Share performance projection
Companion document to the main memo. This document translates the cost numbers from Commitments and consequences into impact on Verifluence's share value — under reasonable valuation assumptions and discount rates — and then distributes that impact across the cap table to show what each option actually costs the founders, TG3, the ESOP pool, and future investors.
This is the most provocative document of the set. It quantifies what's actually being asked in the SHA clause, in shareholder-value terms.
The redlines and option summaries are in the introduction. The architectures are in Options. The cost derivations are in Consequences.
Methodology — how cost becomes share value
For a steady-state company, every dollar of avoidable operating cost reduces enterprise value by roughly the present value of that cost stream. If Verifluence is forced to spend $X/year on something that produces no offsetting revenue, the company is worth less by the NPV of that $X/year over the relevant horizon. That reduction is distributed across the cap table pro-rata to ownership.
This is the standard "cost is value destruction" framing. It's the right lens here because TG3's commitment requires Verifluence to spend money on a chain choice, not on a revenue-producing capability. The ecosystem benefit accrues to TG3 (and to Tezos), not to Verifluence directly. So from Verifluence's perspective, the commitment is pure cost.
Inputs to the model
| Parameter | Value | Source / sensitivity |
|---|---|---|
| Volume baseline | 2,000 deliveries / 100 campaigns per year, held flat | Per Assumption #5 in the introduction. Realistic-growth scenario shown separately below |
| Build cost (one-time, t=0) | Per option (see Consequences) | Direct CapEx |
| Annual OpEx (years 1–15) | Per option, at 100 campaigns/year flat (see Consequences) | Direct OpEx; variable component scales linearly with volume |
| Discount rate (r) | 15% (base case) | Reasonable for an early-stage/growth-stage SaaS with positive cash flow; tested at 10% and 25% in sensitivity below |
| SHA term (N) | 15 years | Per current SHA draft |
| Annual TCO escalator | 0% (constant nominal) | Conservative; real inflation would increase OpEx over time |
| Probability-of-completion adjustment | None | Treating the commitment as binding once accepted |
NPV formula
NPV cost = Build cost + Σ (Annual TCO_t / (1+r)^t) for t = 1..15At r=15%, N=15, the annuity factor is:
Σ 1/(1.15)^t = 5.847So NPV cost ≈ Build + (Annual TCO × 5.847).
NPV impact on company enterprise value
Per option, using the typical-case Annual TCO from Consequences, at the conservative 2,000 deliveries / 100 campaigns per year baseline and the new market rates (€100/hr engineering, $4K/day audit):
| Build | Annual TCO | × 5.847 | + Build | NPV cost @ r=15% | |
|---|---|---|---|---|---|
| Today (Base) | — | <$0.1K | $0.5K | $0 | <$1K |
| Option A (typical, 50% EL mix) | $35K | $29.5K | $172K | $35K | ~$207K |
| Option A (high, 100% EL) | $35K | $30.85K | $180K | $35K | ~$215K |
| Option B | $17K | $7.5K | $44K | $17K | ~$61K |
| Option C | $130K | $73K | $427K | $130K | ~$557K |
Sensitivity to discount rate:
| Discount rate | Today | Opt A typical | Opt A high | Opt B | Opt C |
|---|---|---|---|---|---|
| 10% (mature SaaS) | $1K | $259K | $269K | $74K | $685K |
| 15% (base case) | <$1K | $207K | $215K | $61K | $557K |
| 25% (early-stage premium) | <$1K | $149K | $154K | $46K | $412K |
Sensitivity to volume (at r=15%):
| Volume scenario | Opt A typical | Opt A high | Opt B | Opt C |
|---|---|---|---|---|
| 2K deliveries/yr (current memo baseline) | $207K | $215K | $61K | $557K |
| 10K deliveries/yr (= 500 campaigns) | $249K | $277K | $63K | $619K |
| 50K deliveries/yr (= 2,500 campaigns) | $625K | $743K | $76K | $1.20M |
| 200K deliveries/yr (= 10K campaigns, mature) | $2.04M | $2.85M | $89K | $4.36M |
Take-away: at the conservative 2,000-deliveries/yr volume, Options A and C destroy $200K–$560K of enterprise value over the SHA term — largely engineering carrying cost, not variable transaction fees. Option B stays around $60K. Under a mature-platform scenario (200K deliveries/yr, the original planning target), C destroys $4.4M. The structural conclusion (B << A < C) is robust to both volume and discount-rate assumptions; only the absolute numbers move.
For the share-distribution analysis below, we use the r=15%, 2K-deliveries/yr base case unless otherwise noted.
Distribution across the cap table
The cost impact is distributed pro-rata to economic ownership at the time the cost is incurred. The cap table at the closing under the TG3 round (€200K total):
| Class | Approx. % | Comment |
|---|---|---|
| Founders | ~85% | (illustrative — exact figures per cap table) |
| ESOP | ~6% | |
| TG3 | ~9% | €200K → 9% implies post-money ≈ EUR 2.22M |
| Total | 100% |
We also show pro-rata burden at a 15% TG3 split as a higher-ownership sensitivity case (in the event a different valuation negotiation lands at €200K = 15%, which would imply post-money ≈ EUR 1.33M).
These percentages are illustrative — confirm against the actual cap table once finalised. Sensitivity to ownership split is linear; small errors in % have small effects on the numbers below.
Pro-rata cost burden at the 9% / 85% / 6% split (base case — €200K = 9%)
At r=15%, 2K-deliveries/yr baseline, using the typical-case Annual TCO and the new market rates:
| NPV cost | Founders bear (85%) | ESOP bears (6%) | TG3 bears (9%) | |
|---|---|---|---|---|
| Today (Base) | <$1K | <$1K | — | — |
| Option A (typical) | $207K | $176K | $12K | $19K |
| Option A (high) | $215K | $183K | $13K | $19K |
| Option B | $61K | $52K | $4K | $5K |
| Option C | $557K | $473K | $33K | $50K |
Pro-rata cost burden at the 15% / 79% / 6% split (higher-ownership sensitivity case — €200K = 15%)
| NPV cost | Founders bear (79%) | ESOP bears (6%) | TG3 bears (15%) | |
|---|---|---|---|---|
| Today (Base) | <$1K | <$1K | — | — |
| Option A (typical) | $207K | $164K | $12K | $31K |
| Option A (high) | $215K | $170K | $13K | $32K |
| Option B | $61K | $48K | $4K | $9K |
| Option C | $557K | $440K | $33K | $84K |
What this looks like to each party
To the founders
The founders' share of enterprise value is being reduced by Verifluence's required spend on the chain commitment. At the 85% / 79% ownership split, with the 2K-deliveries/yr baseline:
| Founders' NPV loss | Magnitude in plain terms | |
|---|---|---|
| Today (Base) | <$1K | rounding error |
| Option B | $48–52K | a quarter's worth of one engineer's loaded salary; absorbable |
| Option A (typical) | $164–176K | ~one quarter of senior engineering payroll |
| Option A (high) | $170–183K | ~one quarter of senior engineering payroll |
| Option C | $440–473K | ~2.5 senior engineering FTE-years; meaningful |
At a mature-platform scenario (200K deliveries/year — 100× the conservative baseline), multiply by ~7×: Option C destroys $3.5M–$3.7M of founder equity over the SHA term; Option A high reaches $2.3M–$2.4M; B stays around $75K. The baseline numbers above are the floor.
Read: for the founders, Option C destroys ~2–3× the equity value of Option A at conservative volume — the build-cost gap dominates because variable fees are small. Option B is small enough to be a line item, not a strategic decision.
To TG3
The mirror image of the founders' loss, scaled to TG3's stake:
| TG3's NPV loss (at 9%) | TG3's NPV loss (at 15%) | as % of EUR 200K (≈ $214K) investment | |
|---|---|---|---|
| Today (Base) | — | — | — |
| Option B | $5K | $9K | 2–4% |
| Option A (typical) | $19K | $31K | 9–14% |
| Option A (high) | $19K | $32K | 9–15% |
| Option C | $50K | $84K | 23–39% |
At a mature-platform scenario (200K deliveries/year), TG3's NPV loss is roughly 7× the figures above: Option C alone destroys 160%–275% of TG3's invested capital in pro-rata stake reduction.
Read: TG3 captures the ecosystem signal benefit (whatever that's worth to them) but also takes a pro-rata hit on the destroyed enterprise value. Under Option C at conservative volume TG3 pays back ~23–39% of their own invested capital; if the platform grows to the target scale, they pay back more than their full investment in pro-rata reduction alone.
This is the negotiation lever. TG3 may not have done this math. They likely framed the commitment as "Verifluence pays the cost." It isn't — TG3 pays a sizable share too, and that share grows with platform success.
To the ESOP pool and future investors
At ~6% of cap table, the ESOP pool absorbs ~$15K (Opt A typical), ~$40K (Opt C), or ~$5K (Opt B) in NPV value destruction at the conservative baseline; ~7× more under the mature-platform scenario. Compared to individual employee equity packages, these are absorbable at 2K-deliveries/yr but become meaningful at scale.
Future investors entering at the next round will face a company whose pre-money valuation reflects the negative NPV of the commitment. This is mostly transparent to them (they negotiate against current value), but if the commitment isn't well-disclosed it becomes a diligence issue.
Honest framing — the costs include only direct value destruction
The numbers above are direct cost impact only. They do not include:
- Adoption risk on Option A: if EtherLink-elected campaigns have meaningfully lower operator conversion (due to UX friction), revenue is lower than baseline. Modelling this requires a revenue elasticity that we don't have. Order of magnitude: if 5% of would-be operators churn at the EtherLink election step, the revenue hit could be larger than the cost hit.
- Ecosystem upside on Options A/C: if EtherLink integration produces customer leads or Tezos Foundation grant access, revenue is higher than baseline. No estimate without TG3 specifying what they're committing to deliver. (Worth pushing on the call: what specifically does TG3 bring to the partnership in exchange for the commitment? Grant access? Operator introductions? Co-marketing?)
- Strategic optionality cost: locking future contract development to EtherLink limits Verifluence's ability to participate in other ecosystems (e.g., a Solana version, a Hyperliquid integration). Hard to value; nontrivial over 15 years.
- Insurance/risk premium for Option C: cross-chain protocol breaches have historical incidence; valuing this requires a probability-weighted catastrophe model. A back-of-envelope estimate: 5% probability of a major cross-chain incident per year × average loss of $1M × 15 years = ~$0.75M expected loss. This would be added to Option C's NPV cost.
A full enterprise-value model would net these together. For this memo, we present the direct cost view because it's the only set of numbers grounded in observable rates (LayerZero fees, engineering salaries, audit quotes). Anything else would be speculation.
Implications for the commercial-terms negotiation
Three points worth surfacing on the call:
1. Even at conservative volume, Option C is disproportionate to the investment. At the 2K-deliveries/yr baseline, Option C destroys ~$557K of enterprise value over the SHA term — ~2.6× TG3's EUR 200K cheque. At a mature-platform scenario (200K deliveries/yr), Option C destroys ~$4.4M — more than 20× TG3's investment. Option A typical is more measured at conservative volume (~$207K) but still ~1× the cheque size at the floor and scales fast. For TG3 to be net-positive on the deal, the ecosystem benefits they bring must exceed the per-share loss they bear. That's a claim that needs to be made explicit.
2. The cost burden is approximately pro-rata, which is fairer than founders typically expect. TG3 doesn't pay zero — they pay ~9% or ~15% of the cost via their own stake reduction. At the 2K-deliveries/yr baseline, this is $5K–$84K depending on the option; at the mature scenario it's $35K–$655K. TG3 has real skin in the architecture choice, and "pick Option C because it's the most ambitious" is a decision they're also paying for, in a way that grows with platform success.
3. Option B is the only architecture where the cost of the commitment is materially smaller than the investment. Under Option B, TG3 receives a EUR 200K equity stake in exchange for an effective $5–9K share of destroyed value at conservative volume, and ~$40–70K at scale — well under the cheque size at every plausible scenario. That's a clean, well-aligned trade. Under A or C, the numbers exceed the investment at conservative volume and dwarf it at scale.
This is the financial case for steering TG3 toward Option B unless they can articulate a specific ecosystem benefit that justifies the larger commitment.
What would change the conclusion
The analysis above assumes:
- The chain commitment produces no offsetting revenue. If TG3 brings concrete operator introductions, grant access, or marketing co-investment that produces measurable revenue, that should be netted against the costs.
- Cost numbers are accurate. Per-campaign LZ fees in particular are estimated from public docs; a real quote (
quoteSend()against the production EtherLink endpoint) would refine these. - Verifluence runs at 2,000 stream deliveries / 100 campaigns per year — flat — for the entire SHA term. This is the conservative floor; at the mature-platform scenario (200K deliveries/yr) the variable component of NPV grows up to 100×, but fixed engineering carrying cost only grows modestly. The structural conclusion (B << A < C) is unchanged across the volume range.
- The cap table looks roughly as illustrated. Update with actual figures before the call.
Single-number summary for the negotiation
The cleanest framing to bring to the call, at the conservative 2K/year baseline:
"Under your proposed commitment, Verifluence's enterprise value is reduced by approximately $207K (Option A typical), $557K (Option C), or $61K (Option B) in NPV terms over the SHA term — already meeting or exceeding your €200K cheque under Option A and Option C, at conservative volume. These figures use the new market rates we've adopted — €100/hr engineering, $4K/day audit — and assume our first-year volume of 2,000 stream deliveries (= 100 campaigns) held flat. At a mature-platform scenario of 200,000 deliveries/year, the same numbers scale to ~$2M, $4.4M, and $89K respectively. Of that loss, TG3 bears 9–15% pro-rata — between $5K and $655K depending on the architecture, the cap-table state, and platform growth. We're prepared to make this commitment if it's net-positive for both sides. We'd like to see specifically how the ecosystem benefits you bring to the partnership justify a commitment of this magnitude."
If TG3 can answer that question concretely, the deal can be balanced. If they can't, the SHA wording needs to soften toward Option B as the default.