We rate the Suretly project as “Stable”. The concept was developed on a high level. The project has considerable prospects for scaling. We rate the SUR project tokens as “worse than the market” because of the risks related to their price decrease in the next few months after the ICO. We note the speculative attractiveness of the SUR token for investors who bought the token during the ICO with a 70% bonus.
Analyzing the Suretly, one cannot but mention the professional experience of the team in the relevant area, as well as the recognition of the company's potential by several awards obtained by the project from business incubators and accelerators.
Subject to competent advertising, the project will find its users: it is beneficial both for lenders whom the Suretly allows to give risk-free loans, and for guarantors whose yields may exceed those in P2P lending.
A serious risk of the project is the overestimated expectations of the growth of the project revenues allowed for the business model. Although the lending market is large, the service of “people's surety” is not yet known to a large consumer and it can be spread, especially globally, at a slow pace due to a great number of factors such as the competence of building the marketing campaign or legal peculiarities.
In our opinion the project tokens will not be demanded in terms of infrastructure. The project is not tied to the blockchain architecture and is not focused on the crypto community. In this regard, the idea of using the token as a security coin at this stage does not look viable.
Returns to investors are supposed to be carried out through the redemption of tokens from the market. However, due to the insignificant buyback ratio as compared to traditional stock assets, this factor cannot greatly enhance the investment attractiveness. In addition, there is a liquidity risk for the tokens holders because two platforms - Ethereum and Waves – are used.
There is sense to participate in the ICO only for speculative purposes: the founders are offered a 70% bonus for the SUR token during the first hour after the ICO starts. After the start of the exchange circulation of SUR tokens we recommend to close speculative positions.
Information about the Project and ICO
Suretly is a project of the international system of the “people’s guarantee” whose essence is in providing potential borrowers guarantee services on a paid basis. The platform users select borrowers they are ready to vouch for based on the personal data of the candidates and acceptable risk-return ratio calculated on the basis of statistical data. According to the developers, in case of timely repayment of debts by borrowers, guarantors will be able to earn about 10% of the revenues per month.
The architecture of the system resembles peer-2-peer lending. However, in Suretly loans are given not by the participants themselves but by the accredited partners – micro-financial lending institutions that have the required licenses to carry out this type of activity.
The SUR project tokens can be used as a security bond in the Suretly application. Starting from quarter III after the ICO, the company will quarterly buy from the market and then burn tokens in the amount equal to 0.2% of the total amount of all loans secured by the system participants.
On May 16, 2017 the pre-ICO was held. During it the project raised 1,612.21 ETH, 65.22 BTC, 340.73 LTC and 1,652.36 Waves by placing 50,741 preSUR tokens. All preSUR tokens will be exchanged for SUR tokens at the 1:2 rate.
ICO starts on July 11, 2017.
ICO ends on August 11, 2017, or upon reaching the maximum value of the raised funds.
ICO Price: 0.1 ETH for 1 SUR token or equivalent in BTC, LTC or Waves.
Minimum volume of placement: $1,500,000. In case of failure to reach the indicated amount, all funds will be returned to investors.
Maximum amount of placement: $10,000,000. No additional issues are provided.
Bonuses: during the first hour after the beginning of the ICO, early investors will get a 70% bonus (1 ETH = 17 SUR tokens). After it another 50% bonus will be valid for another 23 hours. Next, the bonus will decrease linearly until it reaches zero.
Escrow: the Whitepaper of the project states that the raised funds will be stored by a third party. However, there is no information on who exactly this will be.
Other conditions: two types of tokens will be available - on the Ethereum and Waves platforms. In case of successful placement, 12% of tokens will be issued additionally. 2% of them will be used to reward participants of the bounty campaign, and 10% - to stimulate the current and future employees (these tokens will be frozen for 12 months).
Description of the Project Services and Field of Their Application
Suretly is an infrastructure website where borrowers who are clients of micro-financial lending institutions look for guarantors, and the service users select borrowers and provide them with security services on a paid basis.
In the system on the basis of their credit history all borrowers are classified into categories from A to G, where A has the highest rating, and G is the lowest, respectively. The lower the credit rating of the borrower is, the more expensive it will be to guarantee him, and the greater the potential profitability for the investor is. We tested the Suretly application, and according to our calculations, the yield on guarantees for loans of low-quality borrowers may exceed 350% per annum.
The guarantor should analyze the borrower's past statistics himself and determine the maximum loss limit. The minimum amount of guarantees is from $2 and the maximum one reaches $10. We emphasize that the founders do not disclose the system of assigning ratings to borrowers, as well as statistics and personal data of borrowers.
At the moment the system works only with short-term loans that are given for a term of 3–30 days. The guarantor immediately gets a bonus for the issued guarantee. Then the amount equivalent to the issued guarantee is blocked on his bank card. If the loan is repaid, the relevant amount is unblocked and the guarantor obtains the bonus. However, if the loan is not repaid, Suretly gives three days for its repayment in addition to the principal term of the loan. In case of any failure to repay the loan, the blocked amount of the loan is written off from the guarantors' accounts to the extent of their guarantees and transferred to the micro-financial institution.
Thus, for a micro-financial institution, a loan becomes practically risk-free while all loan risks of borrowers are born by the guarantors.
It is possible to act as a guarantor any number of times while you have funds in your Suretly personal account or on the bank card depending on the jurisdiction (in the USA there are certain problems related to blocking the guarantor’s funds on bank cards).
The Suretly application is already operational in Russia and can be downloaded in the AppStore and Google Play. To register in the application, the guarantor must enter his/her personal information, passport details and registered address. It is also necessary to provide information about the bank card. The Service will block funds on it if the user acts as a guarantor, and the service will write off funds in case of the Borrower’s default.
The Suretly project calls itself a pioneer of a completely new market - the market of people’s guarantees, or crowd-vouching. However, to our mind, it makes sense to consider this direction as one of the P2P lending segments, also called marketplace lending. We can say that the Suretly project is a superstructure, a derivative of the P2P market. It can be also considered as a derivative of the micro-financial institutions market because Suretly aims to transfer the P2P experience to this area.
P2P lending (peer-to-peer) is a lending format where lenders and borrowers that are not interconnected interact with one another through online platforms bypassing financial institutions. This type appeared in March 2005 in Great Britain thanks to the Zopa company (an abbreviated name from the Zone of Possible Agreement) that began to “bring” unfamiliar people together: some people wanted to get a loan at a rate they could not expect from a bank, other people wanted to give a loan at a rate they could not place it in other fixed income tools. At the same time the service began to keep statistics on its customers, analyze credit histories both inside the website itself and outside it in various financial institutions, provide every borrower with its rating, and based on this calculate fair loan rates. Zopa has become an intermediary working for a commission that does not take on the risks of borrowers, does not accept deposits, and does not need to create reserves.
Such business model had quickly became popular, and projects like Zopa began to be launched around the world: the United Kingdom and the United States predictably became the centers for this new type of lending, some websites appeared in Russia where the founder and CEO of the Suretly project Eugene Lobachev comes from. Transactions began to occur not only between natural persons: a market of corporate P2P lending appeared, and tenors of loans increased. Analysts of such well-known companies as Deloitte, KPMG, PWC began to make reviews on P2P lending. As soon as some intermediary services began to enter the IPO, the market began to grow at high rates.
For example, in Lending Club - the largest P2P website in the US and the world with a share in the world market of about 45%, since its establishment in 2007, the volume of issued loans has grown up to $26.6 bln. while by the end of 2010 the volume was only about $200 mln., and by the end of 2012 it hardly exceeded $1 bln. Morgan Stanley analysts expect that by 2020 the world market of P2P lending will have almost fivefold increased, and according to their calculations the volume of given loans will have reached $290 bln by that time.
Below there is the dynamics of growth of the issued debts volume in Lending Club:
It is necessary to note that the majority of loans through the Lending Club service are given to refinance the previously given loans (almost 61%). Below there is the statistics on the purposes of Lending Club loans:
Depending on the borrower's category and term, average loan rates fluctuate within 7.34% -24.03% per annum in US dollars, while the yield of creditors is within 4.95% -7.1% per annum.
Categories of borrowers, or their rating, are distributed in the same way as in the Suretly application: from A to G, where A is the highest rating. Lending Club has credit histories of borrowers from the leading US banks, as well as its own database.
One more market where the Suretly project is a player is the market of micro-financial institutions in Russia. The project cooperates with some of them. Investments in micro-financial institutions have long been very popular: in 2016 such companies managed to raise 45.7 billion rubles from private investors alone. However, then the Bank of Russia “divided” these organizations into two categories: micro-credit companies and micro-financial companies, and tightened the rules for investing in them, which caused a noticeable contraction of the market. Only micro-financial companies had the right to raise funds from individuals, but the volume of investments was limited to the minimum amount of 1.5 mln. rubles. The number of micro-financial companies was limited to 42 organizations (the data of the Central Bank's register as on June 30, 2017). However as on the late 2015 more than 3,400 organizations had the right to raise funds from retail investors in Russia.
This market is now available for an ordinary private investor who does not have free funds in the amount of more than 1.5 million rubles essentially only through the purchase of exchange bonds with only one of them – “Home Money BO-001R-01” – a five-year debt of the “Home Money” company issued in April 2017 with a volume of 1.25 billion rubles. This is the only bond of a micro-financial company valued 1,000 rubles on the market. The yield to redeeming this paper at the price offered on the Moscow stock exchange is 14.8% per annum, while the same indicator of another issue of this issuer “Home Money BO-01” with the redeem term in October 2018 is 24.5% per annum, but its minimum lot is 2.0 mln rubles.
As for investments directly in micro-financial companies with the amount of 1.5 million rubles, the terms and conditions of such investments vary greatly depending on the organization, term, currency, amount, etc. The terms basically range from 1 to 36 months, the yields in rubles are within 10-21%, in US dollars - from 5% to 12%, in euros - from 4% to 10.
The team is not anonymous and is active on a few social networks, such as AngelList, Twitter, Facebook, Bitcointalk, and via e-mail, answering the majority of user’s questions. The team participated in several big crypto-events and conferences such as LendIt-2017, New York in March 2017. We could talk to the Suretly's founder over Telegram, and he answered our questions. There is also a YouTube video of the founder’s project presentation with the answers to common questions, and his interview on Facebook.
All information provided is given according to the project’s official website, public sources, as well as the team members’ LinkedIn profiles.
Eugene Lobachev, (LINKEDIN), CEO, Founder
The founder of the Suretly project. Over the recent ten years he has been engaged in the development and promotion of start-ups. Before Suretly he successfully launched the Loans Online service that specializes in micro-lending online. He got his Master's Degree in the Russian Academy of Entrepreneurship in 2010.
Anna Paulova, CMO
She has more than seven years’ experience of working in marketing and design. She has experience of working with SMM promotion and contextual advertising of the Yandex.ru website. Before that she was engaged in lead generation in the Krediman Company. She has no experience of managerial positions.
Svetlana deals with the Suretly expansion to the US market, developing financial plans, and working out the development strategy. She has good experience in the financial area (Investments, Banking, Business Consulting). She worked for such well-known companies as New York Stock Exchange and J. Streicher Capital, LLC. She has got the MBA degree in the City University of New York.
Eugene Kovalev, (LINKEDIN), Regional Director for Russia and CIS
Eugene has a strong understanding of Russian banking market due to his executive experience at one of the top banks in the industry. Besides, Eugene is involved in online fintech activity related to online credits, scoring and microfinance technologies. Graduated from the Siberian State University of Telecommunications and Informatic.
Konstantin Vishnivetsky, Lead Developer
Konstantin has 14 years of experience related to developing software products by using C ++, Java, and SQL. Over the recent five years he has been working in the financial area. There are no links to his portfolio and specialized social networks.
Vlad has more than 15 years of experience in software development. He founded the XenZu Technologies LLC Company. He worked for Cisco Systems in 2000 when the company was at the start-up phase. He specializes in VoIP, Cloud, Big Data, Location-based Services, Games, Social Networks, Multimedia, Streaming, and Internet of Things. He obtained MS at State University of Nizhni Novgorod.
Andrey Zverev (LINKEDIN), Business Development & Advising
Andrey has a vast experience in the field of financial technology and payment processing. Held executive positions at several fintech companies in the US. At the moment, Andrey is a co-founder and COO at the online and mobile crowdfunding investment platform “Building bits”.
The project team consists of ten people. The Whitepaper reveals quite little information about key participants. Besides, several team members do not have links to specialized resources that could confirm their competence in professional field. Nevertheless, the analysis of open sources makes it possible to conclude that the project participants have the required competence and experience in related areas.
Project Development Strategy
The Suretly project has ambitious plans to develop the project and enter new markets. We talked to the company's CEO Eugene Lobachev on this issue. Now the project is working only with one partner from Russia in the pilot mode to test the main hypotheses. According to Eugene, they are satisfied with the results of checking the working capacity of the product and even shared their statistics with us. In spite of the fact that they had one partner and the traffic was limited, by now only 3,914 applications have been processed. 776 of them (almost 20%) were approved.
Besides, the development plans are built on the basis of testing this model in Eastern Europe. According to this test, the results among the guarantors were distributed in compliance with the schedule presented in the WP. Unfortunately, we cannot verify these figures. That is why we will not rely on this information.
It is planned to launch the project in Kazakhstan by the end of quarter 3 of 2017. Besides, at the moment legal aspects on the issue related to entering the US market in quarter 4 are being worked out. After that it will be possible to enter the markets of other countries, because now in addition to the USA, the interest in this technology is shown by lenders from Mexico, India, Europe, and Africa. All money raised from the ICO will be used to develop a full-featured application and penetrate markets of new countries.
In April 2017 it was announced about the partnership with the Brainysoft Company, a software developer for the financial sector that fulfils tasks on creating a cloud platform to automate activities of micro-financial institutions and on developing multi-functional web applications (SaaS). The essence of the partnership is the integration of the service on finding Suretly's guarantors into the Brainysoft software solution for micro-financial institutions. Thanks to such integration, users of the software will have the opportunity to offer a new loan product – “loans under the people’s guarantee” to their clients.
Comments made by CEO Suretly Eugene Lobachev on partnership with Brainysoft:
“Our cooperation will greatly simplify the implementation of Suretly in the business of micro-financial and micro-credit companies. In fact, now any micro-financial institution that uses software from Brainsoft will be able to switch to risk-free loans in a few clicks and get a base yield of up to 10% per month. By the end of the year we expect a considerable increase in the demand for the people’s guarantee technology. The fact that Brainysoft is the first in Russia to introduce it into its software solution will definitely have a positive impact on the company's competitiveness in the long term”.
Thus, the main development strategy for Suretly is the expansion of the partner network and access to new markets. The product is new for the market but it is interesting and competitive.
In February 2017, the project was selected for the international Starta Accelerator acceleration program in New York. Suretly was among the ten finalists who raised $130,000 investments from the Starta Capital venture fund in exchange for 7% of the company. In total, 400 applications from 30 countries of Europe and Asia were submitted to participate in the program. This is a certain success far from every project can boast of.
In spite of the fact that Suretly was one of the Starta Accelerator finalists, and the technology itself has caused interest among Western creditors, today they have only one partner in Russia. That is why it will be difficult to develop the current success, and moreover, to implement the plans set in the financial model without a good marketing strategy.
We still failed to get more detailed information which marketing strategy the project will finally have, how the project will attract new partners, how it is planned to promote it on the markets after the ICO and more than that to conquer markets of new countries. The financial plan shows marketing costs. It means that there must be a strategy in one form or another, but unfortunately the documentation does not contain it.
Competitive Advantages of the Project
In our opinion, the main products competing with Suretly include
- Traditional P2P lending through relevant online services.
- Purchase of notes portfolios secured by loans from several borrowers at once on the P2P websites.
- Investments in micro-financial institutions, e.g. by purchasing their bonds.
The obvious advantage of the Suretly project over a traditional P2P lending is that the Suretly application enables the guarantor to effectively collect the portfolio of debts from various borrowers at his/her own discretion, to provide security for minor amounts (depending on his own risk profile), to assess the situation on his/her own, while a traditional P2P lending immediately gives a loan by one tranche, thus, the borrower may not diversify the relevant funds.
At the same time, one may wonder how the Suretly’s default risk evaluation system works with borrowers, which was completely copied from the Lending Club service. However, unlike such provider as the Lending Club that provides the lender with the relevant credit score based on the credit histories kept by the largest US banks and its own service database collected for ten years of operation, Suretly cannot boast of such a thing. It is quite difficult to properly evaluate a credit risk and the probability of the borrower’s default by using the application.
It will be incorrect to compare the profitability of Suretly and the leading P2P websites because loans are in different currencies (Suretly is predominantly operating in rubles), and the risk bonus between the average loan in the marketplace lending and that in Suretly cannot be accurately calculated. In addition, there is no detailed statistics on the profitability of investments in Suretly. There is some data given only by the project team. At the same time, for example, Lending Club has the visual statistics for all time of its operation on the website. Although it is very difficult to check out such statistics, based on it, it is much easier for the investor (creditor) to make his/her conclusions even if due to the “beautiful picture”.
Many services, including the Lending Club which we have considered in details, offer creditors not only to give loans to some particular borrowers, but also to buy credit notes that accumulate debts of an entire groups of borrowers. This is how it is offered to diversify risks. As a whole, this product is very similar to what Suretly offers, but the investor does not know the composition of such notes, and in the project application the guarantor selects the composition of his/her guarantees portfolio himself.
The competition of the Suretly project with investments directly in micro-financial institutions on the Russian market, namely micro-financial companies, looks more tangible since the project was created for guarantors who are individuals, and investments of private investors in micro-credit companies are prohibited by the Russian law.
An obvious advantage of the project here is that investments of individuals in micro-financial companies are possible only if there is an amount of 1.5 million rubles, and the guarantee for a borrower in the Suretly application can be an amount of 100 rubles. Of course, it is possible to invest from 1,000 rubles in certain companies, in particular “Home Money”, by purchasing bonds on the Moscow Stock Exchange, but there is a liquidity risk. In addition, the yield of a single issue of securities is relatively small for the current and potential Suretly users: “only” 14.8% per annum, especially since the audience of the application is short-term investors, and these bonds are a long-term tool.
On the other hand, investing in micro-financial companies, the investor essentially purchases their diversified loans portfolio you can assess independently by reviewing the company's reports. Suretly does not provide such opportunity. Actually it explains the difference in the expected returns of these two types of investments: short-term investments in micro-financial companies bring a little more than bank deposits, and the potential yield from Suretly guarantee for the most risky borrower category may exceed 1,000% per annum.
Suretly will charge a commission from every given loan at 3% of the loan amount. The financial model of the project assumes a 50% increase in the volume of the given loans with the aid of the Suretly platform quarter by quarter. Thus, according to the Suretly calculations, in quarter 12 after the ICO the total volume of loans given under the guarantees of the system participants will reach almost $770 million.
We discussed with the project founder his expectations on the growth rate. According to Mr. Lobachev, the calculation given in the financial model is very pessimistic, and in the reality the potential for growth of the volume of loans given under the guarantees is even higher due to the opportunities for expansion into other markets.
Taking into account really high returns for the investor, as well as the obvious profit related to cooperating with Suretly for lenders, we are ready to agree with these arguments. However, we cannot ignore the fact that when the Loan application quarter growth rate is reduced down to 30%, the accumulated loss of free cash flow will 2.5 times exceed the crowd-sale maximum, and the raised funds will be over in a year and a half. Slowing down the tempos of expansion is definitely capable of changing the founders’ plans as a result of which the project will develop much slower than initially planned.
The project is implemented with a high quality. We do not have any doubts about the qualification of the management and personnel. The project risk is found exceptionally in factors that can frighten away potential guarantors from this type of investments.
Firstly, the level of the guarantor’s potential revenues depends on the borrower's risk group. The higher the risk is, the higher the revenue is. This is 4-5% of the guarantee amount for borrowers of A group (low risk). This is up to 30% for borrowers of G group (very high risk). It is difficult to check out how the risk group assigned to borrowers will reflect the actual risk. We have not obtained answers from the founders as for the method of assigning the risk category to a borrower and what indicators it is based on.
Secondly, in the transaction the guarantor has almost the most important role because if there is no any guarantor, the borrower will not have money. However, it is only the guarantor who bears 100% material responsibility for the non-repayment of the debt proportionally to its share. In case of default, the guarantor shall pay 100% of the borrower's debt to the micro-financial institution.
In order to get the funds returned after the debt is not repaid, the guarantor gets the opportunity to send only anonymous paid SMS to the borrower (the borrowers’ numbers are not disclosed, the communication is only one-way). It is not yet possible to file a court complaint, the company is working on this feature, but in the future the guarantor will be able to use this service only at his own expense. We doubt that he will do it for $10. Even if it is possible to recover the debt, it will be returned to the guarantor with the 10-20% commission.
In spite of the above risks, we consider the project to be of high quality and well-designed. To our mind, Suretly deserves the “Stable” rating.
Investment Attractiveness of the Token
The SUR token can be purchased during the first hour after the beginning of the crowd-sale with a 70% bonus. To our mind, this is the only time frame when it is worth participating in this ICO. The risks of the token price fall after the beginning of circulation on the exchanges are related to the following:
- Firstly, very large bonuses at the crowd-sale: speculators will record profits after the start of the token circulation on the exchange,
- Secondly, the token will be programmed on two platforms - Ethereum and Waves: it will fuzzify the liquidity of the coin.
It is assumed that the invested capital will be returned through the mechanism of the tokens buyback from the market. Starting from quarter 3 after the ICO, 0.2% of the amount of all given loans will be used for re-purchase. The mechanism is the following: after the ICO the legal entity SURcoin pte. Ltd registered in Singapore will acquire a 15% share in Suretly Inc. registered in the USA - most likely the parent company of the group. Suretly Inc. will pay dividends to the shareholders. Consequently, payments accrued on 15% of shares owned by SURcoin pte. Ltd will be used to buy back the tokens from the market.
In accordance with the financial model, the Suretly buyback during the first two years will be about $500 thousand. It corresponds to the average buyback ratio of about 2.5% per year (subject to successful crowd-sale). It is very little even if we compare it with the classical stock markets. For example, two weeks before the Suretly crowd-sale US banks announced new buyback programs: the buyback ratio of such financial organizations as JPMorgan Chase and Morgan Stanley will be around 6.0%, and Citigroup - 8.5%.
The founders assume that the SUR token can be used as a security for guarantors instead of blocking monetary funds on a bank card. To our mind, this opportunity will not be in demand. Nevertheless, the project is not within the blockchain infrastructure. For the majority of its potential users the purchase of crypto-currencies is still a challenge.
We assign a long-term “worse than the market” rating to the SUR tokens. Business needs to develop faster than the tempos set in the financial model in order to provide the tokens holders with a sufficient level of the invested capital return. At the same time we consider the speculative purchase of the SUR tokens during the ICO with a 70% bonus to be reasonable.
The information contained in the document is for informational purposes only. The views expressed in this document are solely personal stance of the ICOrating Team, based on data 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.