There is nothing like waking up, grabbing your morning coffee and opening the window to find a different world to what was there yesterday. I know lawyers who are afraid of losing their jobs due to IBM Watson, social media users who get paid directly for their daily data, and cars that will… well, not need humans anymore to function. It is not necessarily the magnitude of these changes that scares, excites and bewilders — it is more the pace of this change.

As a macro investor, I have always approached the next move as if tomorrow was here today. Imagining yourself in the future can often lead to some surprising insights alongside, of course, taking retrospective data into account. I found myself imagining the future over a coffee just the other day, thinking about the most significant capital markets on the planet — and their appearance in the years to come.

The fixed income market is 3 times the size of global equity markets. Let us put that in perspective for a second: Think of the most prominent companies — Amazon, Apple, Walmart, Shell, Exxon Mobil, Facebook; and the list goes on. The credit markets outshine them by three times in sheer market capital. Within these credit markets are a few different segments, each contributing to its size (US stats):

Treasury bonds: 35%

Mortgage Debt: 23%

Corporate Debt: 22%

Other (Municipal, Money Markets, Asset-Backed): 20%

Despite their size and reach in the global financial space, these markets have been plagued with a lack of transparency due to being executed through a decentralised OTC (over the counter) mechanism. Ultimately, this leads to an inability to calculate global systemic risks and real liquidity in the OTC (over the counter) market. This was illustrated during the 2008 GFC, when complex and toxic MBS (Mortgage Backed Securities) and CDO (Collateralised Debt Obligation) instruments were littered across some of the largest institutions in the world, without anyone having an understanding of the true risks, leverage and exposure.

Hello Blockchain.

Distributed Ledger Technology. Regulators, traders, investors and brokers should all have access to real data on liquidity. The benefits are too significant to ignore. Imagine if, in 2008, participants had anonymised ledger information on the correct exposure of mortgages and securitised mortgages? Home buyers would better understand the increasing premiums they were paying versus other data points, regulators would have a granular understanding of exposure across the banking sector, traders would be able to assist in better-informed price discovery. The result? Decreased volatility and a soft(er) landing for the exuberance of the market.

The year 2008 was not that long ago, and yet we are finding ourselves in a similar place. Leverage in the equity markets is at an all time high, the bond markets have been heavily manipulated due to money printing programs by Central Banks — which in turn are leading to inter-market risks. Investors and banks alike have yet again incorporated riskier assets into their portfolios. Whilst regulation has worked hard to catch-up, it is still struggling with achieving an unfettered view of systemic risks.

When assessing the investment landscape through a top-down approach, we can start to see the tides of change and solutions that will pave the way.

Regulators need more insight into systemic risk.

Corporate bond issuers require liquidity and new channels for growth.

Crypto participants require hedging, yield generating instruments, as well as loans against their crypto holdings.

Funding and VC mechanisms are in a state of flux; securitisation of assets is gaining momentum.

I came across FIC Network when exploring these themes and was instantly impressed. FIC Network solves these challenges by merging the traditional OTC world of Fixed Income with DLT, also creating a mechanism whereby crypto participants can earn interest and borrow against their holdings. It is is an end-to-end, blockchain-based fixed income network that enables the participants to issue and trade financial products in a secure, efficient and transparent way. Furthermore, their use-case is the bond market and go-to-market strategy: corporate bonds.

Stage of the Project:

There is currently an active prototype in the market. Fa​ctury.co​ is the parent company of FIC Network; it is the lending and trust network operating on the distributed ledger. The business has received VC funding from ​Boost VC,​ ​Startup BootCamp​ and B​ialla Venture Partners​.

Team:

Arturs​ Ivanovs, the CEO, based in NY has a secure network and solid team to execute the vision. He has been directly mentored by​ TimDraper​ (DFJ) and Paul Veradittakit​ (P​anteraCapital)​ over a 6 month period while engaged in the Tribe 8 Incubator in 2016/17 for the FIC Network project.

All Advisors have been involved since before the ICO (this is not a pay for a mantlepiece advisor approach). ​Jed McCaleb​ (Founder of Stellar and Ripple) is an equity holder and actively advised the team in the early stages. Jonathan Chou (CEO Bee Token) is helping to drive their marketing and public outreach, and grow their Influencer network. Ismail Malik from Blockchain Lab; currently regarded as one of the most influential people within the Blockchain industry, has recently joined as an active advisor.

The play:

Active networks, working out of NY, a great team solving a real problem that requires blockchain consensus — and working off a prototype, with a low cap raise. Big positives!

Hard cap​: USD 16M

Soft cap:​ 3500 Eth

Tokens:​ 316.5M of which 50% will be sold at ICO, 30% in reserve and 20% for the team.

Tokens released​: 15th May or earlier if the Public sales closes before the 15th May.

Market Cap Comparison:

PolyMath, which is the closest competitor for FIC, has a $200 Million market cap, and we feel this is underpriced. As a comparable company, a $16M market cap for FIC Network at its current stage of development is a steal.

Roadmap:

Disclaimer: I have actively invested in this project.