Interview with Janis Timma, CEO of Crowdestor

2 weeks ago I did a tour of several Crowdestor objects and this week also asked some questions to Janis Timma. Result from interview is below, and some footage from objects is included in Part 2 of interview.

Part 1:

00:45 Dižozols - how it started?
04:00 What are other successful projects on Crowdestor?
06:00 Who are Crowdestor co-founders?
07:55 Changes in Crowdestor Security Agent ownership
08:23 Lending automation to SMEs - what happened to this project?
12:27 Why did Artur Geisari left Crowdestor?
13:10 Marketing - 15y of experience, debt recovery - first job?
14:52 Real Estate projects - does anyone have experience with RE development?
19:50 What are other projects connected to Janis or Gunars?
20:40 Exiting connected projects
22:46 Crowdestor Security Agent OU - no reports, is it empty?
24:19 Crowdestor SME SIA - tax debt of 142k EUR?
25:45 Pledges registered with Crowdestor Security Agent SIA
30:50 Meža Enerģija list of assets - where is it?
31:40 General view on Meža Enerģija
33:10 What is the point, where you stop waiting?
34:40 Inch2 - what happened?
38:12 Orange Square Transport - Janis had 100% control?
41:50 Dystopia user acquisition campaigns - why are they late?

Part 2:

00:00 Promise about strict policy, no-mercy to borrowers
06:15 Grocery store - 17 months late, still not defaulted?
10:00 Connected projects - conflict of interest, debt recovery
16:10 Delivering updates each month
17:00 Commissions paid in cash?
18:25 7.6% of projects are in recovery, any results so far?
19:35 Organika case
21:43 Projects with no hard assets to sell
25:10 Warhunt movie - still looking for buyer?
26:58 Would you agree to external audit of portfolio?
28:35 Are some of objects very bad?
30:57 Can Inch2 be defaulted?
32:35 How many criminal cases so far?
33:15 70-80% discounts in secondary market
36:35 Crowdestor Flex - why was it started?

Part 3:

00:00 Crowdestor Flex - why was it hidden?
05:50 Does lending company that raises capital, needs a license?
07:05 Why are Flex portfolio companies hidden from investors?
08:05 How much money was raised from ticket sales?
09:06 Would you be able to repay equity loans without ticket project?
11:05 Ticket sales are hidden, what happened?
11:50 Where would you like to move Crowdestor company?
12:14 Which regulators have issues with Flex and tickets?
12:48 Can a regulator ask to refund ticket sales?
14:10 Would you be able to spend 800k to solve urgent issues?
15:01 Should platform get their fee when loan is repaid?
15:30 Ticket project description
17:55 What will happen with money raised from remaining ticket sales?
19:05 Will ticket money be used straight away?
19:40 Investors are buying tickets to repay their own loans?
22:20 How many people work for Crowdestor?
23:10 Monthly burn rate?
23:30 Funded volume
24:30 Average fees, cash flow
25:34 How big are Crowdestor reserves?
26:40 Poll about legal action against Crowdestor
27:26 What is happening with big projects?
29:08 Why is Fertilizer not counted as capital loss in stats?
29:30 What happened with Buyback (Provision) Fund?
32:47 Should not Buyback be triggered when loan is in default?
33:35 Can you prove this 400k fund exists?
35:25 Why withdrawals are marked as refunds?
36:53 Georgian loan portfolios
38:15 Vormsate castle, Medical centre Aizupe
41:01 Any steps taken to become regulated?
41:58 Is there a risk to freeze operations or shut down?
42:39 Current business model is not working?

Questions & conclusions

1. Gunars Udris is a co-founder only in theory. Gunars has the option to become a shareholder, but does not want to. Why?

2. Crowdestor team does not have experience with real estate development, but added their own RE projects to grow the platform and amount of investors. Same with Foodestor.

3. Janis claimed that Gunars is not related to any Crowdestor projects, but at the same time Gunars owns 25% of TehniAir OÜ and 15% of TM Education and Trading OÜ.

4. ~€400k Buyback (Provision) Fund is not separated and exists only in theory. It is just a marketing gimmick.

5. For many projects pledges are promised, but real situation reminds of Schrödinger's cat - if you look for a pledge, it might be registered, it might not. When issues arise, you might get your money back, you might not.

6. Crowdestor does not follow their own policies. Similar attitude can be seen from borrowers - they can promise whatever for years, don't deliver and Crowdestor will accept it as long as they are responsive.

7. Janis thinks that “Flex“ product is future of Crowdestor, but Latvian regulator FKTK doesn't agree. Also Estonian Finantsinspektsioon is taking interest in ticket sales (selling equity of a non-existing holding company).

8. In many projects there is not much to recover, and most of them should not have been offered to investors at all. Funding empty companies that buy castles, debt portfolios, resort or yacht in Cambodia - is not that different as investing in camels in Somalia. Some dreams might come true, some ideas might work out, some investors might get lucky, but most will lose money.

9. Janis thinks that investors should diversify and be patient, but I am quite sure that even the most diversified portfolio from Crowdestor projects will have a negative return.

10. I was able to visit 7-8 objects, but when I asked for documents, could not get anything in last 2 weeks. Are real investors getting access to proof of payments, construction estimates, invoices, etc.? Probably not.

11. If investors will fund less than ~€700k per month in new loans, Crowdestor might run into cashflow issues. With 70-80% discounts in secondary market and some investors considering legal action, I don't think there are many optimists left. Maybe Jørgen should step in and do a tour with his mom?

12. 4 companies from Crowdestor have tax debts and one is late with submitting financial report:

    • Crowdestor SME SIA: €143k EUR debt

    • Crowdestor Investments SIA: €24k EUR debt + Prohibition from VID

    • CR9 SIA: €3.4k EUR debt

    • CR7 SIA: €0.5k EUR debt

    • Crowdestor Security Agent OÜ: no financial report for 08.12.2017 -
      31.12.2020

Key Takeaways

• Crowdestor is a great business for Janis (and Gunars?): by collecting ~8% in fees from a €54.4 million portfolio you could say that investors indirectly paid ~€4.3 million for a chance to fund mostly uninvestable companies and ideas.

• Investors who expected on average ~20% return from projects with no collateral, might learn that high interest = high risk. Some might also learn that investing in random crap will result in bad ROI.

• Crowdestor’s business model is not sustainable. I don't think Crowdestor as a platform will survive the new EU regulation or do serious debt recovery. But why even try, if investors might buy 75% of equity?

• Winter is coming for Crowdestor investors. Maybe it is a good time to visit the Sweet Dreams resort in Cambodia, rent a yacht and rethink your P2P strategy?

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