Case Study: A Recap of our Private Beta with SellersFunding

Following the launch of our platform to the general public, we thought it would be fitting to reflect on how successful our first Short Term Note Program (STNP) was during our private beta. Needless to say, it surpassed our expectations as well as those of our private beta investors and our first origination partner, SellersFunding.

Cadence made its private beta debut with the first ever digital debt asset issued on January 2. This was not only a big milestone for our company, it was a critical step forward for the nascent security token industry as we proved a viable path forward exists to raise compliant capital for the digital economy. Since then, we managed to successfully close a total of nine individual securitizations for SellersFunding to the tune of $5,670,000.

Offering sizes on these widely syndicated offerings to both accredited retail and institutional investors have ranged anywhere between $500,000 and $1,000,000. While we’re in the business of offering investors high quality, hard-to-source private credit asset exposure via well structured notes, we pride ourselves on other investor-friendly features. Namely:

  • Transparency with our ERC-20 tokens providing proof of ownership on every note offering with perfect cap tables on the Ethereum blockchain
  • Inherent liquidity given the fact that every one of these nine offerings were sub 1-year in duration and in many cases carried 1 and 3 month maturities
  • Credit enhancements such as first loss protection, segregated assets and bankruptcy remote special purpose vehicles

The underlying exposure offered to investors in this STNP with SellersFunding is direct exposure to their underlying portfolio of working capital assets extended to marketplace merchants. Investors have benefited from SellersFunding’s data and technology-driven underwriting standards that has produced a portfolio of cash flows that are predictable and consistent. While Cadence intends to onboard many more high quality origination partners over the coming months, the compatibility between their business model, our issuance platform and investor appetite for private credit has been uncanny. We’re more confident than ever that a vibrant private capital market hinged on transparency can thrive and begin to rival its public market counterpart.

While investors benefited from consistent, well structured, short duration notes, SellersFunding found our STNP to be extremely efficient and dynamic capital that adjusted well to their near term needs. Our first widely syndicated 3-month $500,000 Series 1-B note issued on January 24 came with a 10.53% APY, which was very attractive compared to their existing capital sources at the time. Since this first widely syndicated note, Cadence has managed to deliver $2,000,000 in outstanding capital across 1-month and 3-month note series (not counting the amortizing 9-month Series 1-D) with a blended average cost of 10% APY. The ability for originators to frequently right-size and re-price their outstanding notes based on market demand is extremely compelling and a dynamic that SellersFunding will continue to leverage to its benefit.

We look forward to developing our relationship with SellersFunding and launching many more comparable STNPs in the coming months.

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Author
Prath Reddy
Head of Capital Markets
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