Ripple Puzzle: Why is Ripple not short of money financing?

Source: DeepChain deep chain of: Off

Ripple, the rich man in the cryptocurrency world, the bull market is full of speculation in XRP, and the bear market is still very nourished. Even in such a bleak year in 2018, it still made a huge $ 535 million.

All in all, not bad money.

On December 20, Friday, local time in the United States, Ripple announced an additional $ 200 million in Series C financing, with a valuation of $ 10 billion. This round of financing was led by New York investment company Tetragon, followed by Japan's SBI Holdings and venture capital firm Route 66 Ventures.

This is the chaotic law of this world. The more money is not bad, the more people send money.

However, since the money is not bad, why should Ripple raise capital again?

"Not bad for Ripple"

"The company wouldn't need this financing, although it would provide flexibility in the balance sheet."

Regarding the $ 200 million financing, in an interview with Fortune, Brad Garlinghouse, CEO of Ripple, a wealthy company, said directly.

In a previous statement, Brad Garlinghouse declared: "Our financial situation is good and can support our vision. Although other companies in the blockchain space have slowed down or even closed down, we have accelerated throughout 2019 Development momentum and leading the industry. "

This is indeed the case. When the cryptocurrency industry encountered a severe winter and many companies began to lay off employees, Ripple was not only unaffected, but was still "actively expanding."

The data shows that Ripple's offices around the world have increased to 534 employees. A Ripple spokesman said the company's plans for next year include hiring 150 new employees and adding overseas offices.

In October, Garlinghouse stated that the company has more than $ 305 million in cash and has about $ 15 billion in XRP. According to the blockchain media The Block, in the first three quarters of this year, Ripple sold a total of $ 487 million in XRP.

All in all, Ripple is not bad money.

So why would Ripple, which is not bad money, choose to accept financing at this time?

Ripple officials said that this round of financing will be used to speed up recruitment, "better serve their growing customer and partner community," and provide greater flexibility for their business development; and said Route 66 Ventures and SBI Holdings Both companies are long-term partners that will help the company continue its rapid global expansion.

Looking back at earlier investment rounds, Ripple raised US $ 121 million from angel rounds, seed rounds, multiple rounds A and B rounds.

Zhang Chen, a VC practitioner, said that for startups, the C round is a very important node. Generally speaking, the C round is the last round of financing before the company goes public, and its main role is to price the listing or seek acquisitions.

In an interview with CNBC in September 2017, Brad Garlinghouse said that although Ripple is not yet ready for an IPO, it "makes sense" at some point in the future.

Researchers at SharesPost studied stock issuance of payment companies such as Mastercard, PayPal, Visa, and found that the average transaction price of stock prices between 2017 and 2019 was 10 times higher than the initial price. If Ripple is successful, it could become very profitable.

But Wall Street practitioner Jack said that from the current situation, Ripple is less likely to go public, mainly due to compliance disputes in XRP and cryptocurrencies' financial audits. SharesPost's research report on Ripple also pointed out that Ripple's IPO may fail.

Then why did Ripple still so much money?

Ripple needs business, XRP needs value.

"Ripple's Business Experience-Selling" Air Coin "”

At the same time that Ripple had achieved "financial success", its token XRP had encountered Waterloo, falling from a high of about $ 3 in 2017 to the current $ 0.19, a sharp drop of 94%.

For a long time, Ripple has been criticized for "relying on the disk" and "XRP has no value at all".

What kind of company is Ripple? Simply put, this is a business that depends on selling coins.

The Block analyst Larry Cermak said that if Ripple becomes a payment company in some way, it will benefit equity holders, while XRP holders can only hold a huge bag to find ways to sell to others. XRP is Ripple's revenue-generating mechanism and nothing more. So far, Ripple has sold $ 1.2 billion in XRP.

Former Wall Street trader and JP Morgan Chase vice president Tone Vays agreed with criticism of Ripple's profit from the sale of XRP. He believes that XRP should be considered as a security, and Ripple has issued it without compliance. Compared with startups that generate liquidity through legal means of operation, Ripple has a “ridiculous financial advantage” by continuously selling coins. ".

Selling coins has always been Ripple's open revenue mechanism. In May 2017, Ripple launched a new feature, Escrow, to gradually release XRP through third-party hosting. The popular explanation is to regularly sell XRP.

The official explanation for this is that Ripple has always been suspected of being too "centralized". In this case, Ripple simply "decentralized" and continuously released XRP through Escrow.

According to official information, Ripple put 55 billion XRP into 55 Escrow's escrow contract accounts, each account being 1 billion XRP, unlocking a escrow contract account on the first day of each month, opening up for corporate purchases, and the same month XRP that has not been purchased will be returned to the new smart contract.

Through this mechanism, Ripple will sell up to 1 billion XRP per month in the next four and a half years.

In addition to selling coins, XRP has also been criticized as "air coins" and has no actual value.

"XRP, like almost all ICO cryptocurrencies, does not need to exist at all, and it does not give you any real rights. Its purpose is to make money for Ripple by selling it to fools."

"I've actually done some due diligence work on the Ripple technology for the client and had an in-depth conversation. This technology has potential value as a back end for some banking systems, but none of these scenarios will really use XRP as A fault-tolerant database, Ripple may be useful for some systems, but the database does not require a token. "Said Peter Todd, blockchain technology consultant.

In Ripple's past product system, there are three major products, xCurrent, xRapid and xVia.

Among them, xCurrent is Ripple ’s flagship product, which mainly provides cross-border transactions between banks, with the advantages of faster settlement and lower fees. At present, more than 300 financial institutions worldwide cooperate with Ripple to use xCurrent for international settlement. But please note that all this has nothing to do with XRP, in the use case of xCurrent, XRP is not needed at all.

The only product that can use XRP is xRapid. The mode is that the payer first changes the payment to XRP and sends it to the bank of the payee. The bank converts the XRP received into the corresponding currency and then pays to the corresponding payee. .

However, few banks really use it. On the one hand, XRP prices fluctuate greatly, which will cause exchange losses. Second, the use of cryptocurrencies for intermediary settlements poses legal risks, although despite Ripple ’s official marketing of third world banks such as Mexico and the Philippines, XRP is But little success.

In all kinds of news, there are often news about Ripple's cooperation with major international banks. Investors believe that this is good news for XRP. In fact, they use xCurrent, which has nothing to do with XRP. For a long time, the value endorsement of XRP is actually based on the great achievements of xCurrent.

Perhaps due to too many exposures and accusations of "XRP uselessness", Ripple started to implement "remedial measures".

The official website of Ripple recently deleted the classification details pages of its products xRapid, xCurrent and xVia, combining the functions of all previous products into a single solution Ripple Net, all banks using xCurrent products will automatically join Ripple Net.

In this way, Ripple seems to be able to publicize its business in a bright and honest way. Hundreds of banks use Ripple Net, and XRP is an important value carrier of Ripple Net. It makes people wonder whether Ripple executives have thoroughly studied the Chinese idiom "cover the ears and steal the bell".

"Ripple's top priority-finding a scene for XRP"

It is Ripple's top priority to take off the hat of "Air Coin", find application scenarios for XRP, and give it actual value.

Ripple seems to have learned the trick from former employee Sun Yuchen. Since other banks do not use XRP, they can use their financial advantages to invest and acquire related companies and use it for themselves.

In November 2019, Ripple completed a $ 50 million investment in MoneyGram, a remittance platform. Prior to this, Ripple had invested $ 30 million in MoneyGram. As a return on investment, MoneyGram agreed to use Ripple's products for cross-border settlement, in particular to expand the use of the XRP liquidity product xRapid payment system. Documents show that MoneyGram has started using XRP for transactions in Europe, Australia and the Philippines since June.

In addition to investing in MoneyGram, Ripple also acquired Algrim, an Icelandic cryptocurrency trading company, in September to expand XRP's position in Europe. In addition, Ripple also acquired the payment platform Logos Network, a distributed ledger-based payment platform. It is reported that Logos is currently studying the development of the DeFi system with XRP tokens as its core.

"It seems a little different for a company that is so rich to seek Series C financing. Yes, they are rich, but the money is more from selling digital assets XRP. If they make more acquisitions, they need to continue to sell a lot XRP, this is not good for the price of XRP. "

In XRPCommunity's active member "XRPTwin", after having sufficient ammunition, Ripple may continue to invest in acquisitions in the future to increase the application scenarios of XRP. He is full of confidence in the future of XRP. He believes that after raising funds, Ripple will make a difference in the DeFi, gaming, micropayment, and smart contract industries and become a leader. Ripple's acquisition of Logos Network to develop DeFi is a clear signal.

In addition to asking for money, Ripple also needs resources.

In the Series C financing, Tetragon, a leading investor, is a closed-end investment company headquartered in London. The investment field is concentrated in real estate, stocks, and credit-related fields. As of September 30, 2019, Tetragon has a net asset value of approximately $ 2.3 billion, which is the first time Tetragon has invested in a blockchain enterprise.

XRPCommunity community members believe that Tetragon is more of a financial investor.

The two investment institutions that followed, SBI Holdings and Route 66 Ventures are early investors in Ripple, and they are also the partners highlighted in the Ripple announcement.

As the predecessor of SoftBank's investment department, Japanese financial giant SBI has played a pivotal role in the development of Ripple. Li Xiaolai believed that the Ripple project was flawed from the beginning, so that the core team left, and several co-founders polished the coin. Later, because SBI supported Ripple, the price of XRP began to skyrocket.

For a long time, the SBI Group has supported Quanli Ripple and XRP. It plans to use XRP to pay mid-year dividends and plans to use XRP to promote remittance business from Japan to Southeast Asia.

Route 66 Ventures is an early-stage investment company that focuses on the financial services and fintech industries. It has invested in a large number of financial management, bank loans, and payment companies, of which there are only 6 payment companies. These are Ripple's potential cooperation Object.

However, the success of Ripple does not mean that XRP will succeed. Whether the US $ 200 million financing can give XRP real value, expand application scenarios, and increase practical value may require time to test.

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