Before co-founding Silta Finance, Ben Sheppard had a diverse career enjoying corporate life and entrepreneurship. He is hard pushed to define himself precisely. Still, recently while watching a Twitter conversation, he spotted an argument that said business ideas came from generalists but that specialists scale them.
“So, I guess I might call myself a generalist with an entrepreneurial spirit.”
Silta Finance is his fourth startup, and here is where Sheppard finds his passion. His corporate career was in infrastructure finance, and he first heard about Bitcoin in 2011 but ignored it initially. It was only around 2016 that he took a more considerable interest, crucially in the functionality.
“I understood that it was an immutable database, but then I saw the functionality in the dApps, and that piqued my curiosity.”
Sheppard was also interested in the accompanying philosophy, the Web3 decentralised view of the world. “I liked that we could approach problems differently, in a more democratised way and free from traditional hierarchical structures.”
With Silta Finance, his blockchain startup, which is described as a bridge connecting DeFi with infrastructure investments, Sheppard believes he can bridge the world of TradFi and DeFi. For him, Silta Finance sits right in the middle of these two worlds and can take the best from both.
Working in Web3 has been a bit of a rollercoaster — not just for Sheppard but also for the industry. When he first arrived, his reaction was that the way of working was mayhem.
“I wondered at first did anything get done — but then I realised that startup environments are organised mayhem and that it did work, but in a more fun and creative way.”
“This organised chaos also pushes the speed of innovation. When you think you’ve caught up with the latest things, something else happens. The speed of innovation is tremendous.”
The comparison with his previous role in traditional infrastructural finance could not be more different. In traditional finance, innovation was a linear process typically carried out by designated teams. In Web3, everyone plays a creative role that results in dynamic, fluid change, and yes, also requires the whitepaper to be edited regularly to reflect the innovations.
The genesis for Silta Finance came as Sheppard started taking an interest in cryptocurrencies and, in particular, the emerging world of DeFi.
“I could see that with something like the AAVE project, and there was a huge amount of money locked up in their DeFi pools, about $6 billion then — now it’s more like $24billion — but I reckoned you could do a lot more than just use the pools for flash loans.”
Sheppard wrote a blog about using DeFi funds in traditional infrastructure finance and promptly forgot about it until he got a call from Binance.
“They said we had to build it – and that kicked us into action. Of course, we had to find out if traditional, conservative infrastructure developers also liked the idea. And to our surprise, they thought it was a great idea too – basically, they said that if we can give them access to faster, simpler and cheaper finance, they would queue up there and then.”
By now, Silta Finance was getting into shape. Sheppard established there was money to invest and developers eager to access the funds. The next step was to build the framework for the credit and impact assessments and underwriting. However, Silta’s secret sauce is in its project evaluation process that uses traditional project finance analysis. It brings that data on-chain with additional weighting for the project’s impact. A deliberate choice was made to concentrate on impact investing using the UN’s Sustainable Development Goals (SDGs).
“We wanted to make sure the solution was compliant and secure – but we also wanted to promote the financing of projects that would make a difference to the world.”
Assessing the projects is done on two levels. First Silta Finance Due Diligence (DD) team undertakes Silta Scoring, which is comprised of DD and Impact assessment. A score is assigned to the project that is encapsulated within a dNFT.
Secondly, Silta DAO elects an investment committee (IC) with eight seats. All members of the IC must have a project finance background and be token holders. The role of the IC is to identify risks in the borrower’s application. Silta Finance, in collaboration with the IC, must then try to identify mitigating factors to offset the risk and finally reach a consensus on whether the borrower can proceed to underwrite.
All borrowers and lenders must go through full KYC and AML checks to ensure accountability. Rules inside the DAO will also ensure no conflicts of interest when decisions are being made. The investment committee will be made up of a broad selection of professionals from legal to accounting to financial.
The size of selected projects is also essential, ranging from $250,000 to $50 million. Projects of this size tend to struggle to raise money as the financial work entailed to raise these amounts is the same as for larger ones while the commissions are much less.
“It’s our sweet spot where we are not stealing market share from institutions and will be helping projects struggling to get finance. We have a pipeline of projects in renewable energies and utilities, but we are not just looking at credit lines. We ask these projects to define sustainability outcomes from the projects following Sustainable Development Goals definitions, although the borrower can propose additional definitions and measurements of its impact.
“So once these are detailed, we agree on monitoring and evaluation procedures, and if these are met, we will reward the projects in our Silta tokens. It’s not just lip service but real outcomes.”
The measurements will be recorded in a dynamic NFT so that the outcomes, good or bad, will be available for review as we advance. This will be especially important should the project stakeholders return to raise more money through Silta Finance.
After much debate, Silta Finance will be built on the Avalanche blockchain in terms of technology. It’s a combination of technology and the team.
“Every time we dialogue with the team, I am impressed more and more. They are also aligned in the environment, which is critical for us. We must be as green as we can – from the blockchain to the projects.”
Silta Finance is starting to come together. The pipeline and dApp are advanced, with the governance process being built. Sheppard is moving into private funding with plans to launch a token soon. He aims to have the first projects financed in quarter three of this year, so he is now busy starting the credit assessments.
One of the first projects in the pipeline is a major solar energy project in the Philippines, aiming to provide power to 40,000 homes. Sheppard visited the rural region, and he got emotional over the difference Silta Finance can make.
“Once these homes get power, they can get the internet, and the children can access better education. This is exactly the type of project we want to work with – we are creating jobs and providing access to sustainable power.”
Finally, there is one more kicker to make this project even more attractive. Traditional finance for infrastructure projects is based on securities, making the investment illiquid. Silta Finance has a partnership with Rari Capital so that lenders can get instant liquidity on their investment through LP tokens which can, in turn, be traded, invested or staked on other pools offering higher returns.
“Basically, people investing with Silta Finance can earn a steady return by helping finance sustainable impact projects — and still take their tokens and perhaps speculate on more risky projects.
“This way, we can attract the steady investor and the more risky ones. And do good.”