# of AB1 Shares on Issue and current EBIT best guess., page-77

Nice analysis, though I'd caution against Afterpay as a useful comparable.

Others in the BNPL sector, such as Z1P, are unable to command a revenue multiple of even 10 to 20x. The short explanation is that Afterpay deserves a premium because it is best-in-class (brand value, growing customer LTV, low CACs, marketplace power, monetization levers, complimentary service offerings, sustainable high growth rates, geographical expansion etc.). The market leaders always appear expensive, but they grow into their valuation much quicker than most people can comprehend.

In the case of Animoca, it is not yet one of the market leaders in the gaming industry and neither is it one of the leaders in blockchain gaming/ NFTs (i.e. it hasn't developed one of the most popular games or platforms ... not yet, at least!). What it does have in its favour, is a potentially unrivalled network of partnerships and a growing portfolio of games/platforms. The ace in the pack is widely thought to be TSB. If the TSB gains the type of traction that Axie has, then most of us will be sitting on 100+ bags.

At a high-level, it might appear that the unicorn valuation was based on 18x times revenue (circa $840m) plus the value of its investment portfolio (circa $160m) = US$1b. But I think that this tends to fit the multiple to the valuation, rather than the 18x multiple (or similar multiple) being a useful tool to inform the valuation moving forward.

Firstly, the median revenue multiple for the gaming industry is reported to be lower than 6x (it was around 5x in 2019). Animoca generates revenue from some non-crypto legacy games, which will only command a very low multiple. Alternatively, REVV games and others will command a much higher multiple as the ecosystem is still being built-out. The result is that Animoca has several revenue streams, with each commanding its own multiple.

Secondly, a large proportion of Animoca's unicorn valuation probably relates to "optionality value". For example, TSB's revenue was almost incidental to how it should be valued, because the game was still in development (revenue from LAND sales etc was basically a promising indicator that TSB could be huge, but no useful multiple could be inferred from this). Instead, VCs and others try to calculate the optionality value. Basically, this thing could be huge, how huge could it get and over what time period, what's the likelihood, what's the downside and what are we prepared to pay for this optionality.

If we apply an above average revenue multiple of 10, the optionality value would be circa $383m, whereas going with the industry average of 6, optionality would be $560m.

Having an idea of the optionality value can also be used to calculate downside risk. Based on the above, even if TSB flopped immediately after the unicorn raise, all other things being equal, Animoca would still be worth $540m to $617m. This is the beauty of Animoca - it offers plenty of diversification across its portfolio.