FOBS Asset Management is democratizing the investment services market for retail investors by providing them with the technology used by international private equity funds. The startup wants to level the playing field for experienced and novice investors by managing digital assets using effective and profitable strategies. Personal experiences of startup founders enable positive financial outcomes for end-users.
Location: Kyiv, Ukraine
Back in 2015, while freelancing, Bogdan Pinchuk faced a problem of transferring funds from abroad. Even for small amounts the bank commissions were too high. He looked for an alternative that would move money quickly and inexpensively and discovered Bitcoin. Bogdan decided from there on to receive payments in cryptocurrency, and even saved some of it to pay for a master's degree in Germany.
After graduating from the Department of International Economics of the Dnipro National University and receiving a master's degree at Hochschule Mittweida, Pinchuk started as an intern in the strategic development department at the multibillion-dollar corporation Carl Zeiss AG. There, he learned how the big business works and how startups are selected for investments. Shortly after Bogdan rekindled his interest in the cryptocurrency market and investments. Anticipating a large opportunity, he began assembling a team for his own startup.
“I started mining and investing in cryptocurrency. We started with a five digit amount and by the end of 2017 my team's portfolio grew to more than five million dollars,”says Bogdan Pinchuk.
In 2018, however, the cryptocurrency market collapsed. The portfolio that the team has been building for two years has decreased by 80% in six months. The approach that the startup was using stopped working.
In 2019, the work on a new MVP started and the team was convinced that it would take them just three months to develop it. Unfortunately, this time was only enough to complete planning. First of all, the startup needed a strong framework in which to test investment strategies. It took weeks to teach their product even one strategy, and the company had hundreds of hypotheses to test. FOBS found someone with experience in programming to help with developing the framework, but after several months of development work their subcontractor ran into financial difficulties and unexpectedly sold the framework to another company. Because of this setback, the launch of FOBS’ product was delayed by a whole year.
"The first year was difficult for me psychologically. After graduating from a European university I gave up a large stable salary and returned to Ukraine with uncertain prospects. Spending a year on a startup that did not make a profit was a very difficult experience," admits the CEO of FOBS.
The MVP was finally launched in 2020. The team went with it to the Lviv IT Arena, where the startup reached the semifinals and secured a place in the top 20 list of the best IT startups in the country. FOBS Asset Management began to grow and sign up customers, and reinvested all profits in product development and restructuring of the company so that it became possible to enter the European or American markets.
At first, Bogdan had an idea for a fund that would invest into crypto assets under its own name, but on reflection, he realized that this approach was a relic of the past, especially for retail investors. FOBS’ final product is an automated service for carrying out transactions on behalf of an investor. Because of that, the startup prefers to work with small investors who own cryptocurrency, but who do not know how to properly manage it.
How does the service work?
There are many traders in the market providing similar services using automated systems, but it’s a very risky space, and many startups working in crypto raise millions of dollars and hire the best specialists, but lose money without creating a product.
Let's imagine a potential client of FOBS’ has $20,000 to invest in cryptocurrency, but does not know how to do it properly. The customer opens an account on the Binance cryptocurrency exchange and makes a deposit there. He then gives FOBS an API key so that the startup can buy and sell the client's assets; this API key, however, does not permit FOBS to deposit or withdraw funds from the client's account, thus guaranteeing the safety of the investor's funds.
The FOBS Asset Management System does the following:
- First step: selection of crypto currencies to be traded
- Second step: selection of one of the 15 strategies for entering or exiting a currency trade
- Third step: the risk module decides on the amount to invest in a particular deal
- Fourth step: automatic execution of all these tasks
The startup also provides clients with information about trades and the balance of the account.
Usually, FOBS signs a six-month lock-in agreement with clients, but can make exceptions if the client needs their funds back urgently. The trading system closes all open trades, and the client can withdraw funds to his bank account within a few days. Other traders are less flexible and lock-in customer funds for at least a year. In addition, customers of competitive products don’t know how their assets are being traded at a particular moment of time, and whether their investments will be profitable.
The startup is working on making its services accessible even to the smallest of retail investors, however, it currently prioritizes medium-size investors to ensure that each customer is profitable. FOBS does not guarantee a particular level of profitability to its clients, instead, it guarantees that customers will never lose more than a predetermined percentage of assets. In a rising market, customers can expect profitability of 20% and above. In a volatile market, 10-50 unprofitable trades can occur in a row, and the startup guarantees that it will minimize risk and never lose more than the agreed-upon amount.
For example, in the past year FOBS’ customers were never down by more than 8%. The average annual profitability was 106%, that is, for each invested $10,000 the company made 8.8% profits per month, or roughly, $880. Of these, one half, or $440, was allocated to investors and the other half, also $440, to FOBS to pay for the server infrastructure and salaries. Accounts with a balance of less than $20,000 are not yet profitable for the company. Today, the nearly 30 clients that FOBS Asset Management currently serves have an average balance of $100,000.
"Just as Samuel Colt once created a pistol that made the strong and the weak equal, so we want to equalize the opportunities for professional and novice investors with our trading service".Founder of FOBS Asset Management Bogdan Pinchuk.
Profitability is key, but protection against market volatility is also important. FOBS is working on making sure that their customers don’t find themselves again in a situation in which they were in 2018, when the price of Bitcoin fell below $4,000 and many small traders lost their savings. Those investors who waited for 12-18 months managed to multiply their holdings, but not everyone was able to wait. "That’s when we realized that we needed to be more real-time. When the market is falling, we also need to be able to make money on that. This is what we are doing now. We make profits for our customers not only when the market is rising, but also when it is falling," says Bogdan.
The team and future plans
The team has 15 employees now - some in Ukraine, some working from abroad. Bogdan points to their business development director and economist Yevgeny Loza: "If it weren't for him, there probably wouldn't be FOBS as a business. He is the best cryptocurrency analyst out there, according to tradingview.com, and has been in this industry for 6 years."
Yaroslav Gorislavets is a co-founder and responsible for technical infrastructure, while Bogdan is focusing on strategy. Yaroslav and Bogdan have known each other since childhood, and made and then lost money in the 2017-2018 Bitcoin boom.
The company is demonstrating good growth rates and the team does not plan to slow down. Bogdan recognizes that some of their competitors are 5-7 years ahead of them, but the team is doing everything to close this gap and is now preparing the company for further expansion in Europe and the USA.