This month I am introducing something new in this blog, an interview with someone that is part of an investing platform. You now have the chance to see what’s behind the scenes and to appreciate the people that actually want to promote transparency.
You probably have seen a lot of P2P lending websites, but the website that I want to introduce today is something else. Envestio is standing out from the crowd because of what it has to offer. They are part of a trend called “new finance” and this platform is combining two new concepts crowdfunding and P2P loans. They are organizing the crowdfunding for high yield projects, and in case you are an investor looking for a loan, you can apply directly to them without having to go to a creditor.
I had the chance to ask Eugene Kukin, Head of Finance, about the investment platform Envestio.com. What’s not common in this sort of platforms is to see the people behind it, and that’s what I like about them. Transparency is at the core, you can see that they put a lot of effort in this direction and that they seem to be here to stay.
I took the liberty to ask Eugene multiple questions about how Envestio is operating and what’s behind it, and I think you will appreciate his openness.
Your project idea is quite different from the p2p lending industry, how did you get to this version?
It is a common knowledge that many p2p lending companies emerged on a basis of “payday loan” businesses, which mainly concentrate on issuing small unsecured loans to private persons. Envestio never operated in this industry, consequently, our business idea was quite different from the very beginning as we decided to focus on providing financing to real businesses, which create added value to the economy. Real estate, energy, urban mining, even blockchain/crypto-mining – companies from these industries operate via real assets and create real jobs. Those can be properly analysed prior to issuing a loan, thus decreasing the ambiguity, and provide investors with certain level of confidence.
Envestio started in 2014 as a private investment fund, can you please describe what made you change your mind and go public?
Developing as a private company always is easier at an earlier stage, but there is also a limit for such development. After successfully completing several projects with our long-term cooperation partners the idea of doing the same, but with a help of online crowdinvesting marketplace with almost unlimited development potential, emerged into a specific plan of actions and launch of Envestio. Online crowdinvesting platform has many benefits in comparison to private investment fund, as it easily matches people, who want to invest their money, and projects that seek financing with noticeably less involvement from the intermediary’s, i.e. Envestio’s side than arranging the same amount of investment privately.
How many projects have been financed so far and for what amount of money? (Can you include an avg return rate for the investors?
From the point in time, when Envestio became public and launched crowdinvesting platform (December 2017) statistics are as follows:
- Number of projects financed – 10
- Amount of funds attracted – EUR 1,160,000
- Historical average annual rate of return for investors – 20,03%
- Number of defaults – 0
You used any VC capital so far, and if not, do you plan to use in future?
Envestio did not use any venture capital so far, however, we do not exclude this possibility at some point in the future.
Questions about new projects
Do you plan to work with lower yield investor projects in the future?
Currently, we are concentrating in the field of providing bridge financing/equity replacement loans to the owners of investment projects, presented at Envestio platform. There is a good market for such type of financing and businesses are able to cover higher interest expenses, as platform-provided loan constitutes only a certain portion (usually up to 40%, often around 25%) of total financing, attracted to the project.
Offering investors lower-yielding mortgage-backed investment projects is being planned for the next stage of Envestio operations, when our database of active participants is big enough to provide necessary financing during a limited period of time.
What are the criteria when it comes to the evaluating process for each new investment project?
We evaluate each investment project from different perspectives, which are essential for getting an insight into the venture, main of which are business, financial, legal, and reputational aspects. Prior to publishing the project at Envestio portal, its owner must prove that the business concept or idea is clear and stable, financial flows, contracts, and timeline are transparent and reliable, local legislation is observed, all necessary approvals are in place, etc. Last but not the least is the reputation of the business and its owner. Being more flexible than traditional commercial banks do not mean that Envestio uses a more shallow approach in evaluating the submitted projects; actually, in many cases, our criteria list is even more strict.
Investor related questions
How are you capable of sustaining such a high yield on your investments, it’s one of the highest yields in the market?
As it has been previously mentioned, Envestio works in the field of providing bridge
financing/equity replacement loans, which constitute a relatively small portion of the total financing, attracted to the specific project, so total interest rate burden for the project is much lower than Envestio’s rate. We do not completely finance big projects at the current stage of operations.
Another option is a short-term addition to working capital, which allows completion of an
additional business cycle resulting in high incremental profit, bearing in mind that fixed costs of the company still remain the same..
Do you offer any buyback guarantees with the projects for investors?
No, but we have an investment principal repurchase guarantee instead, which means that investor is able to sell back his or her investment to Envestio at any moment before the project is closed (usually at 5% cost). We finance business ventures only, so buyback guarantee in a form offered by regular p2p lending platforms is not possible in our case.
Nevertheless, there might be some changes in this procedure after mortgage-backed loans are
launched at Envestio platform.
You had any projects default in all these years?
No, the default rate is 0%. All Envestio participants, who invested in the published investment projects got back investment principal + earned interest in full.