High level of competition in the market for electronic payments from both traditional banks and IT-start-ups / finteh-companies. Orientation in connection with getting into the regulatory field of the United States and Singapore to an accredited investor narrows the circle of potential clients of the fund. The prejudice of investors regarding ABS and especially MBS - market acceptance of this financial instrument is also under question because of the possibility to get access to these same securities through ETF-funds, which can also experiment with leverage and portfolio composition. Risk of a decline in activity in the ICO market: financing instruments like IPOs or ventures have historically evolved through the "pay for the idea - give for development - finance the scaling of the project." Naturally, each step in this chain is accompanied by a decrease in the number of potential candidates (however, and the growth in the volume of the average transaction, too). As for ICO as a tool for crowdfunding, it is still at the starting point, which confirms the hypothesis about the transient nature of investors' hype around the market.
Due to the two-level structure of the token as a structural financial product and the Vaultbank leverage used, the real level of risk to which investors will be exposed is not obvious, since it will be necessary to rely on the objectivity of the rating of ABS tranches, and obviously will not match the declared reliability level of instruments with fixed yield. The positioning of Vaultbank's investment product as an opportunity to diversify investors' portfolios - in particular, to protect a part of the proceeds from interest rate risk, is also not particularly relevant because of the opportunity to participate in ABS insensitivity to interest rate dynamics through ETF - a much more traditional and liquid instrument, than potentially VB. Vaultbank's payment solutions even conceptually lose to the market products and concepts of competitors, both in terms of product economics and functionality, even conceptually. To date, the company is not ready to provide any of the services/products / services described to its potential retail customers, nor does it provide a coherent product development roadmap with prescribed time frames.
The business model of the project is trivial and quite typical for its sector - it does not provide the company any competitive advantages, it is easily replicable.
The owners of the token do not have the opportunity to vote, i.e. influence decisions made by management, could potentially affect the stability of dividend policy. Soft cap at the level of 10 million USD and a hard cap of 100 million USD seem excessive in comparison with the pre-money valuation of the company, which was received at the stage of work with venture investors, in the amount of 7 million USD. The amount of token distribution to the team - 32.5% of the total offer of tokens - seems excessive.
The absence of specialists from the team with experience in trust management in collective investment funds. The unbalanced structure of the team is an obvious bias towards financial market specialists and, as a result, a shortage (in the official documents of the company there is only one person with a suitable background) for successful development of payment and retail solutions of Vaultbank. Parallel employment of members of the management core in other companies / projects is a risk of a spread of attention, which may affect the quality of management decisions. The team and its individual members lack the experience of deploying a project of this scale.
In general, Vaultbank with its solution enters 3 markets: the payment market, structured financial products (it is in this area that the VB-token should be considered, and not positioned as a high-yield low-risk instrument) and, to some extent, the intermediary services market ICO, because among the plans Vaultbank - building in the Orderbook - crypto-exchange, a joint project Vaultbank and Ambisafe - a full-fledged marketplace, specializing in trading of digital assets. Considering the segment of payments and debit card products, we can not fail to note the high level of competition from both traditional banking and IT-startups / filter companies, as well as "intermediate" non-bank market participants like payment crypto institutions like Worldcore, in the future Kevin and others, as well as more "traditional" services in the face of the same PayPal. As for the structure and dynamics of the market of non-monetary payments, it is not homogeneous in terms of maturity and, accordingly, dynamics - CAGR for 2015-2020. promises to be 5.8% for developed countries, and about 20% for developing countries. In turn, the ICO market is experiencing rapid growth, called by many experts a "bubble" - so, by June 2017, the total amount of funds raised during the ICO exceeded the amount of venture capital investments in block-startups over the past 12 months, with the entire 2Q17 the ICO market doubled its volumes on a monthly basis - at the current time in just 2017 within the ICO was collected about 1.95 billion USD. At the same time, other intermediaries interested in the market make their personal projections - for example, according to COMSA calculations, in 2018 the ICO market volume may reach 5.3 billion USD, but there is certainly a risk of correction as investors realize the insolvency of the majority from projects. As for the structured products market, despite its colossal volumes (about 9.2 trillion USD), among the non-institutional groups on which Vaultbank is counting, stigmatization in relation to ABS, which is associated with the crisis of the mortgage market in 2007-2008.
The investment product offered by the clients, represented by the VB-token, combines features that are rarely found in one tool in the financial markets, being thus a structured product - first, it has the features of fixed income instruments, because it is designed to provide quarterly dividend payments, and a more or less acceptable level of risk to customers, in addition to diversifying the portfolio of ABS, provides cooperation with PFSC (Portfolio Financial Servicing Corporation), which will take over BOJ obligation to collect credit receipts and the direction of their desired company (Vaultbank) in case the primary lenders (originators) can not cope with this task; secondly, having stability, theoretically (!) comparable to fixed-income, due to the statistical techniques used by the partner Vaultbank (Random Forest Capital) for the compilation and management of the investment portfolio, based on machine learning (ML) and artificial intelligence (AI ), this portfolio is able to show the superannuation at 8-11% per annum on a non-armbase basis relative to its risk category, The quantitative approach allows to optimally balance the low-risk and high-risk ABS in the portfolio; Thirdly, the credit line (leverage credit line), which plays the role of the shoulder, provides an even greater ROE of investments, which, combined with the reinvestment strategy of portfolio returns, allows the portfolio to be expanded at an accelerated pace, thereby allowing for a fixed token offering, growth of its internal and actual cost. Thus, the token gives its owners the opportunity to win not only from dividends, but also from the upside in the face of capital growth. An additional advantage here is also the fact that Vaultbank will always reserve a certain number of funds for maintaining the token rate. In addition, given the listing of VB on its own site called Orderbook, the company will also monitor the liquidity of the instrument - in particular, due to the weakened regime of handling the token, it is possible to organize the marketing of the instrument in the media, which could potentially affect its recognition and, liquidity. In addition, the divisibility of the tool resulting from the block-based nature of the token also automatically makes it accessible to a wider range of investors, unlike the traditional securities market with its lots. However, if Vaultbank's investment products represent at least some interest for potential customers, although there are a lot of traditional analogues in the face of the same ETFs on MBS, then with retail products (debit cards) and payment solutions, things are somewhat worse - they are interesting conceptually: free opening and maintenance of cards, dumping commissions for transactions, multicurrency, support for crypto-currency purses, i.e. the ability to pay tokens and crypto-currencies for standard purchases, various bonuses, albeit shifted towards high-end services like hotels and restaurants - however, the sphere of payments and retail products are currently very competitive, characterized by low barriers to entry to the market: in addition, This market contains solutions whose authors went much further - for example, they abolished not only the service fee, but also for transactions, and also allowed to integrate accounts from different banks in one card (Kevin).
Vaultbank is building a business model of a crypto-bank with the signs of a "universal" from the point of view of the services rendered by a financial institution - among the proposed solutions are present as retail products like the lifestyle of a debit card and its various variations aimed at different categories of customers , and the tool for indirect access to capital markets in the face of the VB-token, there are also a number of payment solutions - mainly in the sphere of linking crypto-currency wallets with traditional payment instruments such as debit the card. The company implements a commission model of monetizing its services, ensuring its competitiveness through the establishment of dumping rates, which is possible due to cooperation with organizations such as Volopa. The maintenance and opening of Vaultbank accounts are free of charge. The token emitted by the company is given the role of an alternative means of payment in everyday transactions due to the system of its automatic conversion into Fiat. It is noteworthy that the token is simultaneously an instrument of participation in the returns generated by the portfolio of loan assets (ABS), in fact, representing a kind of ABS of the second order, i.e. being secured by acquired Vaultbank ABS: MBS (mortgage-backed security), RMBS (residential mortgage-backed security), assets secured by automobile and student loans, factoring contracts, etc. In the future, Vaultbank plans to turn into a marketplace for digital assets of other companies: this is possible thanks to a joint project of Vaultbank and Ambisafe - Ethereum based Exchange Orderbook, which offers a platform for primary and secondary tokens markets for various projects.
Vaultbank organizes the ICO mainly to obtain sufficient capital to form a diversified portfolio of insured credit assets with a shoulder in the proportion of 4-10: 1 (depending on the results of the ICO) -such as the company gives the following structure of spending of collected funds: 80% will go to the fund, 17% - for business development, and the remaining 3% - for operational activities. Since Vaultbank decided to integrate a revenue-generating mechanism into its own token (however, still depriving shareholders of the right to vote, in effect, giving their tokens the status of peculiar privileged shares) in the form of quarterly dividend payments to owners approved by the board of directors, it was decided to follow the requirements in the sphere of circulation Securities approved by the regulators in the United States and Singapore, however, in a slightly facilitated form - thus, Vaultbank will both disclose detailed information on the results of the activity the ability to publish data on the financial results of the organization - all this will be done in the form of publication of quarterly and annual reports to external users. In addition, Vaultbank implements a scenario approach to planning the development of its project, depending on the amount collected in the main sales funds: for example, soft cap is set at $ 10 million (otherwise, money will be returned to investors). The company sets three key fundraising plans for itself: in the event of achieving 20-25 million levies the company will be able to leverage 4-6: 1 and, accordingly, a 150 million credit line and a 175 million-dollar (USD) portfolio credit assets; at USD 50 million - leverage 6-8: 1, at least 300 million credit line and investment portfolio of USD 350 million +; at 100 million USD - leverage 8-10: 1, 900 million credit line and a portfolio of assets under the management of a volume of 1 billion USD. Key risks and uncertainties: 1. The owners of the token do not have the opportunity to vote, i.e. to influence decisions made by management, could potentially affect the stability of dividend policy; 2. Soft cap at the level of 10 million USD and hard cap in the amount of 100 million USD seem excessive in comparison with the pre-money valuation of the company received at the stage of work with venture investors, in the amount of 7 million USD; 3. The volume of distribution of tokens to the team - 32.5% of the total offer of tokens - seems excessive.
Although the company only provides data about its company at the level of the management core, without affecting junior positions like the analyst, however, given the conventionality of the role of the latter in the team, one can safely make meaningful conclusions about the entire team on the information that is. So, we have a well-staffed team for a hedge fund that uses quantitative methods of trading - for example, a specialist in the field of debt and structured products and shares with more than thirty years of experience, working in such large financial institutions as BofA, BMo, and KPMG, the role of CTO is performed by Austin Trombley - data-scientist and data engineer, however, with ten years of management and consulting experience in 7 Fortune 500 companies, however, who headed the data strategy in Prosper (lending-marketplace) and co-founded Random Forest Capital is a quantitative credit hedge fund. There is also a blocking specialist (however, in this project the role of the block is not obvious and indirect) - Patrick Baron, CBO, head of sales and business development in Ambisafe, a partner of Vaultbank. One of the features of the team of this project is traced here - many of its members are working in partner companies in parallel, which is a negative signal from the point of view of focusing on business processes of Vaultbank (for example, Christopher Cummock is also a principal in Cummock Asset Management). At the same time, the team is seriously skewed towards financial market professionals, while only one member of the team - John Castaldo, MD - has the necessary background in the sphere of payments. Moreover, in the list of employees to be hired in the near future, such specialists are also absent. For investors, this can serve as a signal about which of the branches of the business is risking process. In general, at the level of entrepreneurial experience, none of the members of the team had previously developed projects of this level. At the same time, despite the compliance with competencies in the financial markets, none of the members of the team had previously engaged in trust management in collective investment funds - only Christopher Cummock has almost six years of experience in portfolio management in the field of wealth management, which, incidentally, does not quite fit, since in trading different amounts mean fundamentally different approaches to trading and risk management, even if it is a question of quantitative trading.