Putting money away and investing it for the future is an important part of any long-term retirement plan. The safest place to store and grow money has historically been in savings accounts and US government securities. However, in recent decades, interest rates have plummeted, taking returns down with them. This has led to investors not earning enough money on their assets and even, at times, losing out when it comes to inflation. Case-in-point, after interest rates hit a more than 60-year high in the early 1980s at just north of 20% per annum, they began a long, if volatile, descent. By 1990, they were around 8%. By 2000, they had fallen to around 6%. Today, they’re even lower. 

One company that believes it has a solution to this problem is Snowball Money. The company, at its core, is building an app that changes the way people earn interest. Instead of locking down capital and dealing with redemption dates, bonds trading at a discount to par, or contending with guaranteed rates that are well below the rate of inflation, the company offers a platform that theoretically allows its users to incur interest in real-time. 

The way the firm is doing this is chiefly through cryptocurrency. Users signing up for the app can transfer any of their Ethereum (or another ERC-20 token) to the platform to begin investing. They can also do the same without cryptocurrency of their own by connecting their bank account to the service. From there, the user picks a type of portfolio to place these assets in, they sit back, and they watch the interest come in. 

Snowball Money’s ‘anchor’ product is its Snowball Growth Account. To make withdrawing this money at will easier, the firm intends to offer a debit card that’s linked directly to the account. Assets allocated to the platform will be lent out to other parties that are looking for liquidity. These same parties will pay a variable market rate that management describes as high interest. The rate, management says, is decided by market forces. Last year, this figure averaged about 6%. In its filings, the firm gives an example of interest rates of up to 10% per year. 

To meet privacy demands and avoid custodial issues that are common in the securities industry, Snowball Money has designed their platform as a Decentralized Finance (or DeFi) solution. Simply put, instead of Snowball Money having access to your funds, the assets are stored on a user’s own mobile device. This reduces the business’s liability should something bad happen. It also has the benefit of putting control of the assets in the palm of a user’s hands. Similarly, the company never stores a user’s bank information or credit card details. 

In addition to working with cryptocurrency, the company has plans for other asset types. It intends to offer portfolios that include gold, venture capital, art, and real estate. Its cryptocurrency options will include risk-adjusted cryptocurrency portfolios. The company is also working on a yield-optimal smart contract. This functionality will allocate funds among various investment options to earn the highest interest rate possible. 

This is all very exciting, but it creates a lot of uncertainty. Cryptocurrency is fairly simple because it has an active market. Gold is this way as well. But venture capital, art, and real estate is often extremely illiquid. Another issue that comes into play here is the value of the underlying assets. Active markets create a known market price, but opaque markets like art are hard to value the assets of. For the safety of its investors, the company demands collateral of at least 150% of the value borrowed. But what is the value of certain art, even if it is tokenized as management claims it will be? Or of a venture-funded business that hasn’t raised any fresh rounds of financing in 18 months? 

Not only do these issues create valuation and capital preservation risks, they create other risks as well. Ensuring that certain assets do, in fact, exist to serve as collateral can be challenging. One way the company intends to reduce the risk of loss for its users is to offer optional DeFi insurance policies. There’s no telling at this time how costly that will be. But it’s safe to assume that it would cut into the high-yield returns users receive. Another issue is the risk of bad actors. Management claims that likely borrowers of the funds will be high-frequency traders. So long as they are from legitimate institutions, this should be alright. But a failure to keep adequate oversight over third-parties could impact the reputation and returns of the platform. The same can be said of extreme market volatility. 

In order to generate revenue, the company has come up with a number of services it plans to offer. This includes, but is not limited to, a 1.5% fee on cryptocurrency swaps. It also hopes to charge between 10% and 20% of the interest earned on its accounts, as well as a similar amount for its share of staking rewards. Management also hopes to offer API connectivity for developers/innovators who want to be able to benefit from the company’s platform in other ways. A full list of planned pricing can be seen in the table below. 

Since launching its beta, Snowball Money has seen some attractive progress. The firm has over 10,000 users testing its beta. It also has a waitlist of 220,000 people. Before the end of this year, the firm wants to launch the full version of the app for both iOS and Android. Next year, some of its other functionality is slated to be released. This includes its API, its debit card offering, and even unspecified gamification features. 

Given that the beta was only launched recently, investors should not expect the firm to have generated any revenue through last year. Sure enough, sales for 2018 and 2019 were both $0. However, the company did generate significant net losses over this timeframe. In 2018, the business lost $324,403. Last year, this more than doubled to $679,439. Operating cash outflows have been similar, totaling $343,645 in 2018 before soaring to $621,174 last year.

Snowball Money intends to offer investors the ability to invest in gold, art, venture capital, real estate, and more. Even so, all of these markets really fit in the context of DeFi. Today, DeFi is a very niche but fast-growing space. In 2018, DeFi assets totaled only about $371 million globally. In 2019, this surged past the $1 billion market. The recent downturn caused by COVID-19 sent this value plunging lower, but as of today it is nearing the $1 billion mark again. Markets like peer-to-peer lending are likely to benefit significantly from the advent of DeFi. With peer-to-peer slated to grow at an annualized rate of 50.2% over the next few years, to as much as $589.05 billion by 2025, the upside could be excellent. 

Another way to look at the market is through the lens of cryptocurrency since that’s the company’s flagship focus. Based on current estimates, the top 10 cryptocurrencies have an aggregate value of $242.13 billion. It is important to keep in mind, though, that this space can be incredibly volatile. In 2017, the total value of all cryptocurrency on the market was $566.26 billion. This plunged to just $128.78 billion a year later, and in 2019 the value of the currencies was $237.10 billion.

In order to keep the company charging forward, the management team at the firm is seeking to initiate a capital raise. They are doing this through a SAFE. In all, Snowball Money hopes to raise up to $600,000, but it could close its round of financing with as little as $25,000 committed to it. In order to participate in the deal, investors must contribute a minimum of $111 apiece. The SAFE will convert upon the next round of financing (or upon other triggering events) subject to the value of the company at the time of conversion. Holders of the SAFE will benefit from a 15% discount on the conversion, and the total conversion value for the firm is capped at $6 million. As of this writing, Snowball Money has received commitments totaling $153,486. 

Snowball Money has an extensive team of individuals working on the company’s platform. But unlike many teams out there, only one of them is the founder. This is Parul Gujral, the company’s CEO. At this time, he also serves as a Contributing Author at Forbes. Past experience involves working as an advisor for several organizations. These include CryptoSavannah, the Butter app, and Whyzzdom. Before that, Gujral was an IRA at Andra Capital. 

Though not a founder, another important figure at Snowball Money is Dan Flanegan, the company’s CTO. He is the CEO and co-founder of the Butter app. He has also served as an advisor for several organizations, including Across Realities and The Venue Report. The last major figure profiled here is Anna Olifer, the company’s CFO. She has served as a Senior Business Analyst at Fractal Analytics. Past experience also includes working as a Business Analyst for 4i, Inc. 

Based on all of the data we examined, we are rating Snowball Money as a Deal to Watch. To begin, the company’s progress so far has been impressive. Getting to a beta of significant size and having a large waitlist of users is excellent. Add in the unique solution the company has for investors looking for attractive, real-time returns, and there’s a lot of potential. The firm’s team looks qualified, and the market it operates in is attractive and rapidly expanding. The DeFi niche, specifically, is still very much in its infancy. 

This does not mean, of course, that everything is great for Snowball Money. The firm’s significant net losses and cash outflows are an issue. There are also major questions about the viability of the company’s objective. Offering real-time high-yield returns is undeniably attractive. But execution is everything. Illiquidity and volatility of some markets will prove to be an issue. So, too, could third-party risks the company is asking investors to expose themselves to. At the very least, the high-yield returns are being provided to a degree that’s probably commensurate with the risk that investors are taking.