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Replies to post #32950 on Lecere Corporation (fka LCRE)
July 30, 2010
Starting a Technology Company 101
So Lecere doesn’t have any revenue as of yet. So what. We’ll get there pretty soon, but in the meantime, consider the following.
Google recently bought Aardvark (vark.com) for $50 million. How much revenue did Aardvark have at the time? $0.00.
In 2005, eBay bought Skype for a little over $4 billion. How much revenue did Skype have at the time? Not a hell of a lot.
The NYSE now allows new companies with no revenue a place on the exchange as long as they meet other specified standards.
As one Lecere investor recently pointed out to those who are interested in listening, there are hundreds of companies on various stock exchanges with little or no revenue.
I continue to receive a lot of comments and complaints about Lecere’s outstanding share count.
We have to increase Lecere’s outstanding share count in order to raise the capital we need to operate. Our intent is to eventually increase our market cap faster than the outstanding share count. That will cause our share price to go up even with an increase in the outstanding share count. Our goal is to make long-term shareholders happy with their return on investment.
Google was founded in 1999 by a $25 million Series A Venture Capital funding round. The terminology “Series A” means it was the first funding round for Google, although Google had a much smaller seed round prior to its Series A round. The funding in the Series A round was provided by Sequoia Capital and Kleiner Perkins Caufield and Byers (KPCB).
I am going to have to make an educated guess at this point, but it won’t make very much difference in what follows if I am off by a factor of two (or even more) in my guess. I would guess that the price paid by Sequoia and KPCB in the Google series A round was about $1.00 per share. After that investment, I would further guess that Google would have had about 45 million shares outstanding. That is a post-funding valuation of $45 million, which would have been high even for 1999.
Over the ensuing years after the Series A funding, Google would have had to increase its outstanding share count in order to raise more operating cash, prior to becoming profitable. In other words, Google was diluting prior to profitability just like Lecere is doing today.
Today, Google’s share price is about $452 per share. There are about 318 million shares outstanding. So even though Google has suffered dilution (in order to raise operating funds prior to profitability) from about 45 million shares to 318 million shares, the share price of Google eventually rose from about $1.00 per share to $452 per share. Need I say more? Reread what I said above: Our intent is to eventually increase our market cap faster than the outstanding count.
It should be clear that Google’s market cap eventually increased much faster than its outstanding share count. We have the same goal at Lecere.
I have seen other “expert” critics shouting at the top of their voices recently about Lecere’s revenue goals. Here is one example.
“The cost numbers being portrayed are unrealistic and not competitive. No way. I challenge anyone to show me this POS solution is competitive with these numbers over current POS solutions. If you research it you will gain a better understanding of the costs involved and appreciate my points. Restaurant’s [sic] other then [sic] a few possibly high end ones look at the bottom line and will easily sacrifice features and functions for cost – that is the reality of the business.”
In the first place, FIRMS is a Restaurant Management System (RMS), not a Point of Sales (POS) system. So the writer lost all credibility with me in the third sentence. He/She purports to understand our customer base better than we do, but he/she does not even understand that we are not a POS company.
Secondly, very few restaurants outside of chain restaurants “look at the bottom line”. Most non-chain restaurant owners think that putting out a plate of great food guarantees success. It doesn’t.
Thirdly, it is a well-known fact in the restaurant industry that a restaurant without a POS system would see its revenues increase by about 10% when it adds a POS system. So let’s do some math.
Suppose a restaurant does $500,000 a year in business with no POS system. Adding a POS system will cause its revenues to rise to about $550,000 per year.
Almost all of these restaurants are not using POS systems today because they don’t want to pay the up-front costs and they don’t want the hassle of dealing with traditional on-premises software and hardware. Lecere’s solution is very attractive to these restaurants. If we can provide these restaurants with a low upfront-cost POS solution from which we would realize $1,500 a month in revenue, that gives the restaurant owner the following choices: (1) No POS and revenues of $500,000 per year or (2) Sign up for FIRMS and increase net revenues to about $532,000 per year.
Is this a hard choice? I don’t think so.
Are there very many restaurants worldwide that are not using a POS system today? Yeah, a hell of a lot.
There are other arguments that can be made for FIRMS at restaurants already using POS systems and for chain restaurants, but I will not go into those here.
And now for some miscellaneous comments.
Lecere is not required to file reports with the SEC. Lecere is up to date with its current filings at www.otcmarkets.com. Go to www.otcmarkets.com and search for LCRE. Our status is currently “Pink Sheets Current Information”. We will remain in that status until we go to the OTC-BB, hopefully sometime in Q1 of 2011. At that time, we will have to provide audited returns for 2009 and 2010. We are beginning to work toward that audit goal now. Lecere is a non-reporting company. Financials filed at www.otcmarkets.com are not required to be audited.
Lecere’s management cannot sell Lecere shares, because their shares are all restricted. Moreover, the Lecere transfer agent is currently blocked from lifting restrictions on all Lecere restricted shares. Only I can remove that block, and I have no plans to do so for at least the next year or two. Management has no desire to sell until the share price is much higher than it is now.
I stated in a recent press release that there would be NO reverse split in 2010. I stand by what I said earlier. In my July 7 blog, I stated that there would be no reverse split until we moved to the OTC-BB, but that will likely not occur in 2010.
I am not going to guarantee or even give a hard prediction of when Lecere will reach profitability. However, I will share some of our internal planning with you.
For planning purposes, we are estimating that we can achieve an average of $1,200-$1,800 of revenue per month per restaurant (see above). We are also estimating that 150 restaurants should be about the break-even point for us. We would like to achieve that by the end of Q1 2011, but there is no guarantee that we will.
And, by the way, we have about 90 restaurants that have expressed an interest in using our software, and we have spent about $0 trying to attract customers at the current time.
This is not a projection of Lecere’s revenues. This is a what-if game and nothing more. Please do not use this as any sort of official news or announcement from Lecere.
