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1. Buyback Guarantee
17/2/20 Updated with more information
Ido: If a loan originator (e.g. Finsputnik Platforma) grants a loan to a deal partner (e.g. Epic Cash), for example this loan, and the deal partner goes out of business, will the loan originator (in this case Finsputnik) perform the buyback and compensate investors?
Grupeer: Yes, Finsputnik is responsible for a BuyBack guarantee for the deal partner, such as Epic Cash.
Ido: What is the amount of reserves held by Finsputnik to cover buybacks? Is it enough in case several deal partners default? Because when I look at the company register, it says that Finsputnik Platforma only has 2800 euros of registered capital. The same is true for Primo Invest.
Grupeer: In Latvia giving loans to business, entities is not a regulated activity, so the minimum capital required for such companies is Eur2800. The start-up capital has no relation to the BuyBack guarantee.
Our team and Fisputnik has a risk monitoring mandate, so we try to minimize the chance of defaults. We can’t disclose the information about the value Finsputnik can cover the BuyBacks, but it is manageable to cover for several LOs. If more LOs fail the situation would be similar to bank having a majority of clients defaulting. However, the interest rate the investor is the price they are paid for taking on the additional risk.
My thoughts: The fact that Finsputnik covers buyback for many deal partners means that diversifying among these partners is not very helpful – they are all essentially Finsputnik loans. I am somewhat worried about Finsputnik Platforma’s and Primo Invest’s ability to cover these guarantees, and look forward to their 2019 annual reports.
2. Payment Schedule
Ido: Does the payment schedule presented to investors correspond with the borrower’s payment schedule, or is there a separate schedule for originators to repay Grupeer? Are investors’ accounts reimbursed only when the borrower makes a payment? Does Grupeer ever use its own fund to reimburse investors for late payments? Has there ever been a late payment on Grupeer (beyond weekend delays)?
Grupeer: The borrower’s payment schedule is presented to them separately, but in such way, so the borrower pays first and then the investors receive their earned interest. In the past we had a situation, when we had to reimburse the repayments from own funds (for example when we had issue with bank) , however we plan not to repeat such practice.
My thoughts: Grupeer’s answer is not very complete, and I strongly dislike not knowing the actual payment dates and status. However, this is half-tolerable as long as they notify investors if an originator is late in paying Grupeer.
3. Account Balance
Ido: In the Account Overview screen, does the value of “available funds” represent the actual amount of money currently held on behalf of this user in the bank account where investors’ funds are kept? In other words, is the total sum of “available funds” displayed to all investors combined, match the current balance in the bank account?
Grupeer: Yes, “available funds” is the amount that is visible to clients, and is held on his/her behalf in the bank. Total sum of “available funds” match the total sum held in the bank on their behalf.
My thoughts: Good answer here, no “but”s.
4. Andrejs Kisiks (Grupeer’s co-founder and Alla’s brother)
Ido: There is not much information available about Andrejs Kisiks. His LinkedIn profile says that before Grupeer he was an investor, but in interviews he was said to have a background in construction and real estate development. May I ask what were his former roles, in which companies, when?
Grupeer: Andrejs Kisiks is co-founder of Grupeer. Andrejs has always been an entrepreneur and have worked with different businesses. Last decade he spent in real estate construction industry as a project manager.
His career track record included working on the development projects in different countries, winning and completing government contracts. The last power plant he was working on was supposed to generate the green energy and definitely would bring a high return on investment. Unfortunately, the project was lost due to some investors dropping out. So, that how Andrejs got an idea to create a platform, where the investors would contribute funds to realize the projects to live.
My thoughts: On the plus side, the answer was honest enough to include a not-very-flattering piece of information regarding Andrejs’s failed project, which gave him the idea to start Grupeer. However, I do wish they had gone into more detail regarding Andrejs’s professional history.
5. Main Originators / Partners
Ido: While searching online for Finsputnik Platforma and Primo Invest, I only found mentions of these companies in the context of Grupeer. This makes me think that both companies are related parties to Grupeer. Am I right? Why is this not disclosed to investors? And can you tell me the background story of how these companies were created, by whom, who owns them now, and what is their exact functionality?
Grupeer: Finsputnik Platforma is owned by Alla Kisika and we have state this in the interview with bloggers. The company is issuing the loans in Russia and also we use it as a Special Purpose Vehicle when offering indirect structure deals on the Grupeer platform.
Primo Invest is owned by Harijs Egle. When we started raising funds for Primo Invest, Grupeer acquired a part of the company in order to get involved and monitor the constructions process.
Ido: I feel that the relationship with Finsputnik and Primo should be disclosed more clearly on Grupeer. But perhaps more importantly, I feel that there is a mish-mash in roles between Grupeer and Finsputnik.
Other crowdfunding platforms are also related to their loan originators, but maintain a clear division of roles. The loan originator is registered as a lending business, and deals with the loans themselves. The platform is registered as an IT company, and only provides the technical solution for refinancing those loans. Both companies may be owned by the same people, but are managed by different people. See Mogo and Mintos, Aventus and PeerBerry.
With Grupeer and Finsputnik the situation is less clear. Grupeer presents Finsputnik Platforma as a lending company, but also as a vehicle for issuing loans (by whom? Grupeer?). On the Latvian company register, and on Finsputnik’s own website, Finsputnik Platforma is presented as an IT firm. Grupeer is mentioned as a product in Finsputnik’s portfolio, as if tomorrow they might develop another platform and sell it to competitors.
So if Grupeer is the technical platform, and Finsputnik is a company developing technical platforms – who is officially in charge of the loans? Does Finsputnik even have employees? Does Grupeer control loans, like direct crowdfunding platforms (EstateGuru, Crowdestate), or is it a loan refinancing marketplace (like Mintos), where the loan is issued by a lending company before being offered to investors for refinancing? Is there even a difference, when the originator is essentially the same company as the platform?
This whole thing looks like a mess left over from a previous business model which you pivoted away from. I feel that in order for Grupeer to mature, and truly achieve the transparency you keep promising – you should disclose the relationship more clearly, but also create a clearer distinction in roles and people between the two companies.
Grupeer: Thank you for your valuable points. We definitely will use your comments and suggestions in mind, when planning our updated PR strategy. You are right- during the rapid growth of Grupeer we have left behind some traces of the previous business model and didn’t clearly explain the mechanism of our work right now.
Regarding Finsputnik website- it is not related to Finsputnik loan originator, in 2018-2019 Grupeer was developing Whitelabel solution for p2p platforms- discovering opportunities to sell the platform, but we didn’t go ahead with this plan. White label had the same name, which is also misleading of course.
We will get back to you and our clients, with full disclosure about Finsputnik Loan Originator and it’s business model in the nearest future.
My thoughts: Again the response is not detailed enough in addressing my points, but at least it’s honest. Investors should realise that Grupeer and Finsputnik are very closely related: We essentially lend money to Grupeer’s founders. Both companies also rely on each other’s existence, which is not ideal. This is also true to Primo Invest, but to a lesser extent.
To Grupeer’s credit, they were very quick in responding to my questions – although I would have preferred to wait another day or two and get more detailed answers.
Bottom line: Grupeer is still emerging from its startup and pivoting phase. To become a serious, standalone platform, I think it’s crucial for Grupeer to increase transparency and reinforce their current model: cooperating with more independent loan originators, dropping the bad practice of separating borrowers’ and investors’ payment schedules, sharing financial statements from all originators and deal partners, and perhaps also separating the Grupeer and Finsputnik teams. After all, Grupeer is supposed to be objectively monitoring Finsputnik like every other originator and partner.
Let’s see how they handle their year of “transPEERancy”.