Kapilendo CEO Christopher Grätz Discusses First Digital Security Offering, Digital Banking Services for SMEs

Kapilendo is a Germany based Fintech that started life as a more traditional debt-based crowdfunding platform but has recently issued its first digital security. While moving into the blockchain sector Kapilendo has also added digital banking services catering to SMEs.

Launched in 2015, Kapilendo went live with its first debt-based offering that was funded in less than 48 hours. Much has changed since those early days. Last year, Kapilendo acquired the banking platform wevest as the company moved to offer additional services for small and medium-sized German companies. Around the same time, Kapilendo Custodian was launched to facilitate the storage of digital assets as the company saw the opportunity to broaden its services.

Today, Kapilendo is focused on becoming the financial service firm of the future. Digital-first, blockchain enhanced, Kapilendo aims to provide modern financial services, including capital markets services, in an agile and innovative fashion.

Last month, Kapilendo was awarded an Excellence Award 2020 for its outstanding achievements in the field of digital transformation in the “Financial Services” category. The company said at the time: “We see our position as the leading digital banking partner for medium-sized companies very clearly confirmed.”

Kapilendo was co-founded by CEO Christopher Grätz who previously worked at KPMG in the financial services sector. Today, he manages a team of around 70 employees. Crowdfund Insider recently ran into Grätz at the Paris Fintech Forum where Crowdfund Insider Senior Contributing Editor Therese Torris interviewed Kapilendo during a panel on digital banks. Following the event, CI had a chance to catch up and learn first hand about Kapilendo’s journey and what it plans for the future.

Our discussion is shared below.


Kapilendo listed its first digital security at the end of 2019. Your platform raised € 2.4 million for a restaurant. How did this offering go?

Christopher Grätz: It’s a fully regulated security that got approved by the German banking authority. More precisely a subordinated bond. The issuance itself happened on a blockchain infrastructure making usage of our Kapilendo digital asset platform. The platform covers the issuance of the security as well as the safe custody for the investors. Having an existing customer base of 40.000 retail investors, we tailored the offering, focusing our target customers. That blockchain technology is involved in the product is mostly not relevant for our yield-seeking investors. This is why we seamlessly integrated the new technology into our existing investment processes. The customers responded very positively, and we even managed to attract new customers more tech-oriented and interested in the product features.

Do you expect increasing demand for security token offerings? What type of benefits do you expect?

Christopher Grätz: At the moment the few STOs – or digital securities –  that have been approved by the German banking authority have been bond type products. Profit sharing or equity-like product are expected be tokenized in the near future, thinking ten years from now almost everything will be tokenized. Digital securities are the future of financial markets; they present many advantages in terms of costs, safety, settlement and reconciliation. We like to call them smart securities because of the use of code, which allows increased automation via smart contracts. The low cost of financing through digital securities will also unlock access to capital market financing for SMEs. Other benefits will be to bring liquidity to illiquid assets and ensure a higher level of compliance.

What about secondary trading for issued securities?

Christopher Grätz: It is technically possible to allow securities trading on a decentralized exchange. However, we have to remember that we are at the very beginning of fundamental changes in the financial industry.

Several layers, such as digital identity or blockchain interoperability, are not mature yet. But many companies are working to solve those challenges … We are closer than ever to a financial system that will allow the investment and trading of all types of digital assets (cryptoassets, tokenized SME profit-sharing rights, tokenized gold etc.)

We are closer than ever to a financial system that will allow the investment and trading of all types of digital assets @Kapilendo #Fintech #Blockchain Click to Tweet

Why did you decide to choose Stellar as your blockchain of choice? Are you only using Stellar?

Christopher Grätz: The Stellar network is geared towards financial use cases and the transfer of value of all types. Furthermore, it is less complex, therefore less error-prone than other blockchains.

The Stellar network is live since 2015 (at more or less the same time that Kapilendo launched). Relevant partners are using Stellar for various use cases: e.g. Franklin Templeton for the tokenization of mutual funds, IBM in the building of a new payments system (World Wire Web) etc.

The Stellar network is geared towards financial use cases and the transfer of value of all types @Kapilendo Click to Tweet

What about BaFin? Have they been supportive of your digital security offerings? Has compliance been challenging?

Christopher Grätz: Overall the BaFin has been very comprehensive, and the discussion always have been helpful results-oriented. In the past years, the regulator has been keen to engage in discussion and understanding better digital assets and risks associated with developing a comprehensive regulatory framework around this technological innovation. The new license around the custody and the management of crypto assets is the first piece of this framework. Kapilendo is currently applying for the license and works to become one of the first providers in the market receiving it.

Compliance has been challenging but positive. When developing new products that will be accessible to millions, it is, of course, essential to think about all possible adverse scenarios. We have the advantage that our in-house legal team has been already in regular discussion with BaFin regarding the 200 other projects which got financed on the platform since 2015. We used external legal support from the renowned law firm lindenpartners for this legal set up of our first digital security issuance.

As we issue digital securities based on a 3-page security information sheet and not a complex and many pages long security prospectus, we have found an efficient and light legal set up which aligns perfectly with our SME customers financing needs.

#BaFin has been keen to engage in discussion and understanding better digital assets and risks associated with developing a comprehensive regulatory framework around this technological innovation Click to Tweet

There is an expectation that Europe will harmonize crowdfunding laws with a EUR 5 million funding cap. Do you see an opportunity here? Will Kapilendo expand your services into other European markets?

Christopher Grätz: Besides our home market Germany, we are already operating in Austria and also hold a license there.

However, by having made the step into the market for security and bond issuances, we already today have a fully EU-pass-portable financial product that allows us to finance SMEs all over Europe.

The harmonization of the European crowdfunding law will additionally support our cross-border activities as it provides a level playing field for direct lending within the EU. On our way to becoming a Pan-European SME banking platform, we plan our expansion into Nordics, Netherlands, and Belgium in the next step.

The harmonization of the European crowdfunding law will additionally support our cross-border activities @Kapilendo Click to Tweet

How do foresee Kapilendo evolving over time. Do you see your platform emerging as a digital investment bank?

Christopher Grätz: Lending is and will always stay our core business. However, over the past 4 years, we have spoken to more than 15,000 SMEs and realized that we can provide more services than just financing. This is why we started in 2019 to consequently extend our services.

By acquiring a regulated asset management and brokerage company we are today able to provide SMEs with a superior capital market based liquidity management product. A true game-changer for SMEs in the time of negative interest rates.

We will shortly go live with our own corporate bank account service and debit cards. All of that will be integrated in our 360°FinanceCockpit that provides a completely new banking experience. By combining all those services we are becoming a one-stop shop banking partner for SMEs.

We will shortly go live with our own corporate bank account service and debit cards #DigitalBanking #Fintech @Kapilendo Click to Tweet

How does your deal pipeline look for 2020? What type of businesses and offerings do you expect?

Christopher Grätz: We expect a 75% growth in our lending activities in 2020. The Kapilendo 360°FinanceCockpit will be released soon. Our current account and debit card service will start in the second quarter of 2020. Combining all those activities we are happy to serve all SME key financial functions from the second half of the year. Being in regular touch points with our clients and not just only serving lending will strongly improve our deal pipeline over time.

We expect a 75% growth in our lending activities in 2020 @Kapilendo Click to Tweet

Do you believe your deals will get larger over time? What about partnering with institutional money?

Christopher Grätz: We do not expect single deal sizes to increase significantly. Our comprehensive service offering combining current accounts, debit cards, liquidity management and financing makes us specifically interesting for rather smaller companies with an average turnover of EUR 5-10m and good creditworthiness.

In our security and bond business, we expect growing ticket sizes over time as the market develops very positively and gets more mature.

Institutional refinancing is an important topic for us. We are planning to set up our own debt fund, are in good talks with the EU for seed funding and speak with various debt investors about partnering. Debt investors clearly see our attractive positioning in the market and origination advantage resulting from our comprehensive digital banking service offering.

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