While a growing number of questions remain open about the collapse of Bitwise Industries, one that has been resolved: who were the shareholders in the tech incubator?
As Bitwise Industries sought millions to keep the firm afloat in mid-April, a document tendered by ousted co-CEOs Jake Soberal and Irma Olguin Jr. to local hard money lenders shows a surprising breakdown in ownership more than a month before the firm suspended its operations.
Adding up the dollars: In total, Bitwise reported to lenders that it raised a total $156,635,525.87 from its investment rounds and issuance of convertible notes.
- Of that sum, $127.5 million came via pure investment through the company’s Series A and B rounds, with the largest grossing class of shares being Series B Preferred Stock.
- As of mid-April, the company had distributed – either via issued stock or options – 89.43 percent of its available shares.
Valuing Bitwise’s ‘Black Box’ Business: In loan solicitations to local hard money lenders, Soberal provided an appraisal of the company’s valuation, prepared by Carta Valuations LLC.
- The appraiser valued Bitwise Industries at $257.2 million as of July 2022, with a common stock price of $0.95.
- In its analysis across seven categories, Carta compared Bitwise’s financial performance to a handful of companies, which included Accenture, American Public Education, Inc. Appian Corp., Citrix Systems, Franklin Covey Co., Graham Holdings Company, IWG plc., Information Services Group, KForce Inc., Strategic Education, Inc., The Howard Hughes Corporation, and VMWare.
- Bitwise only led three categories: historic growth rate, projected growth, and projected growth of earnings before interest, taxes, debt, and amortization (EBITDA).
- In the other four categories, Bitwise ranked 13th of 13 for Last Twelve Month Revenue and Historical EBITDA growth.
- The firm also ranked 12th of 13 companies in EBITDA margin and 11th of 12 firms for projected EBITDA margin.
- In loan solicitations, Soberal claimed that Bitwise’s highly-touted $80 million investment led to an updated – though unshared – valuation of $380 million.
- In the same emails, Soberal misrepresented that Goldman Sachs led the fundraising round, funded in 2022 but publicized in February 2023. Kapor Capital served as lead investor in the fundraising round.
Breaking down ownership: In sum, there are nine rough categories of Bitwise industries shareholders.
- Institutional / Major Investors: Non-Venture Capital financial institutions and shareholders who rank among the top 10 shareholding entities of Bitwise Industries.
- Valley-based Investors: San Joaquin Valley-based businesses and individual shareholders.
- Non-Local Investors: Individual shareholders residing outside the San Joaquin Valley
- Foreign Investors: Businesses and individuals whose registered address is outside of the United States.
- Localized Funds: Investment funds and other foundations with a local focus tied to a nearby, current or upcoming Bitwise outpost.
- Standard Venture Capital: Venture capital firms whose investing thesis does not emphasize diversity, equity, or inclusion (DEI) investments.
- Social Enterprise Venture Capital: Venture capital firms whose investing thesis does emphasize DEI investments.
- Unidentified Trusts: Individual and family trusts who were not able to be categorized by location of residence.
- Bitwise Employees and Family
The big dogs: The top shareholder, through a number of entities, is Mitchell Kapor, an early computer developer who founded software firm Lotus that delivered the first major application for IBM's personal computer.
- Kapor's holdings are spread across two trusts – his own and another held by his wife, Freada Kapor Klein – his investment firm, Kapor Capital, and the Mitchell Kapor Foundation.
- The second largest shareholder? A virtual unknown: Nuovo Capital LLC. A lengthy search only yielded only two possible options: one, a sparsely-identified venture capital firm with one noted investment, an air quality monitoring software called Awair. The other? Financial services firm Nuovo Capital LLP based in the United Kingdom.
- From there, Marquette, Mich.-based venture capital firm 906 Ventures, LLC, social enterprise venture capital firm New Voices Fund, LP, and Goldman Sachs subsidiary Special Situations Investment Group II, LLC round out the top six shareholders with stakes in Bitwise exceeding 5 percent of outstanding shares.
The Bitwise faithful: A litany of Bitwise employees held stock options or restricted stock units through the company's employee stock option program devised in 2019.
- At the time of the document's preparation, April 13, 2023, Soberal and Olguin held a collective 4.29 percent of outstanding shares and 9.88 percent of fully diluted shares (a calculation that includes unvested options, warrants, and restricted stock units).
- Relatives of Bitwise's co-founders and now-ousted CEOs Soberal and Olguin were issued Class B common stock and either stock options or restricted stock units.
- Mario Soberal, Soberal's father, held 1.34 million shares of B Class common stock, according to the report. The senior Soberal held a number of top corporate gigs in the IT space, including serving as Chief Technology Officer for Dell's health care tea and Vice President of IT Applications for Anthem (then known as WellPoint)
- Sandi Olguin, Olguin's sister and the company's chief real estate officer, held 166,480 shares in either options or restricted stock units under the company's 2019 stock plan.
- So too did Santana Olguin, Olguin's brother and Bitwise's vice president of building services. He held 42,113 in either options or restricted stock units under the plan.
The surprising names: A few other big banks held shares in Bitwise through the course of its venture capital fundraising rounds.
- Both Citibank – through Citi Ventures – and JPMorgan Chase held roughly 3.58 and 2.73 percent of outstanding stock, respectively.
- Another peculiar investor? The College Board, best known for the SAT, ACT, and Advanced Placement exams. It held 1.43 percent of outstanding stock.
- Other surprising names included hedge funder-turned- 2020 presidential contender Tom Steyer and his wife, Kat Taylor. Between their two trusts, they held 0.06 percent of outstanding shares, or 59,587 shares.
See for yourself: