Upvest's view on the state of asset tokenization in Germany/Europe. It is a high-level overview for a broader audience, summarizing our learnings of two years in the asset tokenization industry. Check out more info on: https://upvest.co

1. Asset Tokenization
A practical deep dive
What we have learned over the last 2 years

2. Hello from team Upvest!
Martin Kassing
CEO
martin@upvest.co
Supported by Europe’s largest VC funds
We offer full-stack asset tokenization APIs
22 Full-time employees
€8m raised in Series A
Founded in 2017
20+ customers

3. Empowering digital asset fintechs since ‘17
Some of our 20+ clients:
€500m
2020 Vol estimate
€50m
2019 Vol

4. Provided by Upvest partners
Upvest’s end-to-end solution
File a security token
prospectus with your
local regulator
Identify and check your
investors
File prospectus KYC/AML checks
Smart contracts for the
token distribution
Automated distribution to
investor base
Custody
Investors access their
assets within any app safely
Tokens can be traded at
partners’ secondary
markets (Q2/20), Upvest
provides the settlement
Settlement
Provided by Upvest
Issuance Distribution soon

5. All services available with <5 lines of code
Simple APIs with support of most
programming languages
Our APIs work well in your existing
workflow/product
SLAs with 99% uptime guarantee

6. Regulatory compliant with advanced security
concept
Banking grade security
The Upvest Enclave is a highly restricted
purpose-built bare kernel environment for
the handling of sensitive operations.
+ Restricted Wallet Handling
+ Secure Network Architecture
+ Hardware Security Module Encryption
+ Authentication and Access Control
Licensed custodial and
non-custodial setup
Live since 2017 and over 20 customers to date.
Access of wallets via APIs in existing workflows and
end user products. Users don’t feel its blockchain.

7. Let’s get started

8. Security tokens (STOs) have some killer features
Digitalization of
securities
Instant global
trading
Fractional ownership

9. Reality: Most security tokens fail
70% of STOs
don’t reach their target
USD M

10. So, what’s missing for
adoption?

11. We think 3 ingredients are missing
Better assets Investment platforms Better UX

12. 1. Let’s talk about
better assets first

13. Today’s STO economics aren’t attractive
Companies with no brand plan to raise
€100m+
>10% of total raise will be used to cover
costs of project reducing the ROI for
investors
<5% target IRR does not move the
needle for many investors

14. Adverse selection in seed stage STOs
90% of startups at seed stage fail
+$150bn in venture capital already available
Seed companies that do an STO often
failed with their Series A

15. Instead, what is working?

16. Monzo did a successful crowdfunding campaign
Monzo had signaling VC investors that did a
professional due diligence before
Individual investors identified with their
mission to create a ‘better’ bank. They became
ambassadors of a paradigm shift in banking
Investors received a return of 25x in less then
5 years

17. STOs for real estate objects tend to work as well
STOs of €3-5m per issuance get filled
on leading crowdfunding platforms
Successful real estate STO platforms
have already a loyal group of +1k
investors
Retail investors see real estate as a
secure investment opportunity

18. This shouldn't be it, right?

19. The world’s greatest assets are not (yet) on-chain
$ 6.960bn
Private capital markets have
amazing assets not yet accessible to retail
investors
These players have not incentive to move
until enough retail investor demand is high
enough to be competitive with institutional
demand
$ 45bn
$ 10bn

20. The big guys don’t need to move until
enough liquidity is in retail markets
Chicken & egg:

21. 2. Let’s talk about
retail investors

22. Acquiring retail investors online is expensive
€250+ to acquire an investor online
€1.000 average retail investor tickets for
first timers
25% of your raise needs to be allocated
to acquire customers
Let’s raise €10m for our STO:
Issuance
€10m
Marketing
€2.5m

23. Fintechs with existing investors have it easier
Direct investment platforms can utilize
their existing and identified (KYC) investor
base
A variable kick-back of 2% to them might
be attractive to sell your STOs
+25k Users
+3m Users
+50k Users

24. Again, Chicken & egg:
Fintechs care a lot about UX

25. 3. Let’s talk about UX

26. What’s the UX for retail clients
accessing their STOs?

27. Today’s crypto solutions don’t convince fintechs
90% break-up rates of today’s wallet
tools
Setting gas fees manually for every
transaction is a pain
Risky private key handling with no
recovery option

28. Today’s depot banking solutions neither
35% of users churn when being re-directed
to another page (stats from payment
industry)
Only 2.5% of individuals in Germany have
a depot to store securities
The number of depots in Germany are
declining since 2007

29. What UX works better?

30. Checkout securities online within any app
KYC Depot creation Trade assets
Let your users create a depot
in your app instantly
The depot can be transferred
to any other app
The depot can be created for
customers all over Europe

31. What pain points do companies have
selling STOs?

32. Huge cybersecurity risks and costs
$4bn of crypto funds stolen in 2019
Crypto custody requires expensive
regulatory licenses
+$1m annual costs for security and
compliance personnel and audits for
licensed custodians

33. There are plug and play tools (yet)
Node Management:
● Software is in its infancy, un-anticipated bugs occur
● Data formats might change unexpectedly
Pre-funding of transactions:
● Transactions need to be funded in native currency
● Dilemma of enabling non-crypto investors to transact
Calculating of balances:
● When to account for transactions
● Nonce handling for outgoing txs is complex
Running a node for your clients means
you control the data-feed
You easily overpay on Ethereum fees as
you want to make sure transactions pass
Late or no account updates will confuse
your investors

34. Betting on one protocol can be risky
€100k salary for 1 blockchain developer
You would need 3+ developers to run a
mid-sized STO project
Migrating from one to another protocol
can take up to 6 months

35. A break in the chain can ruin your project
Prospectus filing KYC / AML Token creation Token distribution Token storage Wallet management
9 months until
approval
Regulatory risk Focus on edge cases Manual distribution Hacked solution Crypto jargon
3 months until
approval
Regulatory compliant Keep it simple Auto-distribution Secure, great UX Human interface
Best practices
Worst practices

36. Are there companies that can help
me?

37. Yes, Europe has great blockchain companies!
Prospectus filing KYC / AML Token creation Token storageToken distribution Wallet management

38. So if you consider doing a STO...

39. Our gift to make digital assets frictionless
€0k onboarding fee
First 6 months for free
0.15% custody fee AuM thereafter
Valid until Easter
https://upvest.co/cac2020