Unbanked (formerly Ternio BlockCard)

Growth Stage

Connecting DeFi and cryptocurrencies to banks, cards, and other legacy finance

Analytics

Raised to Date: Raised: $2,058,372

Aggregate Commitments $

Platform

Republic

Start Date

02/15/2022

Close Date

09/03/2022

Min. Goal

$25,000

Max. Goal

$5,000,000

Min. Investment

$150

Security Type

SAFE

Funding Type

RegCF

Series

Seed

Valuation Cap

$115,000,000

Discount Rate

20%

Rolling Commitments $

Status

Active

Reporting Date

05/21/2022

Days Remaining

105

% of Min. Goal

8,233%

% of Max. Goal

41%

Likelihood of Max
possible
Avg. Daily Raise

$21,667

Momentum
cold.svg
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Location

Alpharetta, Georgia

Industry

Financial & Insurance Products & Services

Tech Sector

Fintech

Distribution Model

B2C

Margin

Low

Capital Intensity

Low

Business Type

High Growth

Unbanked, with a valuation of $115 million, is raising funds on Republic. The company provides a platform for the customers to move money instantly, with real-world application of blockchain and cryptocurrency. Unbanked allows users to buy using their cryptocurrency at about 50 million merchants. The company reported revenues of $1.7 million in 2019, $9.3 million in 2020, and expects to generate $20 million for 2021. Ian Kane and Daniel Gouldman founded Unbanked in January 2018. The current crowdfunding campaign has a minimum target of $25,000 and a maximum target of $5,000,000. The campaign proceeds will be used to increase the marketing spend and grow the customer base.

Summary Profit and Loss Statement

Most Recent Year Prior Year

Revenue

$9,385,513

$1,740,653

COGS

$7,144,963

$616,654

Tax

$0

$0

 

 

Net Income

$-1,273,122

$164,879

Summary Balance Sheet

Most Recent Year Prior Year

Cash

$893,707

$42,904

Accounts Receivable

$0

$0

Total Assets

$1,440,151

$492,823

Short-Term Debt

$250,826

$266,468

Long-Term Debt

$2,112,103

$25,000

Total Liabilities

$2,362,929

$291,468

Financials as of: 02/15/2022
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Raise History

Offering Name Close Date Platform Valuation/Cap Total Raised Security Type Status Reg Type
Unbanked (formerly Ternio BlockCard) 09/03/2022 Republic $115,000,000 $2,058,372 SAFE Active RegCF
Ternio BlockCard 07/12/2020 Republic $15,000,000 $1,070,000 SAFE Funded RegCF
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Synopsis

The traditional banking system has failed a lot of people. Gobally, there are 1.7 billion adults who are unbanked. This is due to many reasons, including living in a poor economy and having no access to reliable financial institutions. Even for individuals who do have bank accounts, traditional banks have often failed to modernize and embrace digital capabilities. Online banking remains a clunky and often frustrating experience for many people.

In recent years, two technologies have disrupted the financial sectors: neobanks and blockchain. Neobanks, a digital financial technology that operates online, have been a popular alternative to traditional physical banks. Neobanks solve a lot of customers’ pain points through lower fees, higher interest rates, and the ability to open an account digitally from home. With 6% of US households not having a bank account, neobanks make it easier for individuals to be banked. 

Blockchain technology, which plays a key role in cryptocurrency, has also helped many frustrated individuals adapt to new methods of banking. Because of blockchain’s decentralized nature, it can bypass a lot of regulations set by centralized systems and provide people with more flexible banking solutions. 

Unbanked, formerly Ternio BlockCard, is a financial technology startup that is meeting this growing demand for disruptive and new banking solutions. The company operates on blockchain technology and offers customers both a digital wallet and a physical payment card that they can use for everyday transactions. Users from more than 200 countries can swap fiat money for cryptocurrency using Unbanked’s blockchain technology. Organizations, including players in the cryptocurrency market, can also white label Unbanked’s platform and have a customized card made for their own company.

Unbanked’s current Republic raise has been rated a Top Deal by the KingsCrowd investment team. 

Price

Unbanked is raising capital via a SAFE with a valuation of $115 million and a discount of 20%. The company had revenue of $9.3 million in 2020, which yields a revenue-to-valuation multiple of 12x. On average, financial technology (fintech) companies usually have a multiple of 15x. In comparison, public neobank SoFi has a multiple of 13.8x. So even though Unbanked’s $115 million valuation might seem high at first, the price is quite fair in comparison to its revenue.

Market

Unbanked is operating in the blockchain and neobanking market. The global blockchain market in banking and financial services is estimated to stand at $1.9 billion in 2022 with a massive annual growth rate of 61.9%. The market is currently small due to the newness of blockchain. However, consumer confidence in both neobanks and blockchain is growing and spurring greater market adoption. 

The market is largely driven by needs for inexpensive and decentralized methods of payment and transferring money. Especially for those that don’t have access to reliable financial institutions, blockchain technology and cryptocurrencies provide a way to bypass traditional financial infrastructure. Users can send and receive payments from mobile devices, access alternative credit markets, and invest in global asset markets. In the US, the percentage of people holding digital-only bank accounts has been increasing. As of 2022, account holders for completely digital banks stood at 13.7% of the population.

Overall, Unbanked operates in a small but quickly growing market that is set to disrupt traditional banking solutions. The company looks well-positioned to take advantage of the market’s growth and secure a significant niche for itself as a blockchain-based neobank.

Team

Unbanked was co-founded by co-CEO Ian Kane and co-CEO Daneil Gouldman. Prior to Unbanked, Kane worked in the advertisement and media industry. He served as the chief revenue officer for Ad3, an advertisement technology company founded by Gouldman. He  has nearly 10 years of experience working in director- level positions at several other advertising technology (adtech) companies. Kane also helped scale and grow DealOn.com during his time at Adblade.com. DealOn.com was later acquired for $11 million, which proves his ability to lead his team and achieve exits.

Co-CEO Gouldman worked with Kane previously as the co-founder and CEO of Ad3 from 2015 to 2018. He also has experience in the financial industry and gained managerial skills from working at AxCess Financial, which aims to bring financial solutions to those who need it. He managed several stores and led sales. 

Both founders have high managerial and entrepreneurial skills. However, they lack blockchain and financial technology (fintech) experience. Although relevant industry experience is not the sole determining factor of startup success, founders with a relevant background might be more likely to become successful. However, both founders’ adtech experience is helpful for the scalability of Unbanked. The growth of the company has proven that the founding team is able to lead and scale the business.

Other Unbanked team members include a chief technology officer, managers, a director of human resources, and an advisor. The team brings experience in entrepreneurial, advertising, information security, and cybersecurity industries. Unbanked employees also include more than 40 contractors distributed internationally. Overall, the founders lack fintech experience, but the team is strong and has diverse skill sets.

Differentiators

There are a few competitors for Unbanked in the blockchain banking industry. Revolut is a UK-based company that provides online banking solutions and allows people to convert fiat money to crypto instantly, just like Unbanked. The main advantage Unbanked has is that Revolut is available in 28 countries, while Unbanked offers bank accounts insured by the Federal Deposit Insurance Corporation in more than 200 countries and territories. 

OnJuno is another competitor where users can buy, sell, and exchange cryptocurrency and also transfer money internationally. However, unlike Unbanked, it can only transfer money to 30 countries. Although Unbanked still doesn’t offer annual percentage yield for customers, the founder claims it will offer up to 50%, while OnJuno offers 1.2%  and Revolut offers 0.07%. If Ubanked can make this happen, the company will have a huge advantage over its competitors.

One of Unbanked’s disadvantages is that it charges a $5 fee for customers who spend less than $750 per month. This usage fee may not appeal to those who don’t spend much regularly, such as many young adults. However, users can get more than 6% in rewards when they pay with cryptocurrency, which might make up for the fee.

What truly sets Unbanked apart from competitors is the ability for companies to white label its card. Unbanked is token-agnostic and can be used as a white label, enabling Unbanked’s business-to-business customers to develop customized debit cards and accounts for their own consumers. Litecoin Foundation was one of the first companies to partner with Unbanked and take advantage of this service. The company’s white label ability is possible thanks to Unbanked’s partnership with the Visa FastTrack Enablement program. Unbanked is one of 12 companies accepted into this program and the only one with a focus on cryptocurrency.

Blockchain banking is an emerging market, though Unbanked does face competition within it. Thus far, the company has succeeded in building differentiators that should appeal to its customers, and its partnership with Visa is a definite advantage. If Unbanked can maintain its defensive moat, the company could emerge as a major player in blockchain banking.

Performance

Unbanked’s revenue increased by 439% from 2019 to 2020, going from $1.7 million to $9.3 million. This is a very remarkable accomplishment that signals the company’s future success. Its revenue is also projected to reach $20 million in 2021, growing by 115%. If achieved, that revenue growth would far surpass the growth rate of the financial technology industry itself, which is still strong at almost 25%. However, it is worth noting that Unbanked’s gross profit margin decreased from 2019 to 2020, going from more than 60% to just 23%. But when compared to the financial technology industry, those margins are still within the average range of 5.1% to 40.5%. Another concerning point is that Unbankedreported a net loss of more than $1.2 million in 2020 after being profitable in 2019. However, $923,000 of that loss was from interest expense due to an increase of its SAFE valuation in 2020 rather than expense due to operation. Thus, the company’s actual loss was $277,000 and its monthly burn rate is $23,000. Unbanked went from a positive to a negative net income within a year, but it sacrificed profitability to achieve its impressive growth that year.

Unbanked has shown great traction at a low cost. According to the founder, the company spends $0 on customer acquisition. Unbanked also has a good online reputation, with a rating of 4.2 stars on Trustpilot. While trust is important for any business, it’s all the more vital for a company that handles other people’s money, so this is a good sign for Unbanked. The company has also managed to raise more than $1 million in a past crowdfunding campaign. The founder’s proven ability to raise capital might help reassure investors who are concerned about the company’s recent net loss.

The company’s most notable partnership is with Visa. The Visa Fintech Fast Track Program allows financial technology companies to accelerate their growth and better serve their customers, so companies such as Unbanked can issue payment cards and scale operations. This partnership has allowed Unbanked to have more than 10 white label customers in its business-to-business channel. Customers include Litecoin Foundation, Paxful, and Nexo. 

Although Unbanked’s net income has suffered, it has shown overall impressive growth. Its strong partnerships and good reputation seem likely to help the company make greater achievements in the future.

Risks

An investment in Unbanked does come with some risks. The company went from profitability in 2019 to having a negative income in 2020. It also has a rather small gross margin of 23%. It’s never encouraging to see a startup regress from profitability to loss. In particular, it looks like Unbanked spent much more on its cost of goods sold. Given the company’s strong traction, that focus seems to have paid off. However, it will be crucial for Unbanked to recover its profitable status moving forward. 

It’s also important to address Unbanked’s debt. In its recent filings, the company reported $2.1 million in long-term debt, which looks risky when set against its $893,707 cash on hand. However, $1.9 million of this debt came from Unbanked’s previous SAFE round which greatly reduces the risk associated with it. The company’s actual long term debt is only around $1 million, which is not particularly concerning since it brought in $9.4 million in revenue in 2020.

Another risk for Unbanked investors comes from this round’s investment terms. SAFEs are riskier than common or preferred equity because there is no guarantee of the conversion price when it converts into equity in the next round. If the next round’s valuation is lower than $115 million, investors won’t see their shares increase in value.

The final risk for Unbanked is the market. Although being decentralized gives cryptocurrency a lot of advantages, it also creates legal confusions and paves the path for potential fraud and money laundering. For that reason, countries such as China banned cryptocurrency transactions. Legal uncertainties around the space could hinder the market’s growth in the future. Unbanked also operates globally and will need to adhere to many different regulations. This requirement will likely create complexities for the company and could slow its ability to scale.

Updates Since Last Round

Unbanked’s previous crowdfunding campaign – when the company was called Ternio BlockCard – closed in July 2020. Since then, its valuation increased 7.6x, going from $15 million to $115 million. Although this is a huge jump, the company’s revenue also increased by more than 400%. In both rounds, the company yields a revenue-to-valuation multiple of around 12x, which makes its valuation increase fair.

Unbanked’s core team went down from 17 to nine members between rounds. This downsizing has not been explained by Unbanked. However, the company has also hired more than 20 contractors, according to the founder. The addition of so many contractors should aid the company as it continues to grow.

The company has also delivered on its promised milestones. Unbanked has rolled out international bank accounts that are available in more than 200 countries and territories. The company has also launched its cryptocurrency reward program and its Crypto Payment Profile. This feature allows customers to receive cryptocurrency payments through a self-custodial wallet, which is a digital place to store cryptocurrencies.

Unbanked has made great progress between its first and second crowdfunding campaigns. Its valuation increased, but its revenue and product offering grew as well. Unbanked still stands as a good investment opportunity and therefore remains a Top Deal.

Bearish Outlook

Unbanked operates in a fairly new market, which can increase risk for the company. The global blockchain neobank market is small, and it is important to acknowledge that Unbaked is unlikely to capture 100% of the market, since there are other strong competitors. 

There are also legal concerns surrounding the cryptocurrency market. There are different regulations in different countries, which could impact Unbanked’s scalability internationally. As cryptocurrency becomes more popular, determining appropriate laws becomes difficult. Data theft can also become a rising issue with unclear laws. Unbanked will need to balance shifting regulations alongside user security as it grows.

Bullish Outlook

Although the blockchain banking market is small, it is growing very rapidly, and Unbanked is also growing rapidly as a company. It grew by more than 5x in 2020 and is projected to have grown by more than 2x in 2021. Unbanked has spent $0 on customer acquisition and has a high review rate, indicating that users are happy with its services. From a business-to-business perspective, its white label method has earned Unbanked further traction and revenue. Unbanked was able to create a partnership with Visa and is the only company to focus on cryptocurrency in Visa’s Fast Track program. As Unbanked keeps establishing a stronger presence internationally, Visa too could become dependent on Unbanked and less likely to switch to another partner. 

Although the executive team lacks blockchain technology experience, the company has achieved multiple milestones between the last crowdfunding campaign and the current one. This progress proves that lack of experience was not a hindrance to the growth and scalability of Unbanked. In fact, the founders’ lack of financial technology experience might serve as an advantage. They might have been able to see things from a fresh perspective and approach it in creative ways. Overall, Unbanked shows many signs of being a promising investment.

Executive Summary

Unbanked is a neobank startup built on blockchain technology whose services are available in more than 200 countries and territories. Unbanked faces a few strong competitors and is targeting a currently small market. It will also need to navigate shifting regulations within the digital banking and cryptocurrency markets, which might slow the company’s growth. Although Unbanked’s revenue increased, it went from being profitable to having a negative net income between 2019 and 2020.

However, Unbanked is one of the first movers in the blockchain banking market, a sector that’s growing very rapidly. Unbanked’s main advantage over competitors is its partnership with Visa, which allowed it to white label its technology to cryptocurrency companies such as the Litecoin Foundation. The company has seen revenue grow by more than 400%, and it has successfully launched new products over the past year. And finally, despite its high valuation, Unbanked’s reasonable revenue-to-valuation multiple makes it a fair deal. Unbanked shows many signs of continued strong growth in the coming years. Taking all factors into consideration, the company has been rated a Top Deal by the KingsCrowd investment team.

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

Analysis written by Yasmin Sharbaf, March 8, 2022. 

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Unbanked on Republic 2022
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Platform: Republic
Security Type: SAFE
Valuation: $115,000,000
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