Quarterly Update #3
TruX: Progress and Achievements
Dear Community,
Following our last quarterly update, we are excited to update the community with our progress and achievements since we launched TruX, the world’s first smart business financing platform, in July 2019 at Asia’s largest tech conference, RISE.
Business Financing
In our latest blog titled ‘Alternative Financing in Asia’, we disclosed the current landscape of the alternative finance industry in Asia and the fundamental challenges it faces today. As a financial technology (fintech) startup solving the problems of business financing globally, we are inevitably listed alongside other new and innovative solutions available. Our valued community advisors have also shared feedback regarding alternative financing solutions that they are familiar with from their respective countries. Thus, in this quarterly update, we would start off with a deeper understanding of business financing.
For startups and SMEs globally, there are mainly 2 types of business financing with key differences;
- Debt Financing: Borrowing of money from investors in return for repayments plus interest.
- Equity Financing: Raising of money from investors in return for company shares.
Given the credit risks in debt financing, alternative lenders may offer a loan to be secured with an asset or offer an unsecured loan. For many startups and SMEs, they may not have valuable assets but may have enterprise customers whom they have invoiced (invoiced company) as part of their B2B sales. When alternative lenders offer an alternative financing solution secured with an invoice, also known as invoice financing, it is a subset of debt financing. This is remarkably different from invoice factoring, where an invoice is sold to a lender who then collects the money directly from the invoiced company. In invoice financing, no invoice is sold, and the creditworthiness of the invoiced company serves as a risk-reduction to originate a loan and/or offer lower interest rates. In the event of default from the borrowing company, the alternative lender may recover the debt directly from the invoiced company instead, followed by the directors of the borrowing company if there is any personal guarantee.
For many startups and SMEs, they may not have enterprise customers paying on a recurring cash flow basis. The absence of recurring cash flow may lead to a recurring need for business financing due to cashflow issues. Debt financing may not be readily or consistently available due to the high cost of financing or long processing time, depending on the credit risk of the borrowing company and any risk-reduction such as invoice financing as mentioned. In order to obtain business financing for the long-term (e.g. R&D, CapEx etc.) and invest into business growth without short to medium term obligation to repay the loans, startups and SMEs may sell their shares to investors, also known as equity financing, which does not have any repayment requirements. This is remarkably different from debt financing as there is an additional element of risk and any return on investment is based on future funding rounds, IPO or profitability that is not guaranteed. In debt financing, however, there is a return on investment for lenders based on the repayments plus interest that is guaranteed contractually.
Unique Selling Proposition
When alternative lenders compete for market share, they increase their risk appetite to originate the loans and/or offer lower interest rates. All is well for alternative lenders when default rates are low, but when default rates are high due to the financial problems of borrowing companies and the wider industry/economy where those borrowing companies are operating in, alternative lenders would struggle to continue lending from their own balance sheet and would require new capital injection from existing or new investors, which is usually done via a series of funding rounds. For alternative lenders from a P2P marketplace, unfortunately P2P investors fully bear the loss of their capital, not the alternative lenders. Unlike alternative lenders whose source of capital are from investors who legally bear the full risk, traditional lenders such as banks do not and cannot have the same risk appetite as alternative lenders, because their source of capital are from ordinary people who are not expected to bear any risk and they can legally withdraw their money at any point in time, which explains the low interest rates for bank deposits. This creates a unique selling proposition for alternative lenders to capitalise on, as they have capitalised with the use of financial technologies such as mobile wallets, online lending, P2P lending and loan aggregation to offer unsecured loans or secured loans that traditional lenders do not and cannot have the risk appetite for.
However, today’s financial technology is still limited in its ability to reduce credit risk as ultimately it is the financial standing of the underlying borrowing companies, which forms the loan book of alternative lenders, that counts. Unfortunately, the financial standing changes constantly due to a complex business environment, especially for startups and SMEs. As such, the fundamental challenge remains and all alternative lenders are always susceptible to the credit risk no different from traditional lenders. It is unthinkable and unsustainable for alternative lenders to continue competing for market share by simply increasing their risk appetite. With global recession an inevitable part of any industry/economy, the business model of alternative lenders will have to adopt new ways of risk-reduction to compete for market share and supplement their risk appetite, otherwise their business model will cease to exist as we have witnessed in China and among alternative lenders globally that have slowly lost the trust of their own investors.
When alternative lenders have a unique selling proposition that is increasingly distrusted, it adds to the unique selling proposition of FintruX Network, the only financial trust network in the world. In 2017/18, we pioneered the 4 levels of credit enhancements for risk-reduction, drawing from our expertise in the securitization industry where our solutions are trusted to manage several billion dollars of assets, therein capturing over 90% market share in Canada today. In 2018/19, we pioneered the TRUST (Transparency, Reputation, Understanding, Security, Time) profile within a global business network where startups and SMEs can leverage on blockchain technology to grow globally with trust. In 2019/20, we are pioneering the financial technology of integrating debt financing and equity financing on a single platform, with a focus on invoice (debt) financing and venture (debt/equity) financing. The use of a financial trust network in an age of distrust will not only empower startups and SMEs to grow globally with trust, but also empower alternative lenders as well as venture capital funds to compete for market share sustainably once and for all.
Our mission to innovate smart solutions for underserved startups and SMEs and our vision to be the one-stop resource and solution provider for business growth and sustainability shall always remain true to the best of our expertise as we expand to greater heights. Sky’s the limit.
Strategic Partners
In line with our unique selling proposition and our focus on invoice (debt) financing and venture (debt/equity) financing, we have signed confidential MOUs with strategic partners across 3 countries; Myanmar, Hong Kong and Singapore. The MOUs set forth a strategic business relationship that specifies further innovation to be undertaken so that the partner network of startups and SMEs would be able to share the value created from the world’s first smart business financing platform, in return for a fair exchange of value with our token economy.
Among our strategic partners for invoice (debt) financing include an agriculture supply chain with B2B transactions for over 2 million metric tons of crops worth more than a billion dollars and an invoice management firm to work with us towards creating an ‘Instagram experience’ for invoice financing in specific industry/economy that is fundamentally profitable. On the other hand, our strategic partners for venture (debt/equity) financing include a venture capital firm with over $100M AUM and a global portfolio of growth startups that our community may already be a consumer of.
Together with our strategic partners, we look forward to deliver value to a network of enterprise customers and earning a fee from all business transactions brokered or originated within a 2-sided marketplace, for the benefit of our token economy.
Earned Media
We were one of 5 start-ups from Singapore to be invited to the growth track at RISE, which has ride-hailing app Uber and online payment company Stripe as notable alumni. This was reported by The Business Times, South-east Asia’s leading financial daily.
Since then, we are proud to be the only startup from Singapore to be the country finalist of 3 global award categories; Best Fintech Startup, Best AI/Machine Learning Startup and Best IOT startup. We will be announcing the results along with another prestigious recognition awarded by a global business news channel during the upcoming AMA.
Live AMA
In 2019 alone, we have had the fortune to interact with our community over 5 live AMAs and we will continue to do so as part of our ongoing commitment to transparency. We will be conducting a live AMA in the month of November and we invite the community to vote on the online medium and dates via a poll to be conducted on our Telegram channel. As always, we look forward to answer any questions from our valued community and provide further insights into our token economy.
Token Economy
Since the global launch of TruX, the utility of FTX has been the only way for startups and SMEs to use the platform. We have had to overcome the challenges of educating startups and SMEs with the use of FTX but we are fully committed to ensuring that the utility of FTX is not diminished in any way as a result. We have every intention to uphold the utility of FTX to complement current and future value created from the platform. Most importantly, we share a vested interest in maintaining the utility of FTX, given that it serves as a key unique selling proposition for risk-reduction as mentioned. On this note, the FintruX team has not divested its FTX holdings as we firmly believe in the utility of FTX.
When we integrate debt financing and equity financing through new modules and subsequent modules within the world’s first smart business financing platform over the next 6–12 months, we will introduce FRX as credits to use those modules. These credits would be sold for dollars to startups and SMEs that require the use of those modules, at a price that would be pegged to the original market cap of FTX at $25M. As these credits are not openly traded and akin to stable coins, there is no downside or upside pressure to its price, which would overcome the challenges of educating startups and SMEs with the use of FTX. Alternatively, startups and SMEs can choose to purchase FTX from the public market, and swap for FRX on our platform at a 1:1 ratio to benefit from the prevailing prices of FTX. In other words, if the openly traded market cap of FTX, which is at the mercy of market forces and is not manipulated or controlled by FintruX Network, is lower than the original market cap of FTX at $25M, there will always be an upward pressure to the price of FTX until the openly traded market cap of FTX reaches $25M, following which we will welcome our community to stake FTX on our platform to obtain further upside directly.
We wish to emphasise that this is a tremendously tricky affair due to the legal complexity of combining business financing with credit enhancements from digital assets for startup and SME owners to enjoy business financing faster, cheaper and easier, globally. As a network-based business model, we continue to strive to be scalable cheaply beyond any jurisdiction with no regulated activities carried out on the platform.
We ask for patience and understanding from the community as we work tirelessly to grow the token economy organically. The token economy has always been our long-standing commitment for the long-term and we maintain our conviction to deliver a token economy that works for all stakeholders, including startups and SMEs.
Team
We are pleased to welcome Moe Danis as an Advisor and Business Director to spearhead the next phase of development as part of our expansion roadmap heading into 2020. Moe Danis is widely recognised and credited as the leader for bringing the securitization model to Canada and making the industry work. Over the past 30 years, he held various senior appointments as SVP (Program Finance) at CWB Maxium Financial from 2016-June 2019, SVP (Structured & Corporate Finance) at Pacific & Western Bank from 2010–2016, Managing Director (Lease Finance & Private Fixed Income) at Sun Life from 2002–2009, Investment VP (Lease Finance & Structured Finance) at Clarica from 1992–2002, Senior Director (Lease Finance & Private Placements) at Mutual Life from 1986–1999.
We encourage our community to share the news of our launch with relevant strategic networks that will help boost our global presence. Please stay tuned for all our updates by following us on social media. Otherwise, please feel free to share our progress and achievements presented on this update to a business near you, today.
Yours Truly,
The FintruX Team
About us:
FintruX Network innovates smart solutions for underserved startups and SMEs. We aim to be the one-stop resource and solution provider for business growth and sustainability.
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