The executive chairman of blockchain and cryptocurrency investor Coinsilium Group Limited (AQSE:COIN), Malcolm Palle, has said the firm is now recognised as “one of the pre-eminent advisory firms out there” following a strong uptick in its advisory business which was launched last year.
The firm also posted a swing to profit in its recent results, an impressive feat considering the volatility of the sector in which Coinsilium operates.
Which begs the question, how have they managed to achieve profitability while the cryptocurrency markets are still recovering from the Bitcoin bubble bursting at the end of 2017?
Advisory services arm leverages the power of tokenisation
When considering investment in crypto and blockchain tech, most would assume that the only strategy is to invest in cryptocurrencies such as Bitcoin and Ethereum and then watch as they accumulate in value.
That’s worked for a lot of people, although the volatility has been huge and at times it’s been a white-knuckle ride, particularly in late 2017 when Bitcoin reached a peak of around US$19,340 before crashing 64% to US$6,914 by early February.
But blockchain is opening up more worlds than the simple creation of a few new currencies, however radical they may be in themselves.
It’s also creating opportunities for innovation in finance itself, the way companies can put money in place for projects and growth using these new currencies.
That’s where Coinsilium comes in with its advisory services arm, which helps companies through the process of setting up a token sale to generate capital for their projects.
Instead of selling equity in the traditional manner, companies can sell tokens that represent future services to a whole range of buyers and raise funds which can then be used to develop the business.
Coinsilium’s advisors cover every step of this process, from white papers and token creation all the way to meeting with potential buyers ahead of the sale itself, taking a fee as a retainer and a success fee if the fundraising goal is achieved.
The response has been very positive, with Palle saying it has already helped raise over US$500mln and is currently working with nine companies to set up their own token sales.
Swing to profit
The uptake in advisory clients is starting to drop down into the numbers as well, with the company posting a profit of £0.55mln for the six months to the end of June compared to a loss of £0.21mln a year ago.
Revenues came in at £1.3mln, more than ten times up from the £0.1mln it reported this time last year.
“We smelled where the money was coming from, it’s good work and it’s very profitable,” Palle says.
Healthy pipeline despite crypto volatility
Looking forward, Palle explains that recent volatility in the cryptocurrency markets (most notably the bursting of the Bitcoin ‘bubble’) has caused prices to drop and investors to become more discerning, with Coinsilium itself having to adapt and become pickier about the companies it chooses to assist with token sales.
However, the pipeline is “looking healthy despite how the crypto environment appears” says Palle, with there being “no shortage of good companies that are well funded, have got good teams, and good propositions that are more likely to get a successful token sale”.
He adds that companies that have already done their token sales are now looking at the “next stage” of funding and are more open to equity as it is a more understandable avenue for investors.
Investment fund interest
The company is also seeing interest from leading investment players, with South Korean digital assets investment fund Blockwater Capital taking a 7.4% stake in Coinsilium's investee company, blockchain 'hyper accelerator' StartupToken, in which it itself bought a 30% stake in November 2017.
Blockwater acquired the stake for £192,548 in mid-December, valuing StartupToken at around £2.6mln. Given the Blockwater investment, the implied value of Coinsilium's own stake has increased by116%, with its seed capital investment rising to £722,222 from £360,905 in 2017.
Coinsilium shares trade at around 3.65p, with a market cap of £4.6mln.
--Adds detail on Blockwater investment and updates share price and market cap--