Startup Launch Series Ep.19.02 — Hxro Games Inc. AMA

We were joined by Co-Founders Dan Gunsberg, Rob Levy and Danny Johnson for a Live AMA with the Paperstreet Telegram community.

On Friday, January 25th, we were joined on the Paperstreet Telegram channel by the team from Hxro Games Inc. for a live Telegram AMA. Representing HXRO Games Inc. for the AMA were co-founders Dan Gunsberg, Rob Levy and Danny Johnson

Hxro, based in the United States, is seeking to raise $500,000 in seed funding. Hxro is offering agreements for future equity at a 20% discount on the next capital raise or with a pre-money valuation cap of $10,000,000.

Access Hxro Games Inc Future Equity Offering

Please note that some questions and or answers may have been edited to account for grammatical errors and appropriate presentation. This summary does not include all questions asked and answered during the event.


Intro / Elevator Pitch

Dave (Paperstreet)
First of all, some of the community may not have heard of your project. Please walk us through the idea behind Hxro games?

Dan Gunsberg
Thank you Dave. Thank you for joining us today for the Hxro Games AMA. I’m Dan Gunsberg, CEO of Hxro Games, Inc. We are excited to be sharing our story, how we have developed our product and traction to date and then invite you and others to help us achieve the next stage of global growth. Hxro is a Player vs Player gaming platform that merges cryptocurrency trading with social gaming.

The team behind Hxro has decades of domain experience across all dimensions of the platform including trading, crypto, social communities, fantasy and real money gaming. We pride ourselves on an execution approach that blends the best of Silicon Valley-style data driven lean start up with the deep domain expertise of a Chicago options trading pit.

The market opportunity for Hxro Games is large and growing fast. We target users from multiple market segments including cryptocurrency enthusiasts, financial market trading, spread betting, and social and skilled gaming which has an estimated 2.5 billion users worldwide.

Danny Johnson
Thank you for having us Dave and Matt.

Dan Gunsberg
In this large market, we are seeing strong indicators of traction, or our holy grail of product market fit. The platform launched its beta with a small group of users on January 1st. The response was immediately explosive. We have since expanded the closed beta to more than 300 users and have maintained consistently outstanding data. More than 9,000 games have been played since launch and our day 7 retention rate has stayed consistently above 75%. Players have entered more than 12.5M $HXRO in entry fees with payouts exceeding 12.1M $HXRO.

One of the core components of the Hxro platform is its telegram-integrated “trollbox”, a chat feature that retains and engages our strong community. With more than 3,000 messages per 24 hours, the “Hxro Beta” has quickly become one the most active and sought after telegram communities in crypto.

Telegram user Seth3rs
What made you think of this idea?

Dan Gunsberg
Thank you Seth. Rob and I both had significant backgrounds in derivatives trading. We both spent multiple years on the trading floor. The trading pits in Chicago (and NY for that matter) had an energy and buzz that was very difficult to find anywhere else. A lot of this was because of the volatility of futures markets, but even more of it came from the social and camaraderie that you developed with your peers/competitors in the pit. Our thought was that integrating social layers with trading type of games, we could capture this feeling that few were fortunate to have experienced.


Re: Hxro’s future equity offering

Dan Gunsberg
On January 9th Hxro launched features to enable our members to refer other members, utilizing Twitter and Telegram. Since then, we have amassed a wait list of more than 25,000 users. We have been fortunate that our core community is made up of a significant number of mid to large influencers — all of whom have participated voluntarily and at no cost to the company. We are proud to share that our metrics demonstrate that we have obtained strong product market fit.

In order to further continue this growth and achieve our next milestone we are now seeking to complete a seed series to help fuel continued expansion of the product. From this community we are seeking $500,000 in the form of a SAFE note. The note is based on a $10,000,000 valuation cap with a 20% discount on qualified financing.

Telegram user sicarious
Are you guys going to pay out dividends to equity holders? Or provide voting rights? Or private parties?

Dan Gunsberg
At the outset we will be re-investing any revenue back into the company to fuel expansion of the platform. Therefore, it is not our intention to distribute dividends. Our focus is to continue to maintain product-market fit and scale the value of the company. Equity holders currently do have voting rights.

Telegram user RVLLP
For the seed raise, will you be availing yourselves to US investors, and if so, only accredited investors for Series A via a Reg D?

Dave Younts (Paperstreet)
The offering is live at hxro.paperstreet.vc . Investors from the US will be required to conduct KYC/AML and verify thier accredited investor status.

Telegram user Hypnotix
Is there a minimum investment?

Rob Levy
2 Bitcoin.

Telegram user jreynolds999
Are you planning on additional rounds of investment, or do you think that revenue generation will be enough to enable no further need for cap raise?

Dan Gunsberg
We do plan on doing a Series A round.


Re: Financial projections

Telegram user Wesdewayne
Do you have any financial projections/budgets to share with prospective investors? What’s your monthly burn like currently and do you have any estimates for how many DAUs (or other metric) are needed to breakeven? How have the beta results impacted your estimates? The DraftKings devs seem to do a great job, but will you require their services indefinitely or will the team transition the work internally?

Dan Gunsberg
Hi Wes. Thanks for the questions. We do have financial projections and are happy to share with serious investors as part of their diligence. Our burn currently runs approximately $60,000/mo. We currently working to transition the team from being outsourced to primarily internal. We currently have a nice pipeline of candidates we are actively interviewing. This is a priority for us.

Telegram user JEEdward
Correct me if I am wrong, the main source of revenue is the 10% scrape… That is in $HXRO? Is there a policy around selling to pay for operations? Is there a burn if there are profits? What is the plan around this?

Dan Gunsberg
Primary revenues are derived from service fee’s taken from each event and from token sales. Revenues are also derived from advertising on f2p/social. We will also be launching a subscription based data and analytics service called Hxro Labs.

Dave Younts (Paperstreet)
You mentioned earlier that 12.5m $HXRO has been played and 12.1m $HXRO has been paid out. What does this convert to in terms of revenue for Hxro Games Inc. and do you have projections for revenues.

Rob Levy
This converts to approximately $20,000 in revenue.


Re: Legal and regulatory questions

Telegram user CryptoVerso
Does this constitute as a gambling game or just an exchange to trade? If a gambling game, will you comply with the UK gambling commission so we can use your awesome game/exchange/site in the uk?

Dan Gunsberg
This is part of our legal strategy we are currently working through with our gaming counsel. Our product is unique and it is not clear as to whether it could be defined as either.

Telegram user KevinSteele
While I’m in no way negative against the project, to play devils advocate, can you tell us more about your legal and compliance team? This will obviously be a longterm consideration for the project moving forward.

Danny Johnson
We are working with of of the top legal firms in the US in OMM and top legal gaming firms in the US to guide us through these waters.

Telegram user Sugar Bear
What are your thoughts considering Hxro and the new legistlation the US passed a few days ago regarding online betting?

Link provided as reference
https://www.bloomberg.com/news/articles/2019-01-15/u-s-now-says-all-online-gambling-illegal-not-just-sports-bets

Telegram user kryptokhalifa
It was basically a federal decision that all online gambling is still illegal

Dan Gunsberg
Thanks Sugar Bear. First of all, we have been working with one of the top global legal firms in crypto, O’Melveny, since the beginning of the project. We have also retained one of the largest international gaming practices to work through our strategy around legal and regulatory.


Re: KYC/AML compliance requirements for users

Telegram user bunchubets
Can you discuss how KYC/AML will work in the future. Will all users need to do KYC to participate? Only on withdrawals? Only on withdrawals over a certain size?

Rob Levy
Our KYC/AML program is enacted on withdrawals above a certain materiality threshold and when a user wishes to purchase Hxro directly from the platform.


Re: Timeline for up the game to a wider audience than the initial beta

Telegram user Sarah
Hey, what’s the timeline for getting everyone in?

Danny Johnson
We’re working on expanding our beta rollout adding hundreds of users daily to ensure we can scale w/o issue and if all goes well in 2–3 weeks we plan on opening up to a much wider audience.

Dan Gunsberg
At launch, the platform will offer both paid-entry and free to play games. This will give users globally the option to play regardless of their jurisdiction.

Dave Younts (Paperstreet)
Interesting. Didn’t know you’d do freeroll. Is it possible that this might harm the for-profit side of the business?

Dan Gunsberg
Absolutely not. It is possible that f2p side of the business could outpace the paid entry side. Based on our current day 7 retention rates, scaling social play should be a very successful pillar for Hxro Games.

Danny Johnson
We want to give everyone the ability to access and play on the platform. The more users playing regardless if its paid entry or f2p the better it is for our platform growth, user retention, and daily user activity on our site. Plus we think the f2p players will convert to paid entry players.


Re: Game modes, features, and expansion

Telegram user kryptokhalifa
I am also curious about what your tournaments and freerolls will look like, I see the 1m $HXRO Freeroll ad on the site but I would love to learn more about what you see those being like

Telegram user Seth3rs
+the alt bag games, what are those like?

Danny Johnson
We see this as a great marketing effort to bring in waves of new users at a relatively low cpa while also rewarding current users with exciting contests that payout large rewards for free just for their continued play and support.

Telegram user sicarious
Do you have long-term plans for expansion? other games of skill, or non-crypto markets?

Danny Johnson
We have other game variants in the pipeline, the first of which is Muh-Bags — a more DraftKings style player vs player, tournament style, portfolio construction game where finish place and payout is related to how your portfolio compares vs other competitors.

Telegram user Cryptoglass17
When will you or do you have a timeline for the release of muhbags. And where can I get a Hxro hat?

Danny Johnson
We’re targeting Q2 of this year. We’ll let you know when our merchandise is available for sale.

Telegram user KevinSteele
While different time contests have been tested, how do you plan to leverage your existing, and increasing, audience to ensure that enough participation exists for each contest type? This obviously would expand with further token predictions etc.

Danny Johnson
We plan to increase contest offerings slowly as we ramp up our user onboarding to support adequate liquidity in more games. We’ll be constantly monitoring this as we deploy to ensure we don’t oversaturate the floor w/ games.


Re: Bitcoin & ETH deposits/withdrawals on site

Telegram user bitcoinkarate
What are your plans to exchange $HXRO back into ETH when it goes live?

Dan Gunsberg
Good question. There will be third party mechanisms available for player to convert back into ETH when we launch.

Telegram user sicarious
Are you guys going to allow ETH or BTC deposits into the site? How does that work with the $HXRO token?

Danny Johnson
It is on our roadmap to allow BTC and ETH deposits and entry into Hxro contests however these users wouldn’t share in the contest fee reduction or bonus frequent player points that those users entering w/$HXRO would benefit from.


Re: Mobile app

Telegram user bunchubets
Are there plans for a mobile app in the future?

Dan Gunsberg
Thanks Bunchu! Yes we definitely have plans for a native mobile application. We built the platform with both the trader and the gamer in mind. Therefore it was important to us that we captured both desktop and mobile users from the outset. This is one main reason we lead with a responsive application. We are planning to launch a native version later this year.


Re: Blockchain use

Telegram user CryptoMonti
What platform do you use?

Danny Johnson
Ethereum.

Telegram user ledgerstatus
I want to know what a Hxro sidechain/blockchain will look like, and how it’ll be used with the platform.

Rob Levy
When we started developing Hxro, we did not believe a full sidechain / blockchain integration was feasible for Phase 1 of the project. With the number of games and transactions taking place on the platform, it would overwhelm the network and be cost prohibitive. The technology is progressing and a deeper blockchain integration is in the roadmap.

Telegram user jreynolds999
Sorry if this has been asked before, but are there any plans to develop your own chain or will it always be an erc-20?

Dan Gunsberg
We have no specific plans to do this at this time.

Telegram user jreynolds999
Being an ERC20 based platform. How will you address scaling issues once thousands of users are on board and playing at once? How will you avoid reaching a critical mass similar to what we saw with Exchanges having to limit new users in 2017?

Danny Johnson
Scaling on Ethereum won’t be an issue for us as we’re not a dApp and every entry and payout isn’t a blockchain transaction.


Re: Hxro merchandising efforts

Telegram user Herbalizah
Merchandise can be a great source of extra income because of your cool branding. Are there steps being made towards an online shop?

Rob Levy
Great question. We will have HOT Hxro merch for players to win and purchase.


To learn more about Hxro Games Inc.

Learn more about Hxro at hxro.io. Follow Hxro on Twitter. Join the Hxro community on Telegram to engage with the team.


Matt deCourcelle, CEO of Paperstreet, is an official Advisor to Hxro Games Inc. Paperstreet does not have any investment in Hxro Games Inc. equity or the $HXRO token. Paperstreet did not receive compensation for conducting this AMA. Paperstreet will not receive compensation in the form of a performance fee or commission on the amount of capital raised in the offering. Paperstreet is compensated by HXRO Games Inc. in cash (USD) for software services provided on a flat fee basis per usage.

Hxro Games Inc. is offering a simple agreement for future equity under the laws of the United States of America. The offering is not available to US investors who do not satisfy the requirements laid out by US law to be an accredited investor. Investments in startups, private companies, cryptocurrencies and utility tokens involve a high degree of risk and those investors who cannot afford to lose their entire investment should not invest. Investors should review the risks and disclosures in an offering’s investment documentation. Before making an investment decision, investors should review the company’s investment materials and Slide Deck for a complete description of its business and offering information.

The material contained in this article is not to be regarded as an recommendation to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information on this document does not constitute legal, tax, or investment advice. You must not, therefore, rely on the content of this document when making any investment decisions.