locutus
Member of DD Central
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Post by locutus on Jul 27, 2016 20:45:28 GMT
stevefindlay sorry to be grilling you with constant difficult questions but it is meant constructively and I'm a firm believer in transparency. So far, BM is making all the right noises but I do have some questions about the company itself. 1. What is your burn rate? It can't be cheap to pay for 16 employees, an office and a technology platform like BM's and it would be nice to know what sort of numbers are required for BM to start to become profitable and when you anticipate hitting that milestone. 2. What sort of funding do you have to keep things running until you do become profitable. 3. Lastly, in the (unlikely) event of company failure, what rights do investors have to their underlying portfolio and what rundown procedures do you have in place to manage this? All this is asked with the best intentions to give more confidence to investors looking to join BM.
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Post by stevefindlay on Jul 27, 2016 21:47:47 GMT
These are sensitive, but fair questions - I'll try to address them here, but we don't like to discuss our funding in detail in public. You can see from Companies House (BondMason Group Ltd - #08411234) that we recently closed a funding round, which included a large angel syndicate, hence the number of new shareholders. This round was done discreetly (that's our style).
1 & 2. As of today, we have 2+ years of cash runway assuming nil revenue. We are careful with our expenditure and cost base - we are not looking to take over the world, just build a sustainable and attractive product for our Clients.
3. In the event of Corporate failure we have a formal Living Will policy. We also have our reputations to uphold - the senior team have worked hard and built their reputations with blue-chip firms in the financial services community (e.g. Fidelity, M&G etc), should BondMason fail for any point, we would ensure our clients our looked after. Our corporate structure is outwith the investment structure - i.e. failure of BondMason Group Ltd doesn't impact the ongoing validity of our Client's underlying investments.
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Post by pepperpot on Jul 28, 2016 9:26:58 GMT
This round was done discreetly (that's our style). Shame, you would have been most welcome at Seedrs.  (I'll keep my fingers crossed for the next round)
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Post by stevefindlay on Jul 30, 2016 8:51:22 GMT
pepperpot Thank you for your kind words. Our minimum per Angel equity investor was £25k. If you have an interest at that level (or greater) PM me, and I can see if we can squeeze you into the round we've just done.
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Post by Financial Thing on Aug 4, 2016 12:53:08 GMT
stevefindlay Since BM is unregulated and not a member of the FCA (for now), I figure my money is being invested in BM as a company so my concerns are about company health and finances rather than p2p loans. Through my simpleton math, charging a 1% fee on money management indicates BM would have to manage a significant portfolio to generate good revenue. £100m in managed money would only generate £1m in revenue. Does BM generate revenue from other sources and when is BM projected to be profitable? Thanks
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Post by stevefindlay on Aug 5, 2016 8:03:16 GMT
stevefindlay Since BM is unregulated and not a member of the FCA (for now), I figure my money is being invested in BM as a company so my concerns are about company health and finances rather than p2p loans. Your money is going directly into Receivables Agreements. Your money (client money) doesn't go into BM, and it is not co-mingled with our company money. As you ask, we have 2 years of cash resources, and we are well ahead of plan to be cash profitable before then. Your maths is fine, however we do have income from other sources, and our cost Base isn't that high - so we don't need to get to that level to be break even. Many thanks
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Post by Financial Thing on Aug 8, 2016 14:15:58 GMT
stevefindlay Since BM is unregulated and not a member of the FCA (for now), I figure my money is being invested in BM as a company so my concerns are about company health and finances rather than p2p loans. Your money is going directly into Receivables Agreements. Your money (client money) doesn't go into BM, and it is not co-mingled with our company money. As you ask, we have 2 years of cash resources, and we are well ahead of plan to be cash profitable before then. Your maths is fine, however we do have income from other sources, and our cost Base isn't that high - so we don't need to get to that level to be break even. Many thanks Thanks for the information. Co-mingling of funds is a lesser concern, the non-regulated part for me is a major concern. Do you have any estimates as to how long it will take for you to become regulated? I'm just trying to understand legally what I'm investing in. Maybe I'm looking at this wrong but I view an investment into Bond Mason, not so much an investment into p2p loans, but as an investment into Bond Mason the company itself. So technically would I be correct in saying you're not really a peer to peer company at the moment even though the vehicle is within peer to peer loans? Thanks for the clarification.
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Greenwood2
Member of DD Central
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Post by Greenwood2 on Aug 8, 2016 15:20:43 GMT
As I understand it on BondMason you are not lending, you are purchasing the rights to the receivables from the loans, ie, the interest and capital repayments. You have a contract for each loan and BondMason have no rights to the receivables once you have purchased them.
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Post by propman on Aug 8, 2016 17:10:23 GMT
As I understand it on BondMason you are not lending, you are purchasing the rights to the receivables from the loans, ie, the interest and capital repayments. You have a contract for each loan and BondMason have no rights to the receivables once you have purchased them. I am struggling a bit as well. I came to the conclusion that Bond mason has a contractual duty to pay over everything they receive on your investment to you. That is way short of being the contractual partner in the receivable. In particular, if Bond Mason goes bust, I suspect that the liquidator would receive the payments and I might merely remain an ordinary creditor for the amount owed and therefore not receive the full amount due.
Other areas I am uncomfortable with the T&Cs include:
1.5. The nature of the Receivables Agreement is that you have no recourse against either the Seller or the borrower under the loan related to the Receivables in the event that the Receivables are not paid to the BondMason Customer Funds Account. You are responsible for making your own assessment of the risks of entering into Receivables Agreements
As I understand it I will not be selecting the receivables and so this cannot be achieved.
12.1.2. not reproduce, modify or in any other way commercially exploit any of BondMason Data, including without our prior written consent (which may be withheld for any reason):
... creating a database in electronic or structured manual form by systematically downloading and storing all or any such Data.
I take that to mean that I cannot keep a track of my investments performance or that of the platform made available to me.
12.5. None of the Data on the Platform, and in particular, neither the User Content nor BondMason Data, can be relied upon by you or any third party as... it is not intended to be relied upon by you as the basis for making (or refraining from making) any specific decision.
See 1.5 above, so how are we supposed to judge whether to make an investment?
13.2. Except as otherwise expressly stated in this Agreement, we shall only be liable for foreseeable loss or damage arising directly out of our own breach of this Agreement, negligence or wilful misconduct.
Per 1.5 etc. that seems to leave them with no responsibility for selecting investments!
As a result, although I was happy to make an initial investment, I will not now be doing so.
- PM
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Post by stevefindlay on Aug 8, 2016 18:52:28 GMT
Thanks for the information. Co-mingling of funds is a lesser concern, the non-regulated part for me is a major concern. Do you have any estimates as to how long it will take for you to become regulated? I'm just trying to understand legally what I'm investing in. Maybe I'm looking at this wrong but I view an investment into Bond Mason, not so much an investment into p2p loans, but as an investment into Bond Mason the company itself. So technically would I be correct in saying you're not really a peer to peer company at the moment even though the vehicle is within peer to peer loans? Thanks for the clarification. Regulated: we applied on December 19th 2015; have a Case Officer appointed, and are hopeful it won't be too much longer. But the FCA has a long backlog. Investment: you are purchasing a receivable agreement - each one is directly related to the economics of a specific loan. This is very similar to the approach taken by LendInvest, MarketInvoice etc I hope that helps.
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Post by stevefindlay on Aug 8, 2016 19:08:08 GMT
As I understand it on BondMason you are not lending, you are purchasing the rights to the receivables from the loans, ie, the interest and capital repayments. You have a contract for each loan and BondMason have no rights to the receivables once you have purchased them. I am struggling a bit as well. I came to the conclusion that Bond mason has a contractual duty to pay over everything they receive on your investment to you. That is way short of being the contractual partner in the receivable. In particular, if Bond Mason goes bust, I suspect that the liquidator would receive the payments and I might merely remain an ordinary creditor for the amount owed and therefore not receive the full amount due.
[Response]: your contractual partner is BondMason Client Ltd. This is outside the group of BondMason Group Ltd (which operates BondMason.com). Therefore, should anything happen to the platform; the Receivables agreements remain in full force and effect, and there is bankruptcy remoteness.
Other areas I am uncomfortable with the T&Cs include:
1.5. The nature of the Receivables Agreement is that you have no recourse against either the Seller or the borrower under the loan related to the Receivables in the event that the Receivables are not paid to the BondMason Customer Funds Account. You are responsible for making your own assessment of the risks of entering into Receivables Agreements
As I understand it I will not be selecting the receivables and so this cannot be achieved.
[Response]: the choice of which Receivables you purchase isn't impacted by this point. All Receivables have the same legal construct on BondMason. Selection only impacts the underlying loan exposure, not the Receivables construct in each case - as this is always consistent.
12.1.2. not reproduce, modify or in any other way commercially exploit any of BondMason Data, including without our prior written consent (which may be withheld for any reason):
... creating a database in electronic or structured manual form by systematically downloading and storing all or any such Data.
I take that to mean that I cannot keep a track of my investments performance or that of the platform made available to me.
[Response]: this is standard legal wording, but I think the key element here is "commercially exploit". If you are keeping track of your own portfolio for your own use, then this shouldn't be a problem. As the clause states, you can always write to use, and we can waive this condition base don your individual use-case. Nonetheless, your entire portfolio is available from your dashboard on BondMason at all times - so I'm not sure why you'd want to do this.
12.5. None of the Data on the Platform, and in particular, neither the User Content nor BondMason Data, can be relied upon by you or any third party as... it is not intended to be relied upon by you as the basis for making (or refraining from making) any specific decision.
See 1.5 above, so how are we supposed to judge whether to make an investment?
[Response]: the majority of clients rely on the auto-bid tool to purchase Receivable agreements through BondMason. The underlying loan and platforms have all been reviewed and approved before they are allowed onto the system. We approve c.1 in 5 platforms, and c.1 in 3 loans. However, if you are looking to conduct detailed DD on each loan, then BondMason probably isn't for you - you are probably better off going to the underlying platforms directly.
13.2. Except as otherwise expressly stated in this Agreement, we shall only be liable for foreseeable loss or damage arising directly out of our own breach of this Agreement, negligence or wilful misconduct.
Per 1.5 etc. that seems to leave them with no responsibility for selecting investments!
[Response]: I'm not sure I'd interpret this as 'no responsibility'. Aside from a duty of care to all of our clients, and willingness to treating clients fairly, it's important to understand that we are aligned: we invest in every loan; we have built up investment careers over a long period of time (and so aren't chasing a 'quick buck'), and so getting a good, consistent return is key to building a business over the long term.
We feel the full weight of the responsibility that comes with being custodians of other people's capital: whether it is their savings, pension funds or otherwise.
As a result, although I was happy to make an initial investment, I will not now be doing so.
[Response]: Ok. BondMason isn't for everyone, but we appreciate you taking a detailed look.
- PM
I've added responses in italics above for ease of reference. Please ask if you'd like any more detail on any of these points. Many thanks, Steve
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Post by argybargy on Aug 16, 2016 16:57:02 GMT
stevefindlay stevefindlay - thanks for your patient & comprehensive responses. Could you please assist with a couple more:- 1. In the absence of FCA or other regulatory oversight: How is the platform risk on BM mitigated? How does BM give comfort to investors that there is a strong corporate governance & controls regime in place? 2. Are the loans selected by BM 100% sold to investors or do either BM or the originating / underwriting institution also hold some exposure to final maturity? I could not find this in any previous threads..... Many thanks,
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Post by stevefindlay on Aug 17, 2016 14:21:02 GMT
stevefindlay stevefindlay - thanks for your patient & comprehensive responses. Could you please assist with a couple more:- 1. In the absence of FCA or other regulatory oversight: How is the platform risk on BM mitigated? How does BM give comfort to investors that there is a strong corporate governance & controls regime in place? 2. Are the loans selected by BM 100% sold to investors or do either BM or the originating / underwriting institution also hold some exposure to final maturity? I could not find this in any previous threads..... Many thanks, : there are probably three ways of looking at this: (I) FCA approach: We are applying for full FCA permissions, submitting our plan in December 2015. Since before then we've had FCA-equivalent (or better) processes and practices in place (II) Experience: we understand the importance of governance and investor protection in building trust - all of the senior investment team have had 15+ years experience with blue chip investment management companies (e.g. Fidelity, M&G, Babson etc); supported with recognised qualifications(e.g. James W and I are chartered accountants with the ICAEW) (III) Our Structure: We have put in place a Board and an Advisory Council that oversees our activities - please see our About Us page Re (2) "100% sold to investors": we do hold a number of positions through to maturity, so they aren't all sold down. Many thanks
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