Review & interview: Envestio

Review & interview: Envestio

Mon, 01/28/2019 - 16:05
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After doing research, experimenting, testing and meeting some of the Envestio team face to face in Riga, I felt it was time to write up my experiences and digest the things we talked about during the meeting.

Note: This post contains referral links to Envestio. By using that you and I can get an extra bonus on our investments.

Note: This post is based on my experiences up to late January 2019.

I've been investing with Envestio since October 2018 with a personal and a corporate account. For both accounts the verification process was smooth and straightforward. The process for a corporate account is slightly more extensive as more documents need to be provided, but all in all it went smoothly.

After verification you need to deposit funds in your account by a bank transfer. By simply following the banking instructions you're able to add funds to the platform. As a European with EU bank accounts, I've not had any issues and most of the time the funds are credited within a day on business days.

Now that you have funds available, you're able to start investing. From October to mid December 2018 there were a lot of projects to choose out of. At the moment of writing projects are a less abundant, but with larger sums. I've been told (late January 2019) though that there are a lot of new projects in the pipeline.

The platform is clear, easy to manage and all payments have been paid on time. There is even a buyback guarantee in case you want to exit your investment earlier. This however comes at a 5% cost, which I feel is very much acceptable. All these points make me a happy investor with Envestio.

However if I talk with other people about this, they feel it all sounds to good to be true and these high returns on investment do almost sound to great to be true. So on a recent business trip in the Baltic states I reached out to the Envestio team and requested to meet with them, which they gladly and easily accepted!

So in late January 2019 I've met with Alesia Nikalaichyk in Riga, Latvia. I was supposed to meet with Eugene Kukin, but I was a bit delayed and he had other engagements, but Alesia was nice enough to jump in. During our meeting I got insightful answer to all my questions, which I have tried to sum up the important parts below.

How are you able to provide such high returns on investment?
We are able to provide such high interest rates for a variety of reasons. One of them is that we are able to provide loans to companies that are all ready steadily operating but are not able to extend or receive additional loans from banks and traditional lenders. In these cases there are no additional liquid assets to provide to lenders as collateral and assets which banks are not willing to accept as other forms of guarantee or collateral. Banks are also limited in their investment choices due to regulations and required fund reserves by governments, which makes them more interested in crediting large solid enterprises. We are able to evaluate the needs of these borrowers and through negotiation come to a project agreement at the current interest rates. 

How does Envestio earn money?
We have several sources of revenue, where the main one is interest placed on project agreements, charged upfront. We used to charge borrowers a 1-2% fixed fee during 2018, and we plan to increase it up to 2-3% in 2019. It’s a one-time fee for every loan/tier placed. This interest sits between what the borrower pays and what the lenders receive as a return on investment. An other component is the buyback guarantee, this is however very minimal.

Are these income streams enough?
We got to the break-even point in 2018 already, finishing the year with a small profit. The financial statements will be published later this year. (presumably – at the end of 2nd quarter of 2019).

Future returns on investment?
Planned interest rates for 2019 are between 15 and 18%. Due to an influx of new investors and funds we are able to lower interest rates, which opens a whole new set of possible projects, as certain companies were not able/willing to engage on the higher ranges. So in general we believe this will benefit the investors.

Growth of the platform?
It took us about half a year to collect the first two million of investment funds. However, we grow substantially and during the 2nd half of 2018 the average monthly growth increased and we were able to collect about 1 million of funds on a monthly basis. Now we are adding about 500 new investors per month. One of our main goals for 2019 is to reach 10 000 registered and participating investors.

How are our investments secured?
In the case of a borrower defaulting in a secured debt project, there is a 5 day grace period for the borrower, after that the lender receives 80% of the invested principle back on the next working day. For the remaining 20% there is a choice: instantly get back half of this amount or wait until the debt is recovered from the borrower. As a result – at least 90% of the investment is fully secured. View our buyback guarantee page for further the details and examples.

In the case when Envestio defaults, there are trilateral electronic agreements between Envestio, borrowers and investors. In a low probability case of Envestio’s default, investors' claims against borrowers remain valid and will be transferred to a third party (a debt collection agency) in Estonia.

How is Envestio structured?
Envestio SI OÜ is the main operating legal entity. Envestio Collateral Agent OÜ is the company which is dealing with assets provided as collateral by borrowers. The company makes pledges for itself. Envestio OÜ is not currently performing any function related to the Platform’s operations (we may assign additional functions to it in future).

Envestio entity structure

VIP accounts?
Envestio also offers special VIP accounts for investors with a minimal investment capital of 100k EUR. The benefit of accounts is that the investor can choose one of the following additional benefits;

  1. 1% extra interest on investments.
  2. 0% fee on buyback guarantee. 
  3. 100% buyback guarantee in case any of the projects defaults
    (instead of current instant 80 to 90% recovery, provided by us).

Wrap-up
I'd like to thank Alesia and the Envestio team for all their time and patience, meeting me in Riga and follow-up questions for additional clarity. Been very interesting to meet, learn more and get some insights into future plans and growth!

Thanks!  



Meeting notes of late January 2019:

Background

  • Envestio grew from a private investment fund into a public investment platform and launched as such early 2018
  • They are a small team with offices in Tallinn and Riga, however a lot of services are outsourced
  • The two million of investment funds took about half year to raise
  • Investor’s funds are placed on a different bank account, separated from operating funds. However there is no separate entity yet where the funds are segregated.
  • How does Envestio earn money.
    1. 1-2 % interest commission, between borrowers and investors
    2. 5% Buyback guarantee fee (this is a minimal revenue component)

Growth

  • Adding +/- 500 new investors and 1 million investment funds a month (Current rate of January 2019)
  • Many new projects are in negotiation; In Energy, factoring and other sectors. Real estate was less popular, unclear if it was due to circumstances or really seen as less favourable investment opportunity
  • Planned minimum interest rates for 2019 will be in the bandwidth of 15-18%
  • Will continue to provide referral programme to continue accelerated growth for foreseeable future

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