Darcmatter Rating Review
|Start ICO||16 Jun 2018|
|End ICO||30 Jun 2018|
We assign the DarcMatter project a Stable rating.
DarcMatter is a platform that is designed to provide investors with transparent and effective access to the marketplace of alternative investment opportunities. The project has been operating since 2014. This underlines the availability of a formed client base, including the base of institutional clients of the elite of the world financial industry. The Token sale is conducted to implement blockchain technologies that are supposed to fix the problems of non-transparency and inefficiency of the alternative investment industry.
Unfortunately, DarcMatter does not describe the planned innovations in detail. Test access to the platform is not provided. The current status of product development is unknown. There are no blockchain specialists in the team. The financial model is not disclosed, which does not allow us to assess the scale of the existing business and the viability of the business model as a whole.
DMC tokens will be used as an internal payment instrument, as well as confirmation of the Singularity Nodes stake. We consider the mechanism of token economy to be successful; it will contribute both to the increase of the liquidity of coins and to their withdrawal from free circulation. These factors are positive for the future dynamics of tokens. However, they can be restrained by the formation of oversupply, as the team and team-affiliated persons retain 50% of the emission.
DarcMatter is a platform that is designed to provide investors with transparent and effective access to the marketplace of alternative investment opportunities.
On the one hand, DarcMatter allows investors to choose various venture, private and other investment funds. On the other hand, it gives management companies an additional influx of customers and funding through the marketplace.
DarcMatter is planning to use blockchain technology to eliminate non-transparency and inefficiency of the global alternative investment industry. The platform uses its own token, DarcMatter Coin (DMC) which is a utility token that will be used by fund managers and investors to form smart contracts and to gain access to the identification of investor clients, KYC and AML. DMC is planning to increase the efficiency and scalability of alternative investments significantly using blockchain technology.
The DarcMatter platform was established in 2014 and it successfully operates on the market, providing a link between interested investors and a network of partners, allowing the first to produce successful investment activities in the field of alternative investments (hedge funds, venture and private capital, etc.). The project already has several regional centers that provide a full range of investment and financial services of this profile.
ICO is necessary for the project’s further development and scaling, as well as for emission of a utility token that will participate in the interaction of various parties within the platform.
The project has implemented the following phases of fundraising:
Private Pre-Sale (31.12.2017 – no data)
$10 million was raised during this phase. The lock-up period is 1 month after the end of the public crowdsale.
Public Pre-Sale (21.03.2018 – no data)
About $16 million were raised during this phase. The lock-up period is 2 months after the end of the public crowdsale.
The project team did not provide blockchain confirmation of the amount of funds raised.
ICO start: 15/06/2018
ICO end: 30/06/2018
Token name: DMC
Hard cap: 5,000,000 USD
ICO price: 1 DMC = 0.2 USD
Minimum Buying Transaction: -
Maximum Buying Transaction: -
Unsold tokens will be burned.
Tokens will be sent to investors after the ICO.
Total emission: 1 000 000 000 DMC:
• 50% - sale to investors within the ICO
• 35% - reserve for management
• 6% - developers
• 4% - angel investors
• 5% - reserve for the company
The size of emission is fixed and it will not increase in the future.
The use of funds is indicated depending on the fundraising scenario:
• 49.04% - Project Development & R&D
• 15.00% - Platform Marketing and Networking Development
• 4.00% PR & Marketing for the ICO
• 15.00% - SG&A / Overhead
• 5.00% - Seed Investor Investments
• 2.00% - Legal Counsel
• 3.00% - Regulatory Compliance
• 2.50% - Shareholder Loans & Reimbursements
• 2.96% - Management Dividend
• 1.50% - Developers Bonus
Management will only have access to a 50% bonus during the ICO.
Vesting for management, developers and angel investors is distributed for 3 years.
We note the non-standard non-market practices used by DarcMatter: the team receives a reward not only in the project's tokens, but also the share of funds raised.
Project and product analysis
DarcMatter sells DarcMatterCoin (DMC) during the crowdsale and it is planned to attract only about 16% of the total volume of fundraising in the course of the crowdsale.
DMC will have two functions: a nominal currency for paying commissions in favor of the parent structure of DarcMatter and paying rewards to the Singularity Node.
The following actions on the platform will be paid the commission for in favor of DarcMatter:
However, the documentation does not indicate clearly whether DMC will be the sole means of payment on the platform or whether DMC will act solely as a currency for payment of fees to the service provider.
To get the status of Singularity Node, a user needs a stake of 15,000 DMC, as well as a necessary volume of transactions to harvest and verify specific transactions. Nodes will work according to the PoI algorithm. Part of the commissions paid in favor of DarcMatter will be redistributed in favor of node owners.
There are no other functions of the token. In general, it can be said that if payment of commissions in DMC does not seem uniquely successful, the mechanism of Singularity Nodes explains the need to introduce a token on the platform and its emission.
Description of services & their applicability
As mentioned earlier, the DarcMatter project develops the described service, relying on the existing experience in this sector. The main service solution offered during the ICO involves the transfer of activities on blockchain and the release of the internal cryptocurrency. The solution and the issue of tokens are supposed to bring to the project a number of advantages of distributed databases and provide users of the ecosystem with a convenient system of mutual settlements due to the implementation of blockchain.
It is assumed that the blockchain-based distributed registry will eliminate non-transparency and inefficiency of alternative investment such as:
• Traditionally, the scope of alternative investment (hedge funds, private equity funds and venture capital funds) is available to a limited number of participants due to the complexity of participation in this investment industry;
• Insecurity from fraud in this area creates problems for effective investment;
• Variability of financial regulations makes it difficult to distribute new financial products and services;
• Most of the interaction occurs offline (the funds process the information offline using physical documentation), which is a long, inefficient and unsecure process.
To resolve those difficulties in the alternative investment market, the DarcMatter service offers a new instrument that provides transactions in the securities market based on smart contracts and a distributed registry and managed by blockchain technology. This approach significantly improves the efficiency of the processes of administration, distribution, reporting and logistics of funds.
The use of blockchain allows all parties to the investment process (including intermediaries, divisions, fund managers and / or investors) to have access to all transactions in the system.
The general principle of the DarcMatter service is shown in the figure below:
In general, describing the offer of the DarcMatter product, it is worth noting the following functions:
• Processing of transaction fees;
• Confirmation of subscription;
• Capital call;
• Reporting on asset management;
• Distribution of dividends;
• Secondary sale of investments;
• Tracking changes in terms of contracts;
• Analysis and interpretation of data.
Technically, the project is based on the NEM blockchain.
Thus, it can be said that in the framework of the ICO the DarcMatter project is modernizing its market offer, using well-known advantages of blockchain technology. Such a decision is not highly innovative, but it solves a number of traditional problems of the alternative investment market. The success of the DarcMatter service, from our point of view, is directly tied to the success of the work on its promotion and positioning in the market.
The DarcMatter project emphasizes the usefulness of its services and solutions in the field of alternative investment.
In its broadest definition, alternative investment assets are assets that are not part of the traditional classes of assets, such as cash, shares or bonds individual investors are most familiar with.
This definition will include investments in assets such as real estate or goods, or luxury items such as art or wine. However, the definition of alternative investment also includes those forms that consist of fund structures and only wealthy people and institutions have access to them.
Thus, alternative investments cover a wide range of asset classes, including private equity funds, private and venture funds. One of the most significant classes of assets of alternative investments is hedge funds, private and venture capital funds. Historically, it was these classes of assets that played the most important role in evolution of the industry and constituted the most significant part of the capitalization of the alternative investment market.
Hedge funds are funds that invest in various classes of assets, such as stocks, bonds or derivatives, often with the use of "leverage" - borrowed capital. Unlike private and venture funds, investments can last from a few days or even minutes, depending on the strategy used. Hedge funds manage more than $3 trillion (40% of all alternative investments) which makes them an important part of the industry. The industry is geographically concentrated. Most of the capital is managed in the USA (70%) and in Europe (21%), while the managers in New York (50%) and London (18%) control two-thirds of global capital.
Private equity funds - this type of funds focuses on the acquisition and subsequent sale of ownership interests in various companies. They invest in a wide range of industries both small enterprises and large conglomerates. As a rule, they acquire the whole company or at least a controlling stake, although some firms specialize in attracting lesser investment. They can also invest in bonds and other forms of enterprise debt. Private equity funds are the second largest segment in alternative investments, managing $1.4 trillion. Firms invest in dozens of countries worldwide, although companies in the US (50%) and Europe (26%) receive a disproportionate share of capital.
Venture funds are funds that focus on investing their own capital in start-ups at various stages, especially those that develop innovative solutions, products and technologies, and have the potential for rapid growth. Venture funds invest in companies for a period of about 3-7 years, depending on the stage of the company's development, after which either a sale to strategic investors or an IPO is conducted. Currently, venture funds manage assets of more than $400 billion. Geographically, investments and funds are concentrated in several countries with only the United States attracting almost 70% of global investment . Investments are concentrated in industries that rely on the development of new information technologies, biotechnologies, as well as energy and other companies.
Currently, the industry of alternative investments is global both in width and depth. More than 10,000 firms manage assets of about $7 trillion and this amount continues to grow.
Total assets under management grew from $1 trillion in 1999 to more than $7 trillion in 2014, and PWC expects that the industry will almost double to $13 trillion by 2020.
We see great potential in this segment of investment. Perhaps, individual capital, not only institutional investors, will make a significant contribution to the development and growth of alternative investments. Increasing the availability and security of investments in this class of assets for private investors is a promising direction.
The competition for DarcMatter is not concentrated in one sector. There is always a competitive struggle for investment capital, including private investors. The important parameters of investment are profitability, risk, liquidity and other individual parameters. In this sense, thousands of investment companies, funds, brokers and large investment companies will be indirect competitors.
Direct competitors will be companies that seek to provide access to investment in various funds related to alternative investments for private investors.
We distinguish the following competitors that are worth mentioning in this segment:
• iCapital Network — a fintech platform that facilitates access to alternative investments, such as private equity and hedge funds for investors with a high entry threshold and their advisors. In particular, it is a marketplace where users can get information about various investment offers. In May 2018, iCapital Network entered into a partnership agreement with J.P. Morgan Asset Management.
• CAIS — the leading platform of financial products that offers access to a diverse array of funds and investment products. The project provides a simplified access to an expanded list of alternative investments, offers in the capital markets, structured solutions and other assets. This platform provides a set of tools for building a portfolio and reporting, and also supplements it with proposals for funds with independent due diligence provided by Mercer.
• MERCURY CAPITAL ADVISORS GROUP offers investors exclusive access to advanced alternative investments. Experts from Mercury Capital Advisors have raised over $160 billion since 2003. The firm covers more than 2500 institutional investors worldwide. These include state welfare funds, state and corporate pension funds, insurance companies, funds, family offices, private and venture funds, etc. In addition, the Digital Mercury iFunds™ platform is a comprehensive solution that offers institutional investment opportunities for investment advisors, independent broker dealers and other investors.
As often hedge funds, private and venture funds are part of the product line of large investment companies, it is worth noting the potential competition with such companies as Fidelity, BlackRock, Guggenheim Partners, VanEck, The Vanguard Group and other large management companies.
Unconditional difference from competitors is the use blockchain technology and smart contracts in the process of investing in an offer or a fund. Simplifying access, as well as increasing the transparency of investment in this industry is promising and it will enable the project to gain some competitive advantage. In the rest, competing with large investment funds with a wide distribution, as well as with marketplace aggregators seems to us a difficult task, which can be solved only by high-quality service and a broad marketing program.
Analysis of the token’s behavior on the secondary market
A significant share of payments on the platform will be nominated in DMC. In addition, the mechanism of Singularity Node will ensure the permanent withdrawal of tokens from free circulation and, accordingly, a decrease of free float tokens. Thus, with the implementation of all the intended and popularization of the DarcMatter platform, DMC has the long term growth potential.
The full-fledged launch of DM-NEM Blockchain is scheduled for Q4 2018. Thus, infrastructure demand for tokens will appear only six months after the crowdsale. Given the current state of the crypto market, we assume that tokens may become cheaper during this period.
An additional factor of pressure on the price of the token after the crowdsale will be the completion of the lock-up periods for private pre-sale (the lock-up will end 1 month after the crowdsale) and public pre-sale participants (the lock-up will end 2 months after the crowdsale).
In addition, supply of tokens in the market can be increased by another 15% of the total issue in a year, as vesting of the management, developer and seed investors will be completed, as well as the lock-up period of the company reserve tokens.
Speaking about the project team as a whole, it is worth noting that a lot of specialists of different directions and competencies are involved in the development of the service.
The management team includes specialists who have a long and relevant experience in implementing similar projects or working in similar industries. It is also notable that the project managers already have experience of joint work and entrepreneurship.
The total number of project staff is more than 20 people, and the geography of the project includes 4 countries with regional service representations.
At this stage, information on the professional staff working on the project is not sufficiently disclosed. The project team explains this by the policy of the company, which protects the personal data of employees. Nevertheless, this circumstance makes it difficult to judge the potential of the project.
We will consider the competencies of project managers and experts involved in its development and promotion in general terms. However, it should be said that the traditional division of the project team and the ICO advisory board is not observed in this case, which causes difficulties in adequately assessing the organizational structure of the project.
Co-Founder and CEO
Experienced specialist in the field of financial services and consulting; an expert in the field of modern technology.
The businessman acknowledged and noted by many editions in the directions of fintech and investment sphere.
CEO & Founder of Return on Change.
Former President of Korean Startups & Entrepreneurs (KSE) and a Contributor at TheStreet.com. He worked in various positions at such companies as CF50, BNP Paribas and WestLB.
COO + CMO
An experienced specialist in marketing and enterprise development strategies. She has extensive experience in the field of bringing companies to the market, social media promoting and exploring markets.
Chief Marketing Officer at Return on Change.
She has worked at PepsiCo for about 6 years in various positions in such areas as marketing and development, as well as brand promotion.
Pioneer in the technology industry and an active supporter of the implementation of blockchain solutions in the field of technology business. Has extensive experience in the development of commercial software with the application to banking, finance, e-commerce and production.
Founder of the Rabulus company, partner in konsol.studio. He worked as Full Stack Technical Consultant at The Estée Lauder Companies Inc.
He was engaged in software development in such companies as AdvisoryWorld Financial Technology, SEOlytics GmbH, Intellect Technologies LLC, Sonopia, Touchlink Mobile and others.
Specialist in the field of administrative activity. Has experience of administrative and analytical work in state structures and organizations of Ukraine.
Managing Director, South Korea
An experienced specialist in the field of trading in securities.
He has worked as Head of Equity Sales for about 15 years in a large number of different companies, such as J.P. Morgan, KDB Daewoo Securities, Woori Investment & Securities, Société Générale and others.
We note the absence of blockchain specialists in the core team.
Let us turn to the third-party participants of the project. As already noted, specialists invited to participate in the project development are recognized and experienced experts in their fields and their quantity indicate the high interest caused by the upcoming ICO. However, one of the unconditional shortcomings in the presentation of the personnel policy of the project is the fact that the prospective advisors, early project investors and representatives of partner companies are inextricably mixed in a single block of information. Thus, the reader is not able to comprehend the real state of affairs in this part of the team. In addition, the roles of these specialists in the future of the service are unclear if they are its advisors or the degree of financial support for the project if they act as its investors. In this sense, there is an unfavorable impression of the desire of the project to inflate its own worth with a messy mention of all the personnel who are related to it.
As for the personalities involved in the project one way or another we note the following:
Mai Gang (Mark Mai)
Co-Founder OKEX and Founder VenturesLab
Managing Director at Strong Ventures
Simon Seojoon Kim
Chief Executive Officer at #Hashed
CEO at CMK Capital
Chief Investment Officer at #Hashed
Dr. Moe Levin
Chief Executive Officer at Keynote,
Co-CEO at Blonde 2.0
In addition to the above-mentioned personalities, the development of the project will involve many more specialists of different profiles. Moreover, the project has a developed network of partnerships. Among the partners of the project are such companies as CoinStreet Partners, Stellar Partners, F50, Blonde 2.0, Ceta Network and #Hashed. The partnership of the DarcMatter project is balanced: the partners are specialized in a whole range of different disciplines, from blockchain projects to venture and PR companies.
Summing up the review of the project team, it is worth saying the following. One of the factors limiting the opportunity to appreciate the potential of the project is, undoubtedly, a bad presentation of the team and advisors / investors. The confusion of the roles of advisors, investors and partners negatively affects the overall impression of the project. In other respects, the team is represented by specialists and managers, whose experience and qualification, from our point of view, will allow them to implement both the technical and commercial functionalities of the platform.
Investment risk analysis
DarcMatter is an operating service with an accumulated customer base both from investors and funds. Moreover, the team declares partnerships with such participants of the financial market as BlackRock, Deutsche Bank, Goldman Sachs, Morgan Stanley, KPMG, etc. Unfortunately, we were not able to find neither affirmations of partnerships with companies belonging to the elite of global financial market, nor comments about the work of DarcMatter. Test access to the platform was also not provided to us. Thus, we can neither confirm nor disprove the compliance of DarcMatter with the declared provision and the quality and variability of investment alternatives offered on the platform.
DarcMatter does not disclose financial indicators and does not demonstrate a financial model / projected business plan. This is a risk for ICO investors, as it does not allow assessing the scale of the existing business, the viability of the business model and its sensitivity to the results of the Token sale. The lack of information about the financial model and the size of commissions do not allow us to evaluate the potential yield for node owners.
The documentation and the DarcMatter website do not include important team members. In particular, blockchain specialists are not represented in the team. The team plans to hire specialists in this industry already the crowdsale. In addition, the team states that not all its participants are ready for publicity, so not all personalities are revealed.
The project also does not disclose information regarding the current status of development. There are no public GitHub repositories where the community could assess the available developments.
In summing up the analysis of risks, there is a chance that DarcMatter's technical solutions may face frictions should regulators take a firm stance on blockchain technology for usage in asset management.
The information contained in the document is for informational purposes only. ICORating received monetary compensation from the entity rated in this report for completing the ratings report. However, the entity rated in this report did not have the opportunity to approve this rating report before the report was published, nor did the rated entity have the opportunity to edit or remove this report once it was published.
The views expressed in this document are solely those of the ICORating Team, based on data obtained from open access and information that developers provided to the team through Skype, email or other means of communication.
Our goal is to increase the transparency and reliability of the young ICO market and to minimize the risk of fraud. We appreciate feedback with constructive comments, suggestions and ideas on how to make the analysis more comprehensive and informative.