a significantly higher percentage of patients than elsewhere in the HC system. US-Favored: These are all good economic deals that drive down the cost of HC and provide terrific services outside of the insured market. Incentives: Merchant marketing opportunity (libertarian patients might be drawn to facilities), more efficient and lower-cost method of payment collection so much larger discounts typically offered. However, most patients still covered by insurance, so many will continue to wait for bills. Txn Size: Avg urgent care and dental visit are moderately priced. Substance abuse centers $$$.
    16. 16. Healthcare: RCM Companies Market: Healthcare providers are bad at billing because of the dysfunction in how healthcare actually gets paid for. Massive opportunity for the third party revenue cycle management companies to improve the way their clients collect copays. Customer Base: RCM companies have a vested interest in helping patients pay copays. US-Favored: Healthcare providers must efficiently collect copays or can be held liable for fraud. Incentives: Providers have legal stick to collect copays, and RCM companies have income carrot to do so effectively on behalf of their customers. Patients might be offered significant discounts for BTC payment of copays upfront (maybe hold in BTC escrow account?), but still a hassle. Txn Size: Copays and cash payments from insured patients are normally small and burdensome.
    17. 17. Client Acquisition Strategy Start: Inbound Marketing & Direct Sales More large merchants adopt Consumers buy BTC for utility Pull Sales Support Merchants understand benefits Direct Sales Higher transaction Content volume Greater inbound interest Mkt
    18. 18. Brute Force (Direct) Sales Personal Connections 1) Many companies highlighted above are ones with which I have personal connections for warm intros 2) The healthcare and charitable industries (nonobvious customers) are particularly interesting Direct Sales 1) Nurture inbound leads to close (see next) 2) Possible direct sales hires down the line
    19. 19. Distributed (Content) Mkting Tools (Hubspot) 1) Seed LinkedIn / Blogs with industry leading groups 2) Sponsor events / meetups ($BNFT “City Tours”) Bodies (Army of Interns) 1) Relatively easy to hire talented undergrads/ recent grads in SV willing to work with a high-flying startup Outputs (White Papers) 1) Library for merchants – sell/promote BTC usage by customers 2) Videos tutorials for consumers – raise awareness 3) Additional library for app partners on the Coinbase API
    20. 20. Other Ideas Be proactive help people pay (avoid not evade?) taxes on appreciation of BTC 1) Integrate with Turbotax or H&R Block 2) Send “tax documents” to users at year-end in case retroactive rates are applied Create currency “hedges” so businesses can safely hold certain levels of BTC – Work with hedge funds? Create industry trade group encouraging adoption by women who control the purse strings in many HH’s

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