Cuba Ventures (CUV.V): So many pieces but the puzzle is becoming much clearer

So a while back I told you about a new blockchainy deal called Cuba Ventures (CUV.V). You guys liked it and it ran hard. We like when that happens.

But the Cuba Ventures story was pretty simple back then.

CUV is building out a blockchain network that allows Cubans and their kinfolk to move money without the need of Western Union’s say-so, at a much reduced fee, almost instantly, and using cryptocurrency.

Want to send money to your family in Havana?

Take it away, Steve Marshall.

Simple is great and all when the sector is running hot, but blockchain is into its second phase now, where the details matter, and as details have been released on Cuba Ventures’ business model, it’s become a tad complicated for the layman.

Here’s our own Lukas Kane, on news CUV had bought into a magazine publisher.

Imagine my shock at a proud investment in a paper magazine, a niche trade magazine no less. In 2018. By a primarily web based technology company. It’s like a mammal buying a stake in dinosaur futures… the evolutionary race is done. [..] I get that cryptocurrency is tailor made for dealing with regimes like Cuba, but I’m not convinced running a crypto and a media empire concurrently is so super smart. Besides with all the hype, is it doing more harm than good to your brand?

CUV is a client of ours but Kane’s commentary was fair. Why the distraction? What was the point?

Well CUV has larger plans and this is one segment of a much bigger picture.

THE BIG PICTURE:

The end of Western Union. That’s the thing that encapsulates all of this. Western Union is a douchebag company that does douchey things to people who have no alternatives, and it’s ripe to be taken out.

There’s boatloads of money that want to be sent to Cuba every week, and sending that money involves paying upwards of 20% in fees to a big nasty company that, in human form, would be beaten with rakes and pitchforks by local townsfolk for being a monster.

CUV is developing a network that will allow folks to use cryptocurrency to send their cash to Cuba, where it will be accessible at ATMs for a much smaller fee.

THE DETAILS:

Cuba is complicated, in every sense. Politically, financially, culturally.

Politically: CUV has things sorted, for the most part, on the Cuban side. They’ve been doing business there for a long time and are welcomed and respected on the island by those with their hands on the political steering wheel.

But moving money from the US to Cuba doesn’t just mean dealing with Cuban politicians, it also requires working with the American side, and that’s where the magazine deal gets interesting.

Both [CUV subsidiaries] Revolupay and CubaFin will benefit from a comprehensive worldwide exposure through the company’s proprietary marketing divisions. [..] The recent acquisition of equity in Cuba Trade Magazine guarantees both digital and print media exposure of both divisions in the United States markets.

I’ll take that further – Cuba Trade Magazine goes to every Congressman and Senator in Washington DC. For a small buy in, CUV just got a window to any politician they might need to discuss business with going forward.

Financially: CUV has been VERY busy. We talked about the RevoluPay crypto-remittance plan earlier, and the company says its ahead of schedule in finalizing that app and the underlying financial systems needed to make it operate effectively.

In accordance with that, they’ve developed a factoring and bridge loan lending platform called CubaFin for Cubans who, currently, have precious few options when it comes to entrepreneurial financing. To make this happen they received $40m in seed capital from Al-Fahim Technologies Group of the UAE, and a public beta version has been subsequently launched.

To make the RevoluPay and CubaFin plans work in a streamlined way, the company knows it should own the entire transaction chain, so it is now working to receive a European e-money banking license. This is no small deal. Such licenses have value outside of any Cuban potential and open a raft of opportunities elsewhere. Ernst and Young is working with the company to lock this down, and credit to CUV for bringing in the heaviest of hitters to seal the deal.

Culturally: Cubans deal with Cubans, and entering that market is far more complicated than simply showing up and renting an office space. You need to know people. You need to have done business with them already. You need established connections and an understanding of how to operate in a system that delivers a 1957 Chevrolet Bel-air to you when you pay for a car rental.

To that end, CUV has taken a piece of a Florida-based travel agency that has long dealt in Cuban travel. It has 432 websites focused on Cuban tourism that the government depends on to facilitate outside business and travel. CUV doesn’t just advertise travel to Cuba now, it can get you a seat as well.

LET’S LOOK AT THAT BIGGER PICTURE AGAIN:

Let’s say I’m a big exec with a big company and I want to buy a thousand crates of products from Cuba. I don’t know how to contact the right people there to do business with (CUV does), or which government people to talk to on the Cuban and US side to make sure I’m not breaking the law (CUV does), I don’t know how to get there without breaking travel bans (CUV does), I don’t know how to get my money to the Cubans without paying Western Union’s extortion rates (CUV does), and the guys on the other side will need access to short term financing to actually produce all the things I want to buy (CUV can handle that).

And who the hell are these CUV people and why should I trust them with my money? (What’s up, banking license?)

And if you think the missing piece here is finding companies that actually want to do business with Cuba, here’s an interesting paragraph in the most recent CUV corporate update:

In September, 2016, chief executive officer Steve Marshall met with a high-ranking executive from the Alibaba group. The discussions centered on possible synergies between the two companies. The company remains positive with regard to these future common interests.

Why raise this now? Maybe because Alibaba outlined what infrastructure would be needed to take that mega-giant’s products to and from Cuba, and CUV is nearly there?

In terms of runway, CUV has $2m in the bank which isn’t the fattest wallet. But it points out that almost all of its development costs right now are being assumed by their partners.

Also, and I particularly love this, though it’s a contrarian viewpoint: The company has decided mining cryptocurrency simply isn’t a profitable enough use of its bandwidth, so it’s moving into Big Data projects.

Blockchain by itself is not a business. Using blockchain to supplement and streamline other industries, and cornering said industries from soup to nuts, is bad ass.

CUV is looking to be Cuba’s bank, and connection to the rest of the financial world. That’s a business model I can get down with.

Also, at $0.20 per share (half what it was in the late December crypto boom), you’re getting some value there.

— Chris Parry

FULL DISCLOSURE: Cuba Ventures is an Equity.Guru marketing client and we own stock in the company.