Caviar is a unique offering in the token space. The idea behind it is to help token holders participate both in the high returns of the cryptocurrency market as a whole while also hedging with more traditional (and lower performing) real estate loans.
The CAV token, in other words, is a slightly different kind of token. It is an ETH20 utility token with a return that is created not only by an amalgamation of arbitrage opportunities across the blockchain and cryptocurrency space but also real estate loans.
In doing so, Caviar is creating a unique service. Real estate entrepreneurs – usually those involved in the redevelopment of the distressed real estate, will thus have access to a revolving pool of loans for property purchase, remodeling or renovation, and other needs. And Caviar’s contributors can earn profit sharing from the returns of these contributions while also earning an additional profit by staking their tokens.
We recently sat down with Kirill Bensonoff, one of the partners at Caviar to have a chat with him about the project as well as finding out his thoughts and insights.
Hi, Kirill. Thanks for joining us today. Can you tell us more about yourself and Caviar?
Sure, and thanks for sharing the Caviar story with your readers. My background is in technology. As a veteran entrepreneur, I’ve been fortunate to have multi-million dollar exits. I graduated from the MIT Entrepreneurial Masters’ Program and have also served as an advisor or angel investor in over 20 different companies. While I was interested in crypto from its early stages, I was activated to participate about five years ago when I bought my first Bitcoin. Since then, I have participated in dozens of token-generating events. Presently, it’s exciting for me to introduce the concept of fundraising for new ventures in the columns I publish with the Young Entrepreneurs’ Council and to also lead discussions about what’s happening on the blockchain at the various events we’re traveling to for Caviar and at the Boston Crypto Meetup series, which I frequently co-host.
While many initiatives being funded through ICOs or built on the blockchain are completely new technologies or concepts, what we’re excited about doing at Caviar is something that’s totally different. The volatility of the cryptocurrency market is addicting for many new investors, and there’s allure around the hype. I recently learned that Coinbase received 100,000 new subscribers over the Thanksgiving holiday alone! Tons of people are jumping in, many of them young and hungry entrepreneurs and investors. At Caviar, our team is led by more senior entrepreneurs. All of our partners are close to 40 and have operated and successfully grown other businesses. We appreciate the need for an offering in the crypto space that brings a sense of stability and balance to its token holders. So we’re bridging the gap between one of the oldest forms of investing – real estate – with the newest by creating a dual-purpose token and crowdfunding platform built on the Ethereum blockchain. Caviar’s token offers access to income-producing real estate debt and fast-growing cryptocurrencies, with built-in downside protection and automatic diversification.
First off, why did you decide to expand your loan service by using blockchain? What was your thought process behind it and how the idea come about?
We started what was Caviar Capital, back in 2013 (which ironically is when I bought my first bitcoin). And I can honestly say we didn’t dream that we would be here today. It started out as a closely held real estate debt fund, with the mission of helping real estate developers and entrepreneurs finance and complete their re-development projects. After having financed dozens of projects, developed deep and lasting relationships, and touched many lives along the way, from a business perspective as well as looking back on time well spent, we can call that project a success. From a numbers perspective, that success has been validated on the results we’ve experienced: we have a 0% default rate, 0 late payments and an average IRR (internal rate of return) of 16% per year. Since its inception, Caviar Capital has consistently outperformed S&P 500 Real Estate and S&P 500 Bond indices by over 300%.
As a parallel entrepreneur running my own technology companies simultaneously, I’ve become wired to continuously innovate as a way to not only help a business survive but to also thrive. So, in seeing all of the things happening on the blockchain at literal warp speed, with constant improvements, changes, and advancements, it dawned on our team to connect the success of our real estate debt fund with the latest cutting-edge technologies of things happening in blockchain, AI, and predictive analytics. We saw not only the opportunity for a competitive advantage in the real estate debt arena but also an opportunity to create value for more people to become involved through the crowdfunding elements of our platform.
Editors Pick: Caviar ICO
Cryptocurrency has repeatedly been criticized for not having a “real” market worth or being far too volatile. In fact, there are increasing fears of a crypto market meltdown or at least sharp market correction after the tremendous gains in 2017 of not only bitcoin but most other cryptocurrencies and tokens.
What do you think is the biggest problem Caviar will solve and why is the problem important to solve?
There are essentially not one, but two problems we see that need solving:
- crypto investors need a way to diversify their portfolios outside of crypto assets.
- traditional investors need a way into the crypto market that hedges their risks in a comfortable enough way to make them willing to put at least one foot on the blockchain.
The solution that addresses both problems through Caviar is to diversify the asset class by combining crypto and the real estate market. And, to address that need we have developed a platform to create a single cryptographic token on the Ethereum blockchain that provides token holders with a diversified, risk-adjusted and data-driven portfolio that takes advantage of both the stability of the real estate market and the liquidity and growth of the cryptocurrency market. This strategy helps to maximize the possible returns from digital coins while hedging against possible market downturns.
Caviar has created very strict rules for its real-estate borrowers. Where did those guidelines come from as you formulated those?
I credit this very important part of our business to our experience and staying committed to tried and true practices that got us to where we are today. My two partners at Caviar – Guy Neumann and Alex Shvayetsky – have decades of experience both managing and investing in real estate and together we apply that expertise to every step of the process. The guidelines we have in place for borrowers were developed based on the strictest execution of industry best practices, and the expertise our team brings. In determining each loan applicant’s ability to receive funding, we require a CScore above 800, an after-rehab value on the property under 75%, a loan to value ratio at purchase under 95% (including construction cost), and favorable location and market conditions. (Additional details are available in our whitepaper – page 10). As we head into 2018, the real estate investment processes that Caviar has developed and maintained over the course of its five-year successful history will stay consistent, including working with established and full-time dedicated real estate developers – who as you noted, are well-vetted and must follow our strict protocols for borrowing.
In the whitepaper, you go into a lot of detail about your predictive modeling. Whose brainchild is that?
Data-driven intelligence and insights are a significant part of what powers our processes and decisions at Caviar. So, it made the most sense as we looked to evolve what was being done in crypto investing to bring on the best data science advisor we could find: David Wirth, who is an aerospace engineer, inventor with patents in the 3D printing and hardware engineering space, and has also been heavily involved in cryptocurrency mining hardware development for the past 7 years. David has helped in the creation of what we see as one of our most cutting-edge differentiators: our Intelligent Predictive Model (IPM). This is an artificial intelligence predictive algorithm based on a machine learning approach for price forecasting in both short and long-term projection timescales, allowing for stronger predictive power and more effective asset allocation. IPM uses historical data and a mixture of qualitative/quantitative metrics, in combination with analysis of the underlying cryptocurrency ecosystem, social signals, and trends. Data is collected from various sources to make agile judgments.
You talk about your adherence to regulatory oversight. Please give the top two examples – i.e. borrower guidelines and your KYC procedures.
Sure, let’s start with by walking through the process by which we adhere to our strict borrower protocols for real estate developers:
- APPLICATION AND CREDIT CHECK: We receive an application for a new project and perform a credit check on the borrower. Caviar uses a proprietary scoring system called CScore to rate each borrower. CScore is assigned based on a number of factors such as experience, Experian credit score, personal net worth and more, and ranges from 0 to 1000.
- MARKET: We then analyze the local market, number of properties for sale, past sales performance and other factors.
- PROPERTY INSPECTION: Caviar’s team meets with the borrower to inspect and review the property, understand the scope of work, and determine if the proposed property improvement budget can be approved by one of Caviar’s expert estimators. The project can move ahead if the estimator approves the budget.
- ARV (AFTER REHAB VALUE) DETERMINATION: After the property inspection, Caviar’s team determines the ARV based on the projected post-rehab value of the property. Caviar loans are always below 75% of the ARV.
As far as the crowdsale, Caviar is fully compliant under international KYC/AML rules. In terms of our KYC procedures, the Caviar Platform will be open to anyone in the world for viewing. However, participants in project funding activities will be required to register and complete KYC/AML verification and have a minimum required balance of CAV tokens in their wallets. Prior to purchasing tokens, every interested prospect is required to confirm reading all of our terms and conditions and whitepaper and accept all terms, conditions, obligations, affirmations, representations, and warranties described in these documents and agree to be bound by them. We currently exclude U.S. or Cayman Island’s citizens, residents or entities, as well as citizens of countries on international sanction lists and others, as dictated by our 3rd party partner, Identity Mind Global. With knowledge that KYC will be required for every contributor before tokens can be released, they’re also required to declare and certify having carried out research or taken relevant advice from specialized attorneys to ensure that no legislation or regulation applicable to their situation and places of residence, or no position or recommendation from a competent national authority prohibits or limits them in the purchase and the possession of tokens, and more widely in the possession of cryptocurrencies.
Let’s talk about your real estate lenders. Why would they come to you as opposed to another financing service (traditional or even p2p blockchain based).
In our corner of the real estate market, your reputation is everything when it comes to lenders agreeing to work with you. Over the last five years, we’ve built significant relationships with trustworthy real estate developers. However, we have processes built into place to validate that each and every project those developers bring to us is viable according to our requirements regardless of our past working history. Lenders see that we are thorough in this regard and committed to delivering what matters most to them: the numbers. Our history of successful returns, growth and a 0% default rate speaks for itself in terms of numbers.
In terms of why lenders would work with us vs. other financing services – be it traditional or a P2P blockchain based provider – I think it comes down to a few facts. Caviar can lend on properties that a traditional lender, like a bank, would not finance, because the real estate is either foreclosed, in a condition that a bank cannot accept, etc. Also, traditional or crowdfunding lenders take 3-8 weeks to underwrite a loan and issue financing, Caviar can get this done in a couple of days. Granted, Caviar is more expensive than traditional banks (but no more expensive than other “alternative” lenders”), but we provide additional value that others can not.
What has been your happiest moment so far working on Caviar? On the flipside, what has been the most painful, or perhaps the most regretful decision you’ve made with Caviar?
It’s thrilling to jump into the crypto world during such an exciting time like now – where you’re seeing mainstream media regularly discuss Bitcoin and in conversations with friends investing in crypto is becoming a more common thing. And, being directly involved and on the pulse of things by having this project be on the line for our team professionally and personally is riveting.
On the other side of that token figuratively speaking, I’d say one of the most painful aspects of this process is the pace of the hype not matching par for par with the mass adoption of investors into blockchain technologies and projects due to fear around regulations, security and lack of knowledge in the space.
Is Caviar already working with notable businesses or firms? Are there any future partnerships in process? If yes, can you explain briefly about it?
We have a dedicated team of advisors who are integrally involved in how we’re working to shape the Caviar project – including the esteemed blockchain investment expert David Drake, Chairman of LDJ Capital; Ivan Labrie, a top trader on Tradingview.com; James Sowers, ICO Advisor, Angel Investor and Crypto Capitalist; Gabriel Jarrosson, a French entrepreneur, crypto investor and a founder of a private crypto investment group; NASA-recognized inventor and data scientist David Wirth; Mikhail Savchenko, CTO at Chronobank.io; and James Jamil, Executive Director of the Wall Street Blockchain Alliance.
We are working on a number of partnerships with notable exchanges (can not offer names yet) and other blockchain companies in adjacent spaces, we are going to have a very exciting 2018.
You are the first “blended” token offering in that you are helping contributors benefit from a hedged cryptocurrency class plus real estate loans. Why did you think that real estate was the best hedge for this kind of token? Why is real estate so uncorrelated with cryptocurrency?
Great question – and it’s one we frequently hear: just where does real estate fit into all this? Simply put, I’d describe it as the yin for a crypto’s yang. As an asset, global real estate makes up well over half of the mainstream market and is estimated to be worth over $217 trillion. So, the question then becomes, “What asset has the potential to match that value while still offering the upside of massive returns?” The answer is cryptos, with a total market cap estimated in 2018 to reach into the hundreds of billions or even a trillion dollars. But while they have outperformed most other asset classes, using them to diversify investment can be difficult. Yes, the volatility of the crypto market makes them profitable, but they may not offer any real, tangible assets behind. This has crypto investors looking for ways to diversify their portfolio using more traditional holdings, like real estate. Most other assets simply can’t offer enough diversification with the fast-growing nature of digital currencies — but real estate can, and we have come up with an innovative way, not using real estate directly, but rather, debt backed by real estate, to provide this badly need diversification.
What do you think is the biggest challenge or obstacle Caviar will face? How do you plan to tackle that challenge?
I think that our greatest differentiator – helping contributors diversify and safeguard against a bear market or crypto crash – could ultimately come to also be the most difficult challenge we face as we aim to quickly raise funds and grow. I think this for two reasons. One, right now the daily frenzy is around how quickly Bitcoin and other cryptocurrencies are rising in value. Just as no one wants to think about saving for a rainy day during a financial boom, so could be the case with approaching a broad market of investors who want the latest, greatest, edgiest thing. And, that’s what many ICOs are selling to their audience – new and shiny technologies that are yet to be built. At the same time, an investor who’s feverishly interested in something just because it’s new may not be that concerned with its very risk and ‘ethereal’ nature. We’re anchored in a tried and true space that has historically performed very well – and we’re positioned to be a stable and smart vs. sexy investment for the winter days of crypto that are sure to come. It’s possible that we’re a little too ahead of our time to offer now what we know people should be preparing for a long future in crypto investing.
Moving on to more personal stuff, what does a typical day in your life look like?
I’m a family guy and parallel entrepreneur living in New England. So my days start early and end late in a continuous effort to spend valuable family time with my two young kids while also balancing out projects that come in for my technology company and the Caviar ICO. Basically, work never ends for me, I (and others on the team) are committed to making Caviar a success for the over one thousand people who have contributed thus far.
Can you express one personal opinion of yours about blockchain? It doesn’t matter if it’s negative or positive, we just want to hear your thoughts on it.
I think based on my experience in tech as well as my perspective of innovation that the concept of the blockchain will eventually be interwoven into every fabric of our lives, and I definitely consider it a good thing. From giving citizens and consumers alike more options for how they access, manage and use money as crypto goes mainstream to the empowering possibilities of more companies adopting blockchain into their operations and solutions – amazing things are on the horizon thanks to this technology.
Finally, what other personal goals (besides your career) do you have in life? Is there anything else in life you want to achieve?
I am working hard and trying to spend time with my family. My goal is travel, I love to see new places and really experience cultures. Also, keeping myself fit through regular exercise and healthy habits, this is not easy to do, but it’s one of my personal goals.
That concludes our Interview with Kirill Bensonoff
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