PE Assessment for B2B Fintech Crypto Investment

Crypto B-2-B Fintech

Situation

Target company is a Crypto centric White-Label B2B2C Fintech Platform founded in 2018 in the United Kingdom.  They are focused on being a Business-to-Business provider of Fintech services through a managed services model.  

Their current objective is an $11M raise to facilitate a strategic acquisition, (EMI), and fund operations in anticipation of a planned IPO.  LoBue client’s investment is a majority of this investment round.

As part of the four-week assessment review LoBue evaluated the target company in the context of organization and corporate structure; operations analysis; products and services; resulting in a rating of Integrated and Mature (four on a scale of one to five).

Recommendations
Results

High-level Review and Recommendations:

  • Vetted and expanded target’s forecast for five-year plan (no plan existed when we started our review).
  • Staffing ramp identified need for target changes for staffing plan supporting technology roadmap resource demands.
  • Presented review of UK and US compliance considerations.
  • Developed detailed competitive research for direct competitors.
  • Our organization and corporate structure review resulted in accountability and span of control improvement recommendations.  Corporate structure review identified deal structure action items for client.
  • Reviewed target company products and services and readiness for delivery.
  • Prepared Sources and Uses Statement to provide LoBue client with expected cash flow demand, as well as identifying potential challenges and opportunities.

Select Detailed Findings and Recommendations:

  • In reviewing the organization chart provided, we recommend rationalizing the current organization structure to reduce the CEO’s span of control and provide more direct accountability and focus on the manager and team levels.
  • Given the ramp-up in lending revenue, it is important to have tight control over client on-boarding and cryptocurrency wallet management.  In the beginning this will be a combination of staff and automation.
  • Given their experience with both large and smaller customers, management has shifted their client acquisition focus more toward larger clients.  From a risk management viewpoint, it is important to understand the possible risks of a too concentrated client base.
  • With the marketing shift to larger clients, operations and especially client services may have to be re-evaluated to provide client focused teams to tailor services to individual clients.
  • Operations planning is important in scaling for growth.  Onboarding with proper training is imperative to avoid process disruptions and client service issues.
  • Disaster recovery for both technology and process operations should be developed with periodic reviews, updates, and testing routines.
  • If not already in place, management should develop a detailed roadmap for all future development activities to ensure proper technology resources are assigned and timing and cost of completion is segregated at the task level.
  • A technology disaster recovery plan for all systems, networks, and physical space should be developed, with periodic updates and tests.
  • With significant cryptocurrency deposits, and deposit lending and crypto lending to partner, focus should be made on defining, selecting, and implementing real time monitoring tools to ensure down-side triggers are available to avoid any unnecessary losses.  
  • Currently the Impairment balance is a negligible percent of the lending balance.  Management should consider performing a more detailed review by LTV ratio, cryptocurrency, and customer type.
  • Given compliance approval, required reserves should be reviewed and included in budget.

The initiative resulted in Private Equity Client moving forward with three to four Million Dollar investment in current round.