DropDeck is a project focused on royalty and debt financing for fast growing businesses or innovative startups. The platform integrates with a smart-contract and token-incentive mechanism to evaluate and fund businesses worldwide.
To understand the concept better, let me first explain royalty financing. Royalty financing is a type of investment where the business gets money based on future revenue. The investor will earn back his money in the form of royalties. A royalty can best be described as a percentage of the company’s revenue.
On the other hand, we have debt financing. It means that other businesses or investors can give a loan to the company. The company promises to repay the loan over time, with interest. The downside of debt financing is that, unlike equity financing, the lender doesn’t get rights in the company he funded.
So, DropDeck offers a business funding platform for both small investors as bigger groups or companies on which both royalty and debt financing are possible. To take this platform to the next level, DropDeck seeks to score companies accurately enabling investors to make smarter investments.
This scoring is improved with the use of Artificial Intelligence and user scores. With this combination, they seek to provide quality scorings so investors are able to fund companies with a minimum of risk.
Now we understand the concept, we can bring in the use of the token. The DropDeck funding platform runs on the Ethereum blockchain on which they issued their DDD (Decentralized DropDeck) token. The DDD token will be used as the reward for all participants on the platform. Funding and refunding happens with DDD tokens. So, royalties and interest on loans will be paid out in DDD tokens.
Use of Funds – Distribution
Product Development and R&D – 55%
- Building AI Engines
- Creating Smart Contracts
- Hiring financial specialists, risk analysts, data scientists
Marketing and business development – 20%
A lower amount is allocated to marketing because they are relying on word-of-mouth publicity as users are encouraged to invite others because they will receive a reward for newly adopted users.
Legal Expenses – 10%
Compliance is key for DropDeck, especially in the long term. Acquiring all the necessary licenses across multiple jurisdictions will need a vast amount of funds.
Operations – 10%
To ensure that day-to-day operations continue running.
Buffer – 5%
Just a safety buffer for any unexpected problems.
Types of Platform Users
A hunter is responsible for seeking companies who are in need of funding. Not just any company is allowed on the platform. The hunter has the task of finding interesting, innovative companies.
An evaluator investigates claims. He can approve or deny claims for a certain deck containing a startup. Besides that they can predict winners.
Delegates are responsible for entering companies into legal arrangements so they can enforce the repayment of the loan. Then funders can make a smart contract and send DDD tokens to it. The delegate will receive a percentage of the funding.
DropDeck’s Trust Scores
Every user can evaluate companies. But we won’t know how trustworthy this user and his evaluation are. So DropDeck came up with a scoring system to evaluate trustworthiness. Here are some of the elements which determine your trust score:
- Crowd Evaluation: How other users rate your previous evaluations.
- On-site behavior: Attempts at spamming will result in a lower trust score.
- Rankings: Reputation on other sites like Quora, MatterMark, CB Insights, and others
- Identity consistency: consistency of your information across those identities.
A user has a trust score, but a company will receive a potential score based on:
- Venture credentials: based on amount invested by founders and how trustworthy they are.
- Suitability to a user: based on user preferences for funding.
- Social reputation on networks like LinkedIn, Facebook, and others
- Use of language by company and how they communicate.
Moreover, artificial intelligence is used to make those scorings better. To improve evaluations, DropDeck uses an incentive mechanism. Users can bet on the outcome of future events. Each evaluation costs DDD, but if they are right, they will get a piece of the total pot reward. Evaluators are also rewarded when they upload evidence which shows that the outcomes are met.
Pros and Cons
There are a lot of advantages to using the DropDeck token and platform as listed in the whitepaper. We selected the most important advantages:
- Speed: Business can find funding much quicker, from anyone, anywhere in the world.
- Transparency: The funder can monitor their investment by looking at the spending activities of the funded business.
- Minimize risk: The platform enables small investors to fund companies. In this way, it is possible to spread your investments over multiple interesting companies, which means you are reducing the risk of losing money.
- Safety by funding through the use of smart contracts. Funders tokens are locked until all requirements are met.
- DropDeck knows how to tackle the adoption of the platform by using incentivized hunters who will hunt for interesting companies in need of funding and explain the platform to them.
However, as with all trust rankings, a person can suddenly act maliciously, even after receiving a good trust score. With that in mind, we don’t know what happened between the delegate and the company stepping into the legal arrangement. It’s possible that the delegate creates some beneficial side-arrangements for himself. It’s just a possibility. Many actors are involved in the platform. That means it’s not easy to trust and manage everyone.
Besides that, the whitepaper mentions that every participant must collaborate in the best interests of each other. People tend to act differently without gaining personal advantage, it’s human’s nature. This is a risky statement.
First thing we noticed was that all team members and advisors have linked to their LinkedIn profile. We explored some team members:
- Michael Phan, CTO:
Michael has major in banking and computer science, which is a good combination for the DropDeck project. He has worked for two fintech companies for three years. His first job was at Google Singapore for one year.
- Yao Yuan, Blockchainer: Yao has a master in software engineering, with emphasis on cloud computing. In most of his positions, he was a ‘Technology Director’. Since October 2016, he had his first experience with blockchain as we can see that he started working for BTCC (cryptocurrency exchange located in China, has the record for the oldest exchange which operated for 2,305 day) as ‘Director of Software Engineering’. According to his profile, he specializes in designing and building highly scalable and responsive systems under pressure with an awareness of deadlines and efficiency.
- Nagu Thogiti, AI & Blockchain Advisor: Very experienced guy who collected several certificates at MIT for Fintech, Big Data and cybersecurity. He has launched two AI projects/websites himself (Programfy.com and 314.ai). He markets himself as a problem solver. Finally, he is also an advisor at WandX, another fintech blockchain ICO project.
DropDeck identifies three main issues: lack of proper evaluation methods for funding businesses, lack of secure mechanisms for funding, and lack of reliable mechanisms. DropDeck solves those problems by offering smart contracts which hold the funds until all conditions are met. Hunters search actively for promising businesses and the use of evaluators, claim voting and artificial intelligence solve the problem of proper evaluations. Finally, delegates offer security by making sure companies enter into legal arrangements before funding starts. DropDeck is a great project which enables both large and small investors to fund new, innovative companies, as well as existing companies that need money.