Linen

Early Stage

Build wealth with the ownership economy

Analytics

Raised to Date: Raised: $4,900,000

Aggregate Commitments $

Platform

Republic

Start Date

02/24/2021

Close Date

01/01/2022

Min. Goal

$25,000

Max. Goal

$4,900,000

Min. Investment

$200

Security Type

SAFE

Funding Type

RegCF

Series

Series A

Valuation Cap

$22,000,000

Discount Rate

0%

Rolling Commitments $

Status

Active

Reporting Date

10/17/2021

Days Remaining

76

% of Min. Goal

19,600%

% of Max. Goal

100%

Likelihood of Max
exceeded
Avg. Daily Raise

$20,851

Momentum
cold
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Location

San Francisco, California

Industry

Financial & Insurance Products & Services

Tech Sector

Fintech

Distribution Model

B2C

Margin

High

Capital Intensity

Low

Business Type

High Growth

Linen, with a valuation cap of $22 million, is raising funds on Republic. The application has been developed to allow retail investors to access alternatives to bonds and peer-to-peer loans. Linen will use high-end technology to enable the use of blockchain by investors in the form of stablecoins and provides access to liquidity pools on the Ethereum blockchain. The company was founded in June 2018 by Vitaly Bahachuk, Alex Bazhanau, and Max Okala-Kulak, and is backed by Coinbase, Were Capital, HashKey Capital, and Polychain Capital. The current crowdfunding round has a minimum raise of $25,000 and a maximum raise of $500,000, and the funds will be used to launch new functionalities, implement scalability solutions, and connect the app to the broader DeFi ecosystem. Linen has already found its product-market fit with its low operating costs and scalable growth.

Summary Profit and Loss Statement

Most Recent Year Prior Year

Revenue

$998

$0

COGS

$0

$0

Tax

$0

$0

 

 

Net Income

$-353,422

$-349,622

Summary Balance Sheet

Most Recent Year Prior Year

Cash

$193,308

$225,251

Accounts Receivable

$0

$0

Total Assets

$661,147

$637,106

Short-Term Debt

$59,091

$66,628

Long-Term Debt

$0

$0

Total Liabilities

$59,091

$66,628

Financials as of: 02/24/2021
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Raise History

Offering Name Close Date Platform Valuation/Cap Total Raised Security Type Status Reg Type
Linen 01/01/2022 Republic $22,000,000 $4,900,000 SAFE Active RegCF
Linen 01/16/2021 Republic $19,800,000 $27,472 SAFE Funded RegCF
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Ratings

Analyst Report

Synopsis

Decentralized finance is a concept — and a market — that is still maturing. It looks to minimize the need for third-party brokers in a financial contract. Instead, the customer and company enter into their own agreement through “smart contracts” that are stored via blockchain. Each of these contracts cover payment in a large variety of ways, including cryptocurrency, social tokens, stablecoins, digital art, and more. These contracts are binding because of signatures through private keys, which are 12-to-24 word (non-recoverable) seed phrases unique to their respective contracts. 

For the average person, all of this can be too much to handle when trying to enter into the world of decentralized finance (DeFi). That’s where Linen steps in. The company provides a platform that is easy for novices to access and begin earning yield from the ownership economy. The app will allow users to educate themselves about these topics. From there, they can deposit cryptocurrency, make bank transfers into their wallet on the app, access the DeFi ecosystem, and either sell assets or withdraw funds to their external accounts. The platform that Linen has created is currently in beta on iOS and wait list only on Android. Linen’s platform has seen solid traction thus far with more than 15 thousand downloads and 1,370 deposits onto the app.

Linen’s current Republic raise has been rated as a Deal to Watch by the KingsCrowd investment team.

Price

Linen is raising at a valuation of $22 million with no discount. As a new company just starting out in the industry, this valuation is quite high. While Linen could grow to become a major name in the DeFi space, such a high valuation cap removes some of the benefit of being an early investor. Thus, the price score for Linen is its lowest across all five metrics.

Market

It’s difficult to pin down the exact size of the DeFi market, but the most important takeaway in regard to the new financial system is that it’s still maturing. Companies in this space have seen market caps boom alongside bitcoin in 2020 and 2021, with the global crypto market cap sitting at $1.58 trillion. Further fueling the rise of DeFi is a lack of trust in traditional financial institutions, which has been low since the Global Financial Crisis in 2008. In 2009, only 22% of Americans considered these institutions trustworthy, and this rate only rose to 33% by 2019. All of these factors are creating a very high growth rate for the DeFi markets. However, those markets are currently still quite small, due to how young they are. Balancing these factors against each other, the market score for Linen is just slightly above average.

Team

Linen was founded in 2018 by Alex Bazhanau and Vitaly Bahachuk. Bazhanau graduated from Belarusian State University in 2017 with a bachelor’s degree in computer science. He has held jobs in and around the industry of cryptocurrency and blockchain, previously working in positions such as lead Ethereum engineer at Monetha and as a software engineer at Adform.

Bahachuk has a bachelor’s in finance from the University of Colorado and a background in investment banking with a focus in financial technologies. He spent three years working at KeyBanc Capital Markets as an analyst and nearly two years as an investment banking associate at Kaufman & Company. After his foray into tech investment banking, Bahachuk began his career as an entrepreneur. He co-founded EDISOFT Belarus, an electronic invoicing company based in Belarus. He later joined with Bazhanau to develop a product called LoadScan, a portal for discovering the best rates to loan and receive digital currency. The pair continued their partnership by founding Linen.

Bazhanau brings cryptocurrency knowledge and technical skills while Bahachuk has past entrepreneurial experience. However, neither of these founders has strong business development or operations expertise. It isn’t clear that their combined skill set will be sufficient for Linen’s continued growth. Thus, the company’s team score is below average.

Differentiators

According to Linen, similar wallet platforms fall into two categories. In the first, “users do not have access to their private keys, cannot participate in DeFi, and cannot acquire the long tail of assets or access third-party decentralized applications (Dapps).” The second group is oriented toward experts, not amateurs. However, Linen’s platform was created for people who have limited to no experience in decentralized finance. Its virtual wallet makes the whole process simple, removing the need for seed phrases, which can be scary for new DeFi entrants. It acts as something known as a “self-custody wallet” for cryptocurrency and other digital assets. This is a much-needed innovation for DeFi, and it strongly sets Linen apart from other companies offering digital wallets to users. The only downside currently is that Linen has no patents for its technology, so there is limited defensibility. Despite this concern, the company has done an admirable job of creating a platform that is strongly distinguished from the competition. The differentiators score for Linen is its highest across all five metrics as a result.

Performance

The traction that Linen has achieved thus far has been solid, particularly in terms of its user base. Linen users made more than 1,300 initial deposits into various DeFi pools. Its application has had 15,000 downloads thus far as well, despite only being in beta on IOS. In such a new, innovative market that can be difficult for many to understand, these early indications of success bode well for when the industry as a whole picks up steam.

From a financial perspective, Linen is showing encouraging signs, though it is far from profitability. The company saw $988 in revenue in the most recent fiscal year, while net loss came in at around $353,000. However, the company has low amounts of debt — just under $60,000 in short term debt. Given the strong user growth and decent financial status, Linen’s performance score is strong.

Bearish Outlook

Decentralized finance is an extremely intricate, difficult concept. Therefore, its widespread adoption amongst Linen’s intended audience everyday people may not come to fruition. If the industry fails to catch on amongst this group of amateur DeFi investors, Linen may not scale alongside the industry as a whole. It is also worth noting that the company has yet to make anything close to a profit. The company will also need to attract talent as it continues to build and expand its platform. 

Bullish Outlook

Cryptocurrency has been exploding for the last year. The emerging market of decentralized finance is also continuing to grow. By positioning itself as the most accessible option for novices looking into DeFi, Linen is well positioned to scale alongside the ever-growing industry. The company’s early beta success and the 1,300 deposits onto the platform indicate that Linen is on the right path towards success.

Executive Summary

Decentralized finance, cryptocurrency, and the blockchain are all concepts that may be difficult to fully comprehend, but it can’t be denied that they are all concepts and markets that are growing at fast rates. Linen is a self-storage wallet app that looks to simplify the process to allow for novice investors to take advantage of the ownership economy and other DeFi liquidity pools. The market is expanding rapidly, and the company has seen solid traction on its app thus far. However, it seems to be a long way away from profitability, and the hard-to-understand concepts may scare off users. Altogether, Linen has been rated as a Deal to Watch.

For questions regarding the KingsCrowd staff pick or ratings for this company, please reach out to support@kingscrowd.com

Analysis written by Ethan Thomas.

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Platform: Republic
Security Type: SAFE
Valuation: $22,000,000
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