Category: Investment Platforms and Marketplaces

Online investment marketplaces including peer to peer lending, investment crowdfunding, security token platforms and more.

Decentralized Securities Depository, dba Openfinance, Raises $8.6 Million. Seeks Up to $50 Million

Decentralized Securities Depository, LLC, dba Openfinance, has raised $8.6 million from 19 different investors, according to a filing with the Securities and Exchange Commission (SEC).

Decentralized Securities Depository/Openfinance is a secondary trading market for digital securities. Simply naming the company decentralized indicates the utilization of blockchain or distributed ledger technology (DLT).

Openfinance has an alternative trading system (ATS) license and provides secondary trading for digital securities to both individual and institutional investors. Openfinance seeks to provide additional liquidity in both traditional and non-traditional markets. The company recently tokenized a hedge fund offering as well as a media firm, Current Media. Openfinance believes that the Reg A+ exemption may provide a path for future digital asset offerings.

The marketplace operates 24/7 and is providing trading services to investors both within the US as well as a growing list of international markets such as the UK, Germany and France.

Openfinance operates wholly-owned broker-dealer Sageworks Capital as well. Openfinance has partnered with the three top digital securities issuance platforms: Securitize, Harbor and Polymath.

Openfinance is part of the building block of building a full-stack digital securities ecosystem. The Form D filed with the SEC indicates that the company is hoping to raise up to $50 million.

Openfinance was founded by co-CEO Juan Hernandez who filed the document with the SEC.

The advent of digital securities is accepted as a given it is more a question of how long will it take to migrate from the traditional, more analog, operations of today to a more streamlined digital asset environment. In multiple jurisdictions around the world, the transformation to digital securities is moving forward at various speeds. At times, regulators have struggled to keep up with the transformation.

New Bakkt All-Time Record: Over $20.3 Million in Bitcoin Futures Daily Trading Volume, 2728 Futures Contracts Traded

Bitcoin (BTC) futures daily trading volumes on crypto-asset platform Bakkt recorded another all-time high, according to data obtained from the Intercontinental Exchange (ICE), the trading desk’s parent company, which also owns the New York Stock Exchange. Over $20.3 million in Bitcoin futures contracts, or 2728 futures contracts, were reportedly traded on November 22.

Bakkt’s new daily trading record represents approximately a 66% increase over the previous 24-hour period and is about 30% greater than the previous all-time futures trading high. The previous record was set on November 9, 2019.

Open interest from yesterday presently stands at around $1.75 million, which represents a 29% increase over the previous 24-hour trading day. Bakkt was off to a relatively slow start when it first launched in September 2019. However, the trading volumes of the exchange’s physically settled Bitcoin futures contracts have been steadily increasing.

Bakkt’s latest record volume has come at a time when the Bitcoin price has dropped significantly. BTC fell below $7,000 mark on November 23. Previous surges in crypto futures volumes have also been accompanied by large spikes in BTC price, as experienced from October 25 and November 8 (according to CoinMarketCap data).

ICE, which runs 23 major exchanges throughout the world, has most recently reported Bakkt’s BTC futures trading price at $7,240 on November 22.

Bakkt’s management recently revealed that it is planning to further expand its offerings, including Bitcoin-related products, due to increased institutional interest.

Earlier this week, Bakkt stated that cash-settled BTC futures would be tradable on ICE Futures Singapore, starting on December 9 of this year. Regulated options contracts for BTC are scheduled to be introduced on the same date.

Shade: CEO of WeOwn Says London Stock Exchange Arrangement with PrimaryBid is “Too Little, Too Late”

Earlier this week, Crowdfund Insider covered the new partnership announced by the London Stock Exchange (LSE) and PrimaryBid.

The LSE is, of course, one of the largest traditional stock exchanges in the world with a history that dates back to 1571.

Just this past week, PrimaryBid was recognized by AltFi as the “Crowdfunding Platform of the Year.”

PrimaryBid is not your typical crowdfunding platform as it connects retail investors to new share issuance on the same terms as institutional investors. Typically, institutional investors get the first and best cut of any securities offering. PrimaryBid’s internet-based platform gives individual investors exclusive access to new share issues and issuers on the LSE can access a broader pool of investors to augment capital formation and trading liquidity. Part of the democratization of finance as technology seeks to level the playing field for the little guy.

Lipstick on a Pig?

But not everyone was convinced that the deal was really that good.

WeOwn CEO Sascha Ragtschaa sent over a comment on the LSE/PrimaryBid hookup saying it was simply too little, too late. To quote Ragtschaa:

“Levelling the playing field for retail and institutional investors is a step in the right direction, but it’s too little, too late in terms of engendering real change. Investing in new interface technology without addressing fundamental issues with the stock exchange model is really just putting lipstick on a pig. The London Stock Exchange is still utilising the same antiquated legacy environment, and the investment model is still reliant on intermediaries – PrimaryBid is just another neo broker – so it’s not actually widening access to IPOs. This partnership doesn’t address fundamental problems such as cost and risk.

“Rather than big players making attempts to appear innovative, we need a new model for the stock exchange – one focused on providing a fairer, balanced marketplace for all types of investor. And one that uses technology to cut out middlemen and create a better working model, rather than focussing on a shiny user experience.”

“Tokenisation and blockchain technology have shown real capacity to reduce counter-party risks and enable real-time settlement, both of which are tangible benefits to both listing companies and participating investors. This is where real change will come from. We need to look towards a blockchain-based exchange model that will address underlying efficiency gaps and major systemic risks within the equity space, providing the true innovation we need to give retail investors a better deal.”

WeOwn has developed an investment platform, run on a bespoke blockchain, that digitizes assets – to simplify capital raising in a cost effective process. WeOwn takes care of the complete fundraising lifecycle, from issuance to investor management.

WeOwn is not the only platform seeking to leverage the benefits of a distributed ledger to remove existing friction in the issuance-transfer-custody-management process of traditional securities. I have yet to meet someone who does not believe digital securities are the future.

That being said, LSE has dabbled a bit in the tokenization sector but it is not clear if they are planning a transition similar to what the Australian Stock Exchange has been working on. The ASX is on track to deliver the current decades old CHESS system with a blockchain-based replacement system by March-April of 2021.

Whether LSE’s partnership with PrimaryBid is too late or not, the digitization of securities is inevitable.

Sharedrop! Republic Enables First Ever Private Equity Incentive Program: by Banking App Linen

Republic, an investment marketplace offering both traditional securities or more esoteric digital offerings, is powering the “first-ever legally compliant free private equity incentive program or “Sharedrop,” as it is being called. Obviously, the name takes a cue from the widely utilized airdrop feature during the ICO heyday.

Banking Fintech Linen App is offering $300,000 worth of investment in the company using a Simple Agreement for Future Equity (SAFE) to prospective users for downloading and signing up for the app.

Linen is planning to offer a whopping 4.65% APY on assets held via its platform.

To quote the website:

“We launched Linen App because we identified a gap between the tech and finance savvy who are able to earn high yield on their cash and stablecoins, and the rest who don’t have easy onramps to blockchain-based lending. We saw an opportunity to create new products such as Linen Cash, which is a high-yield cash management service powered by lending liquidity pools on the Compound protocol, and the Linen Card, a debit card to spend Linen Cash.”

Republic has earned a reputation for thinking outside the securities box while adhering to existing securities law. Republic has created a compliant and easy-to-use Sharedrop tool to provide companies, like Linen, the opportunity to give away private securities to customers and fans for free or in exchange for their contribution to a project.

Previously, Republic hosted the first security Airdrop to retail investors in the U.S.

“Equity can now be used as a flexible engagement and marketing tool like no other,” explained Jed Halfon, a Partner at Republic. “Giving away a piece of the pie and getting fans and users to share in the success of a company is one of the best ways to bootstrap a community and grow the user base.”

Something for Nothing?

Not really. Linen is basically giving you equity in exchange for your time and service. The first task, it seems, is registering for their forthcoming offering and then perhaps downloading the app. I will predict they will put shareholders to work to generate some serious social love.

Republic is the only platform capable of launching these compliant Sharedrops. The thesis is equity and stock options are the most powerful incentive tool in a startup’s toolkit, Republic now lets companies take this tool and face it outwards by giving away incentives to early adopters, key customers, and supporters. Previously, product users and early adopters missed out on the potential upside from their early support.

“Acquiring early users and building trust in consumer fintech is no small task,” said Vitaly Bahachuk, CEO of Linen App. “Just as startups grant early employees stock options, we want to reward our early members with equity and build Linen App together with our community. Imagine being an early user of some of the biggest tech companies and receiving equity – it’s an exclusive opportunity.”

The waitlist for the Linen App Sharedrop is open now.

Bigger is Better or Race to the Bottom? Schwab May Acquire TD Ameritrade

Two titans in the online brokerage space are preparing to merge, according to multiple reports. Schwab and TD Ameritrade are poised to combine operations in a deal that could be finalized as soon as today for an estimated $26 billion purchase.

The move to consolidate brokerage platforms comes at a time when agile Fintechs are nipping away at online brokers – a business that once crushed traditional brokerages. The disruptors are now the disrupted, in effect.

Recently, TD, Schwab, and Etrade all announced zero commissions – a vital source of revenue for these online platforms. The strategic move was compelled by insurgent Fintechs like Robinhood that have long offered commission-free trading. In 2018, Robinhood went from 4 million users in the summer to over 6 million users before the end of the year. The rapidity of such growth represents a huge challenge to traditional online brokerages as these millions of customers must come from somewhere.

So is bigger better? Or is this a race to the bottom where the once cool, online brokerages are flailing to keep pace with innovative Fintechs. That is the question that needs to be answered. But by combining Schwab’s 12.2 million accounts with TD Ameritrade’s similar number of users, the economies of scale start to make sense. TD Ameritrade announced in October that since eliminating commissions the number of accounts jumped by a whopping 49%.  Perhaps they are on to something?

While Fintechs may have schooled old online brokerages by eliminating commissions and taking the quarterly hit it seems that brokerages get it. Change they must or whither and die. This is less about a race to the bottom than a need to remain competitive while providing new services such as access to alternative investments and other new services that may make up for missing commissions.

Currently, shares in both Schwab and TD are reacting positively. Shares in TD have jumped by 25% premarket (NASDAQ: AMTD). Schwab has moved up over 11% 13% (NYSE:SCHW). The market likes what it sees. While a day of trading doesn’t make a company, perhaps the market is onto something.

What say you Etrade?

London Stock Exchange Partners with PrimaryBid to Give Retail Investors Access to Share Offerings on Same Terms As Institutional Clients

The London Stock Exchange (LSE) has partnered with Fintech PrimaryBid, an internet-based investment platform, in order to give retail investors the opportunity to access to share offerings currently unavailable. PrimaryBid’s solution is said to digitally connect retail investors to quoted company offerings at the same terms as institutions – an important qualification.

According to the terms of the deal, which were revealed on November 21, the LSE and PrimaryBid pair will introduce online infrastructure that will allow firms that are either listed or listing on LSE to give individual investors the chance to participate in initial public offerings (IPOs), retail bonds and various other types of equity offerings.

LSE’s head of equity primary markets, Charlie Walker, stated:

“This agreement is part of our ongoing commitment to broaden the services available to retail investors. Individual investors and issuers will benefit from the additional capital and liquidity available through Primarybid’s platform, helping to make markets more accessible for all.”

The UK-headquartered Fintech firm PrimaryBid will give individual investors access to various real-time share deals on the LSE. Firms that are issuing shares will reportedly have access to a centralized retail gateway through the LSE.

Walker noted:

“Individual investors and issuers will benefit from the additional capital and liquidity available through Primarybid’s platform, helping to make markets more accessible for all.”

PrimaryBid’s internet-based platform gives individual investors exclusive access to new share issues.

PrimaryBid CEO Anand Sambasivan mentioned that his company was “excited to be working with London Stock Exchange in laying down the digital infrastructure that gives everyday investors equal access to capital markets transactions on the same discounts as the institutions.”

Sambasivan also said that the deal with the LSE would be beneficial for issuers and individual investors.

He added:

“Issuers on the LSE can now access a broader pool of investors to augment capital formation and long-term trading liquidity. This is applicable to companies listed on AIM all the way to the FTSE 100. Having this gateway available during transactions unlocks historical inefficiencies and brings tangible benefits to the ecosystem as a whole. London Stock Exchange’s deep knowledge and trusted relationships with the capital markets ecosystem makes them the ideal partner to help achieve this vision.”

In early September 2019, PrimaryBid finalized a £7 million investment round, which was led by Pentech and Outward VC. The company said it will use the capital raised to expand its sales and marketing efforts, and further enhance its IT product development.

Following the multi-million dollar investment round, Sambasivan remarked:

“We are on a mission to democratise public equity offerings. Everyday investors are a vital part of the stock market and yet unable to buy discounted share deals – a longstanding imbalance in the public markets. This is true whether it is a government selling down its holding in a large company or a quoted company is raising growth capital. Our online platform addresses this challenge, giving small investors the same access as traditionally afforded to large institutional investors.”

PrimaryBid’s management announced on November 19 that it had won the “Crowdfunding Platform of the Year” award (from AltFi Awards, which has been “a barometer of success among Europe’s leading alternative finance and Fintech businesses” for over five years).

New Reg CF Funding Portal Fundopolis Seeks to Simplify Investment Crowdfunding

Recently approved funding portal, Fundopolis has announced its intent to “make it simple for individuals and communities to invest in and support the small businesses they love.” Four issuers have now posted offerings on the Fundopolis site.

The FINRA regulated funding portal issued a statement announcing its public launch this week. Crowdfund Insider noted its addition to the list of Reg CF platforms on Monday.

Fundopolis also announced that Michael Mook has joined the company as CEO. He is said to bring more than 30 years of financial technology and Wall Street experience to Fundopolis.

Mook joins Fundopolis from Weeden & CO. LP, a company that was recently acquired by Piper Jaffray. Mook is described as passionate about “making crowdfunding more accessible to the general population through the use of next-generation technology, including blockchain.”

Mook explained that by shifting focus to the community aspect of equity crowdfunding, they will unlock the ability to tap into a treasure trove of opportunity for local businesses:

“With the launch of our platform, any individual will be able to invest and support the local businesses they are passionate about, through a seamless user experience. I am excited to assume this new role as CEO, and help Fundopolis make Main Street’s goals a reality.”

Jan Steenbrugge, founder and President of Fundopolis, explained that small businesses are at the heart and soul of communities:

“Successful businesses help communities thrive, and our platform gives owners and entrepreneurs a chance to succeed by providing people direct investment opportunities in businesses they love. It’s the dawn of a new era, and we are excited that Fundopolis will play an integral part by connecting small business owners with their most valued customers in a mutually beneficial relationship.”

According to Fundopolis, business owners may choose the terms for the securities they offer on their platform. The issuers may generate a return for investors with a combination of money, perks or a stake in the business.

Fundopolis seeks to simplify the capital-raising process via investment crowdfunding, saving businesses time and money by making it easy to set their own terms and communicate with their supporters.

Fundopolis says it also provides additional tools needed to manage the securities and perks they offer.

The inaugural issuers on the Fundopolis platform include:

  • Apotheka, a Los Angeles, CA-based provider of an electronic health records and information exchange platform that connects healthcare providers, payers and patients to deliver optimal care;
  • Bee Mortgage App, a Jacksonville, FL-based provider of a patent-pending mobile mortgage app designed to make homeownership more affordable for the average family;
  • Peeka, a Seattle, WA-based platform where children read, learn and play in virtual reality; and
  • Tennessee Hemp, a Mount Juliet, TN-based provider of high CBD cultivated hemp strains to licensed hemp cultivators, extractors and manufacturers across America.

FirstRand Bank in South Africa Shutting Down Accounts Linked to Crypto Exchanges

FirstRand Bank (FRB) in South Africa is shuttering accounts affiliated with cryptocurrency exchanges, according to a report in MyBroadband.

Quoting a letter seen by the publication, the justification is due to associated risk regarding these exchanges:

FirstRand Bank has been considering its risk appetite in respect of virtual currencies and virtual currency exchanges for some time. Within this context, the bank has taken the decision to discontinue the provision of banking services to virtual currency exchanges and/or entities dealing/trading in virtual currency. Future regulatory clarity may cause us to revise our decision.

The exact date of account closures was not revealed. Industry participants are said to be in discussion with South African regulators regarding FRB’s decision.

This is not the first time a bank has turned its back on the cryptocurrency market. In many jurisdictions around the world, traditional banks have decided the operational risk was simply too large to ignore.

Cryptocurrency markets have been rife with fraud and unscrupulous transactions as regulators scramble to keep up to date on these virtual asset service providers or VASPs. Earlier this year, the Financial Action Task Force (FATF), a global entity, issued rules designed to curtail illicit activity enabled by crypto exchanges but it will take some time to implement the new rules.

AltCoinTrader, one of the largest crypto exchanges in South Africa and a banking client with FNB since 2015, said they were very surprised by the bank’s decision to terminate all services across the board. CEO Richard de Sousa said they are disappointed, and pointed to international pressure for the termination.

de Sousa added that they are disappointed that a financial institution would succumb to international pressure like this, with banking services being denied to individuals and industry players around the globe.

“We have solidified relationships with other major institutions, and believe that further engagement is necessary. A close working relationship always increases trust and understanding when dealing with emerging technologies like cryptocurrencies. We want to inform our FNB customers that we have not given up and will continue to fight for their banking rights,” de Sousa concluded, “We believe that the limitations set on the industry will only drive innovation. Customers can be assured that it is business as usual and challenges, whilst sometimes unexpected, are not uncommon in such a nascent industry.”

Real Estate Crowdfunding Platform EstateGuru Partners with Ober-Haus on Market Research

Real estate crowdfunding platform EstateGuru and OberHaus, real estate agency operating across the Baltic region, have joined together to produce shared real estate market research and analysis with a specialized focus on the needs of the crowdfunding platform.

A general and combined analysis of the three Baltic markets, Estonia, Latvia, and Lithuania, are expected to be published once a year. Monthly reports of individual countries are set to be published monthly in the future.

Daniil Aal, Head of Group Sales at EstateGuru, explains that as one of the few crowdfunding platforms in Europe where every loan has a mortgage as security, it’s only natural that to have real estate experts in our team who cooperate with the best real estate companies in the industry.

“Ober-Haus has vast experience and is the leading expert in the market. When we combine these competencies, we believe we can offer the best quality loans and information to our investors,” says Aal.

Audrius Šapoka, Managing Director at Ober-Haus Lithuania, explained that his firm has been a frontrunniner in the market and they believe property crowdfunding is here to stay:

“We see it as a substantial compliment to the real estate development tools in these changing times as traditional banks are not always that flexible and sometimes customers need other solutions. We, at Ober-Haus, see this cooperation as a perfect opportunity to be on the verge of the next era where there are more participants in the market besides traditional banks and real estate companies.”

EstateGuru is a Pan-European marketplace for short-term, property-backed loans for SMEs. The Fintech is building a new ecosystem of property finance as well as wealth management. Investors may access geographically diversified, professionally underwritten, and property-backed, fixed-income investment products on the platform. EstateGuru reports over 35 000 investors from 106 countries and the total money lent to date is more than €160 million.

Online Lender TWINO Group Tops €1 billion in Originated Loans, Appoints New CEO Anastasija Oleinika as CEO

TWINO Group, a European peer to peer lending platform, has topped €1 billion in originated loans, according to a company release. Launched in Latvia in 2009, TWINO reports half of the billion Euros in lending has been issued in the past three years as the Fintech scales its services.

TWINO issues loans via subsidiaries in Poland, Russia, Georgia, Latvia, Kazakhstan, Denmark, and Spain. Investors come from all over Europe with the UK accounting for the second-largest share of investment at 12%, according to the company. Germany is the largest market with 33% of the investing.

TWINO provides unsecured consumer loans, small business loans, and invoice financing. Most of the loans are short term in nature. Some of the loans incorporate a “buyback guarantee” thus mitigating investor risk. Overall, the default rate stands at 6.6%. TWINO hosts an informative stats page here.

TWINO reported a profit of just under €9 million for 2018.

Simultaneously to the milestone event of surpassing a billion Euros in lending, TWINO has announced that founder Armands Broks is being replaced by Anastasija Oleinika, former CFO of TWINO. Oleinika has worked at TWINO for about three years, managing the Group’s finance as well as its business operations during the past year. She has also managed TWINO’s operations in Russia, one of the largest lending markets. Oleinika has worked on several M&A deals at SEB Enskilda and Superia Corporate Finance prior to joining TWINO – a fact that may foreshadow future events.

The change in management is said to help strengthen the company’s “financial, operational and risk management.” Broks will focus more on the development of new business opportunities, as well as attracting new talent and supporting the local ecosystem.

TWINO states that during the past 10 years TWINO has become one of the largest Fintech firms in Europe, serving over 1.5 million customers.  TWINO Group’s turnover is said to have increased by 157% year-on-year.

Oleinika said that reaching the €1 billion milestone is significant for TWINO, and is reflective of the business’ continued growth and expansion.

“The restructuring process we started in 2017 has brought the expected results in a very short time, and our financial results are testament to this,” explained Oleinika. “European Fintech is revolutionizing the way people view and manage their money, and we are proud to be driving this renewal of trust in financial services. As the market evolves, we are continuing to develop and expand our product range to meet customers’ changing needs and preferences. This will involve strengthening our data science and IT capabilities and expanding our team of financial technology experts.”

Broks said they are delighted to have Oleinika leading the team at this important time in the company’s growth.

“We’re currently working on a number of new business developments and are evaluating opportunities in new markets, most notably Asia in the next year,” added Boks.

Mintos Recognized as Alternative Finance Platform of the Year

Mintos, a marketplace for investing in loans that has facilitated nearly €4 billion, has been recognized as the Alternative Finance Platform of The Year and People’s Choice during AltFi Awards 2019. The recognition took place on the 18 November during the annual AltFi Berlin Summit. Mintos points out that it is the only business to become a double winner this year. This is the 4th year in a row that it has received the People’s Choice award.

The winners in alternative finance and Fintech categories were selected by two expert panels from a record 120 nominations, while People’s Choice was determined by 5,500 voters.

“Our vision is to make investing in loans as common as investing in traditional investment assets – stocks, bonds, real estate, and others,” commented Martins Sulte, CEO and Co-Founder of Mintos. “The steady growth of our business, which was acknowledged by the two awards we won, reassures that we are on the right path as investing in loans is becoming a common choice for investing among individual investors around the globe.”

Mintos touts its rapid growth. Currently, approximately 200,000 investors have used their platform from 85 different countries.

Mintos is a Fintech that matches individual investors with a simple path to investing in loans originated by multiple online lending companies. Launched in 2015, Mintos claims to be the largest marketplace of its kind globally.

Crowd2Fund Seeks Up to £1.2 Million in EIS Approved Crowdfunding Round

Investment crowdfunding platform Crowd2Fund is raising capital in a self-crowdfunding round seeking up to £1.2 million in an EIS approved offering. Shares in the company are being offered at a pre-money valuation of £35.8 million. Crowd2Fund says this round is in advance of a future Series A round  raising £10 million.

Of note, Crowd2Fund reports that following this current raise, they are planning to use the remainder of their £12 million EIS allowance to conduct a Series A investment round to “pioneer the world’s first decentralized bank, combining the benefits of a challenger bank with P2P lending.”

Crowd2Fund plans to offer direct investing into entrepreneurs along with an AI automated investing system with deposit capabilities and full banking services.

This most recent round was originally revealed in September.

According to the offering page, about £225,000 has already been raised from 25 individual investors. The EIS qualification provides important material benefits for investors as tax benefits can reduce actual exposure while possibly removing any capital gains tax.

Crowd2Fund explains the EIS benefits as follows:

“For example, if you invest £10,000 in Crowd2Fund, you will potentially be eligible to receive up to £3,000 from HMRC in the form of tax relief, depending on your individual circumstance. Investors are sheltered from paying capital gains tax on any future returns and they could also be protected from losses, with up to £3,150 of loss relief. This means that their financial exposure to Crowd2Fund is potentially reduced to £3,850 while retaining the full £10,000 in equity.”

Crowd2Fund plans an ambitious growth trajectory. In a comment,  Crowd2Fund states:

“… we can grow the business to be lending £210m per year to 2,628 hard-working entrepreneurs and value Crowd2Fund at £99m, based on £12.5m generated in revenue. We do however plan to go further than that, in line with our original forecasts and raise at least a further £20m after EIS to allow us to achieve the £1bn valuation which is eminently achievable with 30% UK market penetration – which is looking more and more achievable, due to the poor service offering from the larger competitors.”

Previous predictions of growth have not matched actual platform performance but Crowd2Fund is confident in its growth plans.

The funding round is apparently an extension of a round from earlier this year that was paused due to a delay in EIS authorisation.

Crowd2Fund is both a debt and equity platform that allows investors to back individual entrepreneurs. While many of the largest debt based platforms (P2P) have shifted to funds, Crowd2Fund continues to pursue a single investment platform where:

“investors control and choice over the investments they make. Businesses leverage this approach because having access to the community of investors helps their business grow and they can also reduce the cost of the finance.”

Crowd2Fund adds that it is expanding internationally via the UK Fintech bridge programme

Reg CF Funding Portals: 50 in Total with Several Exits and Several Additions. Is Reg CF Ready to Scale?

Periodically, Crowdfund Insider revisits the Reg CF sector of online capital formation. Reg CF or “Regulation Crowdfunding” may have garnered most of the attention from popular media but really there are three individual crowdfunding exemptions including Reg A+ and Reg D 506c.

Under Reg A+ you must file an extensive offering circular with the entire offering process costing around $300,000, according to one estimate. But Reg A+ enables an issuer to raise up to $50 million from both accredited and non-accredited investors.

Under Reg D 506c, you may raise an unlimited amount of money but only from accredited investors. This is the most popular crowdfunding exemption and Reg D (5o6c and 5o06b) is a trillion-dollar market.

Issuers using Reg CF may only raise $1.07 million and must utilize a FINRA regulated Funding Portal or a broker-dealer. Due to the low cap on funding, frequently issuers will do a side-by-side Reg D 506c offering to circumvent the extremely low amount you may raise.

Last time CI revisited the number of approved Funding Portals was in July. Since that time, several new funding portals have joined the approved list and several have exited.

Regarding Reg CF funding portal exits – two more have departed this sector of crowdfunding.

EquityBender based in Charleston, South Carolina, is no more. The domain just indicates a private site.

Seeding VR is the other exit. As the name indicates, Seeding VR was targeting the virtual reality sector. Apparently, it even attempted to launch a crowdfunding platform in the UK. Today, both domains simply time out.

This brings the total of funding portal exits to 12 with at least two the direct result of some time of enforcement action: UFP LLC and DreamFunding Marketplace.

The three additions to the list bring the total to 50 FINRA approved funding portals with one in question as Fundpaas has long been on the suspended list and is expected to join the exits.

The three recent additions include:

Fundopolis has yet to list its first offering but appears ready to launch its first issuer. According to its website, Fundopolis expects to also enable issuers to raise capital under both Reg A+ and Reg D as well.

Infrashares is described as follows:

“InfraShares is a crowdfunding platform that pools investment from individuals into large sums of development capital for critical infrastructure projects (roads, bridges, airports, mass transit, water systems, renewable energy and schools).”

This platform is utilizing Reg D as well. Currently, there are two issuers posted on the site -both under Reg D 506c.

Prospect Equity does not appear to have a live site as of yet.

As Crowdfund Insider reported in October, Reg CF has raised over $300 million in securities offerings since the exemption became actionable in May of 2016, providing capital to over 2000 campaigns. This is according to a report by Crowdfund Capital Advisors.

Overall, Reg CF can be called a success as it has helped smaller companies raise much-needed growth capital while creating new jobs. But multiple shortcomings hobble the exemption thus undermining its potential success.

First, the fund cap is widely recognized as far too low.

Average seed rounds in the US stand at about $2.2 million – typically using Reg D. A good number raise much more.

In the UK, the most robust crowdfunding market in the world, issuers may raise as much money as they want. A prospectus requirement at €8 million creates a virtual speedbump for issuers looking to raise more than that amount.

The most successful Reg CF Funding Portal, Wefunder, stated earlier this year that limitations to the exemption may make the exemption an option of last resort.

Republic, another leader in the Reg CF sector, published a letter providing the perspective from issuers that have utilized Reg CF to raise growth capital. The letter, signed by 23 different founders and CEOs of early-stage firms, indicated that Reg CF has its benefits but suffers from serious limitations.

Every industry participant has voiced their concerns to both Congress and the Securities and Exchange Commission (SEC). While some policymakers have supported common-sense updates, since 2016, little has been accomplished.

And it is not just the funding cap that undermines Reg CF.

A report by the SEC from this past summer touched upon many of the issues.

Common sense changes that allow for special purpose vehicles (SPVs) that safeguard smaller investors while making it simpler to gain access to higher-quality deals is a no brainer.

There is also the 12g trap that may compel a company to become a reporting company once it has 500 investors. A problem that is antithetical to investment crowdfunding.

The Association of Online Investment Platforms (AOIP), an advocacy group for online capital formation, has posted a position paper with its goals.

So is Reg CF ready to scale? Probably not without some changes to the rules. Many of the larger platforms now have broker dealer licenses and offer other services. Doing enough $1 million deals in a year to cover your costs can be quite difficult.

The SEC is currently going through a regulatory review, as defined by a concept release, which seeks to improve the exemption ecosystem while harmonizing the alphabet soup of rules. This may be the best opportunity the industry has to see some impactful improvements. If not, it will be up to Congress to step up and do the job. Don’t hold your breath.

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Digital Securities Platform iSTOX Raises $5 Million in Funding Led by Tokai Tokyo Financial Holdings

iSTOX, a regulated capital markets platform that provides digital security issuance and trading, has raised $5 million in funding from Tokai Tokyo Financial Holdings.

According to a release from iSTOX, the funding also brings a valuable partnership that provides a gateway to accredited and institutional investors, as well as issuers, across Japan via Tokai’s network.

Danny Toe, founder and CEO of ICHX, iSTOX’s parent company, said the partnership is an important aspect regarding their goal of establishing his platform as a leader in the emerging ecosystem for digital securities.

Toe said that “Japan is a very key market for us and we’re extremely happy to partner a well-respected and established institution like Tokai to bring more choice and opportunity to the Japanese financial ecosystem.”

Tokai offers investment and trading services to investors across 149 offices in Japan. Tokai holds consolidated net assets worth USD 1.4 billion and USD 39 billion worth of client assets under custody.

Tateaki Ishida, President & CEO of Tokai Tokyo Financial Holdings, explained that the world of financial services is nearing a pivotal period of change and blockchain tech is among the leading catalysts.

“We believe that forward-looking providers of financial services must embrace this change if they wish to truly serve their clients in the new century. For this reason, we are excited by our partnership with iSTOX and look forward to working with them to better serve the investing community.”

iSTOX recently completed its first digital asset issuance and secondary market listing on its platform.  iSTOX has benefited from being a part of the Monetary Authority of Singapore’s (MAS) Fintech Sandbox. Full operation is predicted for the first quarter of 2020.

iSTOX recently struck a similar deal with Kiatnakin Phatra Financial Group, giving it access to the Thai market.

Based in Singapore, iSTOX’s other key other shareholders include Singapore Exchange (SGX), Asia’s leading multi asset market infrastructure and exchange operator and Heliconia, a Temasek Holdings subsidiary focusing on investment in fast-growing companies.

Last September, iSTOX maid a key appointment hiring Lim Mei Shern as its new Head of Compliance. Lim was previously at the MAS where she spent the past 15 years in the supervision of capital markets as well as on areas of Fintech. This appointment is a key indicator of government support of the iSTOX mission.

iSTOX seeks to lead the digital securities transition across Asia. By leveraging blockchain or distributed ledger technology, iSTOX will remove much of the friction intrinsic in traditional security issuance, trading and custody. The reduction of fricion brings with it a reduction in cost and, perhaps, may engender a new generation of esoteric securities.

China Rapid Finance Regains Compliance With New York Stock Exchange’s Continued Listing Requirements

China Rapid Finance Limited (NYSE: XRF), one of China’s largest consumer lending marketplaces, announced on Thursday two developments that mark significant progress in regaining compliance with the New York Stock Exchange’s Continued Listing requirements. China Rapid Finance reported that it completed its 2018 financial statement audit and filed its 2018 Annual Report on Form 20-F with the U.S. Securities and Exchange Commission (SEC).

“In addition, the company instructed its Depositary Bank to implement a ratio change for its American Depositary Shares (ADSs). The new ratio will be 10 Class A ordinary shares per one ADS. The company expects the effective date for the ratio change will be on or around December 2, 2019; however, the exact date could change depending on the timing of SEC approval.”

China Rapid Finance also revealed that Dr. Po Wang will now focus on new business development in order to accelerate the Company’s growth and planned return to profitability. As a result, Dr. Wang’s title was changed from Co-CEO to Executive Vice-President, New Ventures. The company added:

“Dr. Wang will remain on the Board as an executive director. A key element of the Company’s recovery plan is to partner with multiple financial services enterprises that can leverage the Company’s “decision-making” technology to better serve their large customer bases.”

Holiday Gift Guide: Wefunder Shares List of Funded Companies that Offer Perfect Gifts

Wefunder is the largest Reg CF (Regulation Crowdfunding) portal in the US. While having completed Reg D offerings in the past and the occasional Reg A+ offering, Wefunder is mainly a CF portal.

A Wefunder spokesperson recently shared the below comment with Crowdfund Insider:

“Wefunder is closing out 2019 having passed several milestones: More than 300K investors on our platform have invested well over $110M into 300+ companies to date. We’re the largest equity crowdfunding portal to date, and we couldn’t have done it without the fantastic companies who raise with us, nor the investors who are willing to give these startups a shot.”

Wefunder has put together an informative stat page regarding the results of issuers using their platform.

Earlier today, Wefunder published a “Holiday Gift Guide” generated from past issuers on the Wefunder platform.

Wefunder said, “this is our way of giving back to those involved in a way that benefits both our Wefunder alumni and investors alike.”

As many Reg CF issuers are consumer-facing, the gift list is heavy on food & beverage and other consumables and services.

So if you are looking for some unique, cool stocking stuffers and other gifts for the Holiday Season this is a good place to start. You can check it out here.

Online Lending Platform October Celebrates One-Year Anniversary in the Netherlands

October Nederland, a financing platform for small and medium-sized enterprises (SMEs) in Europe, celebrated its one-year anniversary on October 31, 2019. The firm’s application to operate as a Netherlands-based lending platform was approved last year by the Dutch Authority for the Financial Markets. October (formerly dba as Lendix) is based in France and currently operates in France, Germany, Spain, Italy, and the Netherlands.

October’s blog post says that new business owners often find it challenging to obtain financing for their ongoing growth and development. Obtaining loans can be difficult, so October aims to make this process easier. The company provides different financing options for institutional and retail clients.

October’s management notes that SMEs can obtain business loans of up to €3.5 million (appr. $3.85 million) in less than a week.

The October team states:

“We not only distinguish ourselves from banks, we are also different than other non-bank financiers. Our financing by institutional investors allows us to rapidly finance a company and facilitates certainty of funding to the entrepreneur. The co-financing by the crowd requires us to have simple and transparent communication. And that has a positive impact on our client interaction and our own culture.”

Following October’s fifth anniversary in France, the company’s entrance into the Dutch market seems to be the right move.

October has quickly become one of the largest crowdfunding platforms in the Netherlands, as it has provided loans to over 30 projects with a total funding amount of more than €15 million (appr. $16.5 million).

The company reveals that investments of €40.000 to nearly €1.5 million were “financed by thousands of retail lenders in combination with professional investors such as pension funds and insurers.”

The firm’s blog notes that crowdfunding in the Netherlands has become a popular way of financing new businesses. Unlike traditional financial institutions, October provides quick financing “without collateral or a personal guarantee,” the company explains.

October’s management acknowledges that crowdfunding in the Netherlands, and Europe in general, still faces certain challenges. Acceptance of new forms of financing among Europe’s SMEs is “still in development and for many people lending money to these companies is quite thrilling,” October’s blog states.

It adds that “crowdlending” is viewed as a legitimate alternative to further diversify the financing landscape. The European Commission (EC) is currently developing crowdlending regulations as it aims to professionalize the emerging sector.

The SME Financing Foundation was established in the Netherlands with the assistance of the Ministry of Economic Affairs and Climate, in order to support crowdlending.

The nation’s parliament has reportedly asked the government to apply the “green investment scheme” to alternative financing methods.

October’s management says it will continue to provide transparency and maintain good relationships with it clients. The company says it will remain committed to helping SMEs grow through crowdlending.

The October Nederland team says:

“We put our money where our mouth is (or practice what we preach) with senior management investing in every loan on our platform.”

It adds:

”Making mistakes is allowed, not learning from your mistakes is unacceptable: A prerequisite for the ultimate client focus is a safe environment in which people can make mistakes. This includes the courage to openly share these mistakes. To learn from them and thus improve the client experience.”

October’s management also encourages independent thinking. The company regularly obtains data and feedback from customers, and evaluates its performance in order to “improve the client experience and increase scalability.”

Robocash Tops $500 Million Loans Issued

Robocash Group is reporting that during Q3 of 2019 cumulative loan volume across their lending platforms amounted to $500 million.

According to Robocash, in Q3 2019 Russia had 63% of all loans issued, Kazakhstan – 15% and Spain – 4%. At the same time, the Asian markets that have been in focus for the group since 2017 grew their share from 16% in Q2 2019 up to 19%. Among the latter, the Philippines was leading with 15%.

Showing a 92% increase year-over-year in the volume of the issued loans in the first nine months in 2019, the company has targeted to hit $ 294 million by the end of the year. Meanwhile, the number of issued loans exceeded 6.5 million. 75% of loan volume is said to have been obtained by repeat customers.

Robocash says the number of customers of the group increased to 7.9 million. In Asia, Robocash reported an upward trend in Q3 2019 in the Philippines (+16% QoQ), there was a significant increase in the number of served clients in Vietnam (+98%), Indonesia (+172%) and India (+333%).

Sergey Sedov, founder and Chief Executive Officer of Robocash Group said that Fintech is developing at a tremendous speed in Asia.

“Take the recent estimate of Google & Temasek on digital lending in Southeast Asia: the loan book that is expected to grow from $23 billion in 2019 to $110 billion by 2025,” said Sedov. “These figures are not the limit. The growing use of digital solutions helps to narrow the gap in financial inclusion and benefits people in Asia already today. As a company, we are proud to be a part of that process and aspire to provide the fastest and most convenient access to finance no matter the country and any peculiarities.”

Robocash Group is a non-bank consumer lending providing marketplace funding in Europe and Asia.

LendInvest Expands Into Scotland with Buy-to-Let Offering

Online property finance platform LendInvest has announced the expansion of its services into Scotland. LendInvest will offer Buy-to-Let property financing as the “Scottish property market booms.” LendInvest states that recent research shows that property prices in Scotland have soared to an 11 year high, with Glasgow reporting the fastest growing house prices in the UK.

LendInvest sharest that its current 2 year fixed rates start at 2.89% with five years starting at 3.19%. ICR assessment rate is 5% across all products, with the exception of the 5 year fixed interest product which remains at 3.6%.

Scottish borrowers will also have access to a £750 legal fee cashback offer on 5-year fixed to 75% LTV.

This most recent move comes months after the announcement that LendInvest has received £200 million in funding from the National Australia Bank for the business to expand its capacity to lend in the UK BTL market.

Ian Boden, Sales Director at LendInvest, said that Scotland has always been a priority market for LendInvest.

“For a location with such huge potential, it’s surprising that the Scottish market continues to be undersupplied by active mortgage providers,” said Boden. “Following the fantastic reception we’ve had for our BTL product so far in England and Wales, we are excited to be delivering the same high quality loans to the Scottish market.”

 

RBC Confirms It Has Filed Patent Regarding Possible Crypto Trading Platform

A spokesperson for the Royal Bank of Canada (RBC) has confirmed that the top 5 Canadian bank has filed patents for crypto trading platform technology. The spokesperson would not confirm plans to launch, however.

“(L)ike many other organizations,” Jean Francois Thibault told The Logic Monday, “(RBC) files patent applications to ensure proprietary ideas and concepts are protected.”

According to The Logic, RBC has enrolled 4 patent applications in the US and Canada regarding a possible platform.

Language from one patent suggests the tech may be designed to streamline use of cryptocurrencies, which can be complicated due to the relatively high levels of computer efficacy and responsibility needed to properly manage ones cryptocurrency “private keys.”

Unlike conventional payment systems, Bitcoin and other crypto transactions cannot be reversed by a sender or interlocutor. Once a person inputs their keys (essentially alphanumeric passwords), they are en route, and mistakes can be costly

Old-school crypto aficionados typically recommend storing cryptographic keys offline in hardware storage devices called “cold wallets.” This recommendation is made because of a very high number of hacks executed against cryptocurrency changes. To date, more than a billion dollars in cryptocurrencies have been stolen by hackers from exchanges.

Businesses hoping to take crypto more mainstream are working to offer secure custody to customers who likely can’t be bothered with the risk or fuss of maintaining a personal cold wallet.

According to The Logic, the latest RBC patents suggest the bank may one day offer crypto trading accounts. Other patents filed by RBC include possible “blockchain” systems for the management of credit scores, vehicle records, consumer points and loans tracking.

Three Canadian crypto exchanges have folded or been investigated in recent months, including: