SONM ICO Investment Analysis

Overview: SONM is the universal fog supercomputer powered by the Ethereal blockchain.

What is SONM

SONM is a decentralized worldwide fog supercomputer for general purpose computing from site hosting to scientific calculations. SONM company is an effective way to solve a worldwide problem — creating a multi-purpose computational power market. From a technical point of view, SONM is a top layer of underlying P2P technologies — BTSync for data transfer, Cocaine open source PaaS technology as a decentralized computing platform, and Ethereum Smart Contracts as a consensus system.

What is Fog Computing

Fog computing or fog networking, also known as fogging, is an architecture that uses one or more collaborative multitude of end-user clients or near-user edge devices to carry out a substantial amount of storage (rather than stored primarily in cloud data centers), communication (rather than routed over the internet backbone), control, configuration, measurement and management (rather than controlled primarily by network gateways such as those in the LTE core network).

SONM Challenges it Will Face in The Future:

1. Execution of Working Model (Human Capital, Financial Capital, Time Capital)
2. Competition
3. Marketing

a. Gaining user adoption

4. SONM Marketplace between Buyers of Computation Power and Miners/CPU Providers

5. Profitability

After each area, I will be quantitatively scoring on a 0–10 scale, 0 is bad and 10 is excellent. At the end, an average will be taken for all five areas of interest in this investment analysis. I will address each area and follow with a brief conclusion of my findings.

Execution of Working Model

Now, it appears that SONM has an Alpha version prototype. My understanding, is that the ICO funding will be used to actually build out and enhance their universal fog super computer alpha version. It is unclear as to how much is smoke and mirrors and how much is real.

I must address four main areas that every single business venture needs to execute and is the major reason, in my humble opinion, why business ventures fail, and that is management and or mismanagement.

Management in the areas of Research & Development, Accounting/Finance, Sales & Marketing, and Operations which includes Legal, Logistics, Human Resources.

Management relies for the most part on the team.

And execution of any project, albeit, building a tree house to building a universal fog super computer, depends on the, human capital.

In any investment, whether it’s an investment of time, money or human resources, requires one to ask profound and very important questions.

The question I pose, is whether or not the team at SONM is capable and has the experience to reach the milestones that are have set forth?

Here is a link to their technical roadmap:

SONM’s Technical Roadmap :

In reading the SONM whitepaper, there are several references to their competition and where the competition lacks in their technology.

Rather than to expound on the competition, I will leave that for the later section, aptly entitled, “Competition”, what I will let you decide is which team i.e. management you believe is best qualified to execute on a decentralized supercomputer?

I will use the two other companies for which SONM has referenced in their whitepaper the most, Golem and iEx

SONM Management Team:

Team | SONM

Golem Management Team:

Golem

iEx Management Team:

Team - iEx.ec

I want to reiterate once again, as repetition is the mother of all learning, that a great management team is the difference between a successfully pre, post, and sustainability of any business venture. Experience always rules first in my book. And experience does not simply equate to years of age nor years of experience, but what one has done and accomplished in the past.

Rating: 5

Competition With any business venture, one of the key advantages is “first to market”. Having as they say, first mover advantage is a big differentiator.

Unfortunately for SONM they are, for all intents and purpose, late to the game. There are already plenty of competition in the “decentralized supercomputer” space, with companies such as Golem and iEX. If you factor in other decentralized supercomputing that are focused in an area of expertise such as Folding Coin, Grid Coin, then SONM is extremely late to the game.

SONM makes claims in their whitepaper as to the deficiencies of their counterparts, and in this case, they reference Golem and iEx.

I have yet to verify the claims made by SONM as it pertains to iEx.

I was able to contact Golem and I received this from them:

Here is the link that they forwarded me:

On Competition, Technology, and Prices, or, Why We Do Not Speak About The Others

I will let you read the post, and decide for yourself.

However, Golem has established themselves as a leader in this space as is the 800-pound gorilla that SONM needs to defeat in order to obtain serious market share. It is difficult to say how SONM ranks to the competition because they just launched their Alpha version. But if we use first mover advantage as a basis for factoring in where SONM ranks in competition their rank would be:

Rating: 4

Marketing

Marketing is the backbone of any business, and this is especially true when it comes to cryptocurrency and blockchain technology projects.

The messaging and marketing of the venture is critical toward the short-long term success.

The American Marketing Association has defined marketing as “the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.”

Now based on this definition, how do ranking and rate SONM?

Let’s see.

Unfortunately, SONM has had some minor obstacles, pre-ICO,

1. Accusations of from a former employee, that he was not fully paid
2. Code errors from SONM developer5
3. Pre-ICO changes to distribution and payment of tokens regarding the price of ETH6
4. No Escrow for ICO, announced 3 hours prior to ICO launch

When I followed up on the no escrow rumor, it was indeed confirmed with this message:

“SONM uses multisignature address; three people have a key, they are Sergey Ponomarev, Alexey Antonov and SONM’s advisor, Chronobank CEO Sergey Sergienko. We think that the trust towards SONM team members and Sergey Sergienko is much higher than the trust towards one person who recieves all funds as an escrow. SONM team believes that paying commission to the escrow guarant is an unnecessary investor’s money spenditure and we have no right to trust Sebastian the money raised as he’s not an authorized representative. Sebastian’s statements are likely to show his mercenary interests. SONM team had spoken to the advisors and made the described decision.

https://user-images.githubusercontent.com/19887061/27184110-b4e81a74-51e9-11e7-8307-c5533fdb5aad.png

The issue at hand is not to lay blame or find out who is right or wrong. As a business, managing the public facing reputation of the business is paramount. SONM has done an abysmal job of marketing.

Aside from the website and marketing collateral which is at best average.

The interviews of the certain team members explaining the project has been subpar. In fact, I felt at times that the interviewer knew more about the project than the founders.

The company has shown their lack of management in handling these issues.

In addition, as many ICOs, there was mischief and scammers trying to get unsuspecting investors to send them ETH inside the chat. However, SONM is handling the issue unprofessionally. I have been in the chat groups and witnessed incessant complaint

Of course, the messages could be from trolls, ergo competitors, who is to say?

As someone who has partaken in numerous ICOs, this ICO was handled extremely unprofessional.

Marketing definitely needs to be a main priority. And the delivery of the message needs to more clear, concise, especially when it comes to the SONM marketplace, as tokens are now being considered a monetary value within the marketplace for buyers and sellers to exchange compute power.

Remember the definition of “marketing” from the American Marketing Association: creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.

How would you rate SONM?

Have they communicated, delivered, exchanged offerings that have value?

How do they plan to gain mass market adoption when they are trailing behind Golem and iEx?

Rating: 3

SONM Marketplace between Buyers of Computation Power and Miners/CPU Providers .

It is unclear just how the supposed marketplace for computational power will take place.

Miners in the SONM system are considered those that offer the computational power for sale.

(18:40 Minutes)

“In case of SOMN it is like a market, I can provide the service of computation, like computer region task of something for my price. So the reasonable price for doing computation is different. You can change the price of Amazon but you can have two people…”

When the interviewer, interrupts and says, “I hear what you are saying, but basically there is a huge distinction here, understand what you are saying, Amazon is a private service, but you guys are designing a market. So this is totally different.”

“So prices in our system, would be ruled by the market itself. Like the stock market or something. I want to do the job for $100 but someone wants to do it for $200, so you can have the market to create prices. …how it works for both sides, one side that has tasks to do, and from the other side, there are people that have free resources to convert them to money.”

The issue I have is that SONM is stating that they want to be cheaper than AWS. But if it is a free marketplace, than what prevents someone from charging more than the fair market and or than AWS.

I don’t want to mince words but “free market” is extremely subjective, are we talking about Laissezfaire, Ludwig Von Mises, or you fill in the name, and concept/definition of free economics.

Let’s just adhere to a super dumbed down version of supply and demand putting aside any further theory and or rationale. Then it is easy to see that controlling forces in this supposed marketplace could indeed have a monopoly to control the price based on supply and in this case amount of tokens as well. And what is to prevent market makers, from entering in and manipulating prices for their own interests?

There are many questions in this supposed marketplace that I don’t clearly understand, and that have not been clearly messaged to the public.

Rating: 5

Profitability

Here is a link to the ICO terms:

PRE-ICO Tokens Migration Conditions

As for profitability, it seems like any standard business plan with best and worst case scenarios.

For details of the financial model please see page 12

Overview:

The profit generation comes from usage of SONM tokens by buyers of computational power and dividends to tokenholders.

• Profit generation comes from .5% fee of the hubs’ turnover funds
• Fees can be changed by tokenholders through the DAO governance tool
• Dividends to SONM tokenholders will be allocated as a % from network fees
• Hubs will transfer settlement commission to DAO wallet which will distribute funds to investors
• Actual usage of SOMN tokens on the platform will also positively influence the SONM price

Here is the ICO Allocation:

It is worth examining the two scenarios that SONM has painting, which show how long it will take to reach profitability:

Pessimistic scenario

Cloud System Infrastructure Services (IaaS)

Cloud Management and Security Services (CMSS)

Cloud Application Infrastructure Services (PaaS)

Cloud Application Services (SaaS)

Cloud Advertising Cloud Business Process Services (BPaaS)

Assumptions:

1. The BPAAS, PAAS, SAAS, CMSS market share, taken up by SONM will reach 2.5% by 2021.

2. The market share grows steadily by 0.14% each quarter;

3. Fee will be 0,5%;

4. Cloud advertising project will be launched in the first quarter of 2019.

Implementing this scenario, the dividend yield of the token in US dollars without adjusting for possible revaluation of the / USD rate in 2017 will be 1.93% (for two quarters) on invested capital ($ 0.13 per token).

By the fifth year it will reach 72.8%. The total dividend for five years will be $ 0.21 per token or 165% of its price.

The nominal period for obtaining a profit comparable to the amount invested will be 3.44 years. A classical economic model is used for calculations.

Optimistic scenario

Assumptions:

1. The BPAAS, PAAS, SAAS, CMSS market share, taken up by SONM will reach 10% by 2021.

2. The market share grows steadily by 0.5% each quarter;

3. Fee will be 0.5%;

4. Cloud advertising project will be launched in the first quarter of 2019.

Implementing this scenario, the dividend yield of the token in USD without adjusting for possible revaluation of the ETH / USD rate in 2017 will be 7.6% (for two quarters) on invested capital ($0.13 per token). By the fifth year it will reach 285.9%. The total dividend for five years will be $ 0.86 per token or 648% of its price. The nominal period for obtaining a profit comparable to the amount invested will be 1.68 years.

So essentially SONM expects to be profitable between 3.4–1.7 years that is if everything goes as expected.

Profitability has less to do with how much the business can generate and once again more to do with management. The basics of cash in and cash out and managing those inflows and outflows.

The question lies as to whether the management team has the expertise to execute on the business plan and deliverables? Also, does the management team have the financial wherewithal to take a business from 0- ??? Millions?

Rating: 3

Conclusion

In conclusion, SONM has very little that is original as far as technology. They are not first to market with a lot of competition. The competition already has a well-established brand and market share. The team at SONM is not experienced. Execution is critical to the success of any business endeavor.

Synopsis

Marking out of Total of 10 Marks .

I give this an investor rating 4 out of 10, or 40%.

Again, execution and the management team are the underlying forces to any success of any business venture.

References :-

[ANN][ICO] SONM: Supercomputer Organized by Network Mining

SONM

SONM - Supercomputer Organized by Network Mining

First-mover advantage - Wikipedia

Ex-Member of the SONM Blockchain Project Racketeers Investors

Review of the SONM presale contract

SONM