A Q&A with Cadence: The Securitization Platform for Structured Debt

1. Description of Company

Cadence is a securitization platform for private credit markets, making structured debt investments available to the broader investment community. Cadence’s proprietary technology transforms structured private securities into digital assets. By leveraging distributed ledger technology (DLT), our platform brings transparency, accountability and traceability to an opaque marketplace plagued by information asymmetry. We are changing the paradigm of alternative investing by lowering the barrier to entry for private credit investments, as well as lowering the cost of capital for financing originators.

2. Vision

Our vision is to provide alternative investments for all.


Many novice investors do not know the benefits of alternative investments, from the ability to against market volatilities to the alpha generation. In fact, many investors who have the credentials to be accredited investors do not know they qualify. We want to educate investors to help get them started in alternative investing through our low investment minimums and robust supply of investment opportunities. We also want to help expand access for sophisticated investors who have the means to participate in such investments, but are often restricted by the lack of visibility into new and diverse opportunities

3. Team

Nelson Chu is the co-founder and CEO. He is a 3x startup founder with several years of experience at leading financial institutions, including Bank of America and BlackRock. Prior to Cadence, he founded a strategy consulting firm specializing in helping companies build products and raise capital for growth, creating over $1B in equity value. He currently serves as an advisor to an ultra high net worth family office and is an active angel investor, with notable investments including BlockFi, Cadre, and dv01.


Jane is a co-founder and the Head of Strategy. Jane is a graduate of the University of Waterloo, where she majored in Mathematical Sciences. She has over 8 years of experience in Financial Services and Technology. Jane started her career in FX Trading for 2 major Canadian banks, followed by 3 years in Management Consulting, where she implemented trading technology for some of the biggest banks in the world. Prior to joining Cadence, Jane worked under Blythe Masters at Digital Asset, a leading enterprise blockchain company, where she established and executed operational strategies.


Prath is the Director of Risk and Capital Markets. He has over 10 years of experience in financial services, primarily within investment banking. Prior to joining the Manager, Mr. Reddy was a Director at UBS Investment Bank within their debt capital markets group based in New York. He has originated, structured and executed numerous fixed-income securities for both public and private corporations across various sectors and markets during his career. He received a degree in Finance from Northeastern University and is a CFA® charterholder.


Kryspin is the CTO and has worked for almost two decades in alternative asset management, building technology for the buy-side. Having helped launch 3 funds from scratch, Kryspin has worked with the complete spectrum of asset classes and a similarly wide range of trading styles and strategies. Prior to this, Kryspin Ziemski was an original member of an AI startup focusing on NLP and conversant AI, building intelligent automated chat bots for the eCommerce and knowledge discovery space.

4. The Industry Problem

Alternative investments such as private credit are a great way for investors to hedge against the volatile public markets and generate passive income. However, investing in these private markets is difficult and opaque, creating problems for both investors and finance originators. Unlike the public markets where technology continues to evolve with the demand and support of large banks and exchanges, the private credit markets remain antiquated.

For the financing originators in this space, the fundraising process is still heavily manual, costing them time, capital, and resources. On the investor side, many who are looking to participate are denied access to viable private investment opportunities because of high barriers to entry and the inability to find these investments at scale.

5. Solution

Using DLT, Cadence is directly addressing both problems mentioned above by creating the infrastructure to support and accelerate the growth of private credit. By digitizing and fractionalizing structured debt opportunities, Cadence automates the manual fundraising process for many businesses, providing them with a lower cost of capital while giving underserved investors the ability to participate through low investment minimums and enhanced liquidity.

6. Traction

The Cadence platform is currently live in private beta. On the user side (investors), we have ~700 users signed up through word-of-mouth, SEM, and minimal marketing. We have successfully launched 3 live deals so far, all of which were oversubscribed in less than 3 days. Each deal had a diverse mix of retail and institutional investors, maintaining minimum investments of just $500. The retrospective for the two latest deals can be found here and here.


In addition to the warm reception from the investment community, we have also partnered with a leading market data provider after a successful proof-of-concept. Cadence opportunities will be discoverable on the market data platf
orm for investment by buy-side institutions.

 


A breakdown of the investors who were involved in these latest offerings can be seen below.

7. Market Opportunities

Currently, we have no direct competitors with an identical product, that is, a blockchain-based private credit platform. As mentioned previously, we have had very good feedback from the alternative investing community, as well as praise from our originator partner who participated in our private beta. Additionally, Cadence is the first digital asset to be listed with our market data partner.


However, Cadence has tangential competitors. For example, there are private credit marketplaces out there who are analog and do not tokenize their assets. There are also existing tokenization platforms focused on digitizing assets such as real estate and venture equity. Cadence is the first solution that bridges the gap by providing a blockchain platform for private credit investing by digitizing instruments such as private fixed income and structured debt.

8. Progress + Challenges

On the business side, we are gaining more users daily. Currently, we have about 700 investor accounts in our private beta, and we are securing new originators regularly with our unique structured note programs, increasing our visibility into 2019 deal flow pipeline. Each of our deal so far has oversubscribed and closed quickly. The challenge is to delicately balance the equilibrium between originator supply and investor demand. Thus, as we gain more users, we also need to development strategic partnerships with more originators.


We are also getting recognized by leading market service providers such as ratings agencies, and insurers. Securing the partnership with the market data vendor is a major milestone for not only Cadence, but the digital asset industry, as we are the very first digital asset provider to do so.


On the technology front, we are continuously refining our features to optimize UX. Our challenge, like other FinTech startups, are to deliver our product on time and correctly. We have plans to enhance the investment process by, for example, introducing a bidding mechanism for allocations, instead of the current first-come-first-serve system, to allow more investors to participate in our offerings.

9. Business Model

As our vision is to widen the investor base for private capital markets, we currently do not charge fees from our investors. We have a participation fee structure we charge our originator partners for every dollar we securitize for them on our platform.

10. Advisors

Oliver Wriedt is the former Co-CEO of CIFC, a $20B credit fund specializing in corporate loan-based assets.


Kevin Goldstein is the former US Lead for Alternative Investments at KPMG.


Kyle Okimoto is formerly the Head of Marketing at E*Trade.


Zac Prince is the founder and CEO of BlockFi, the leading financial services provider in crypto.

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