Cake Board Report Q1 2020

In order to give our customers and partners a few insides into what’s happening behind the curtain at Cake, we would like to publish our quarterly board report. Please understand we will remove sensitive information where necessary. For more information please visit: https://www.cakedefi.com

Below you can see the full text, but if you want, you can access the board reports here:

Agenda: https://docs.google.com/document/d/1lLJ03C_hE6uoEDu1wroWEWZfr3rujozvzVjVDQLLDaU/edit?usp=sharing

Last quarter reflection: https://docs.google.com/document/d/1ngQdIX0xSKs5g1NYmoblBuW5KaedF44Pms5ZdOE5THg/edit?usp=sharing

Next quarter’s CEO directives:

https://docs.google.com/document/d/1BSjk4coG9KaisZmmdzdx8-qe-JboQA32OI08oN86Nd8/edit?usp=sharing

Have fun! :)

Message from the CEO about Q1 2020

Dear Cake Pte Ltd board.

Due to the Covid19 outbreak, this first quarter of 2020 will go down as one of the craziest times in history. Nevertheless, we at Cake did a fantastic job as a team to pretty much achieve all our goals we had set during the last board meeting. Let me give you a few of the highlights, of the details which you can read below:

  • Doing the extra fundraising at the end of 2019 turned out to be a win-win for all parties and the extra liquidity will make us very strong going forward. Obviously hindsight is always 20/20, but the decision to be willing to give up slightly more equity to get him on as an investor was the right move.
  • At the beginning of Q2 2020 (with all salaries and obligations paid) we have over a year worth of runway, excluding any revenue or further fundraising. We should therefore be in a strong economic position.
  • In Q1 2020 we have added the Bitcoin Lending service called Bitcoin Lapis (https://medium.com/@cakedefi/announcing-bitcoin-lapis-the-most-transparent-way-to-get-6-cashflow-from-your-btc-592c72073c3f) and with that we have seen a 60% growth in users in Q1 2020. U-Zyn and I have done several Q&A sessions with the community to answer all their questions: https://bit.ly/btclapisen
  • With that we were able to increase the average deposit per user by 200%.
  • Our total Assets under Management (AUM) have also seen an increase of over 200%.
  • We have started to list a new metric, that was used by PayPal in their incredible growth phase: Growth week over week. During their peak times with maximum expenses they managed 15% growth, which obviously is unsustainable in the long run but a great goal to achieve when blitzscaling. Depending on the number we choose to use, we are at around 4% right now.
  • Product and Tech have allowed us to get here and going forward I see them less of a limiting factor as over the past quarters, when the team was smaller and everything still had to be built. The team is in great shape and doing a fantastic job to scale further.
  • Hiring wise we have a good size team of approximately 15 team members. We might hire a few more, but not with much focus. Here it is quality over quantity. Salary wise we have been doing a great job in keeping costs low, while paying appropriately and fairly for the delivered value.
  • We have also decided to get our first co-working space at WeWork: https://www.wework.com/en-GB/buildings/71-robinson-rd--singapore Since our team has always worked remote, the current lockdowns do not affect us at all, which is very positive.
  • Operations-, Legal- and Compliance-wise everything is under good control. The main focus here for Q2 is to get the Head of Compliance and Legal on board, which we need until the end of Q2 to be fully compliant with the Payment Services Act in Singapore.
  • On the DeFi Chain side everything is ready for a Q2 launch, which will help us provide Bitcoin lending without a trusted third party and will also help us with raising additional funds.

To summarize Q1 2020, with the Bitcoin Lapis Launch, the fantastic user growth and the preparation for the DeFi Chain launch, the quarter went very well and we are on track with our goals.

Now, shifting the focus to Q2 2020, while in the previous quarters it was mainly product and tech that set the limitations, I see mainly 3 challenges to overcome in the upcoming three months:

  1. Compliance: We have to get the Digital Payment Token (DPT) license here in Singapore. While we are well-equipped, we still need the head of compliance in order to have all the pieces in place. There are not many things to discuss here, rather, this will be my personal responsibility to get it done.
  2. Marketing: While we still have some limitations, which were set by ourselves for risk management, on the funds we can handle from the users, we now have to start getting significant market share. While I have some good ideas on how to direct the company, I would like to discuss ideas on how to approach this matter in general. Also, looking at how PayPal grew their customer base by 15% week over week, I would like to discuss what key metric we should focus on to blitzscale as well.
  3. DeFi Blockchain: We are finally ready to launch our DeFi Chain built on top of Bitcoin. I would like to discuss the initial coin distribution and some details around the launch for Q2.

A few other points I expect to happen in Q2 2020 are:

  • User insurance fund to being able to scale with adequate risk — this will also be a discussion point later on.
  • Moving into our co-working space once the COVID-19 situation calms down.
  • Launching Ethereum Lapis
  • Launch of our Affiliate program to aid with marketing.
  • I am not expecting to grow the team much other than getting our head of compliance on board and maybe 1–2 other team members.
  • Other points have been removed from the public version.

While most of the things described above are straight forward, there are 5 points I would like to discuss deeper with the board:

  1. Annual Marketing & Business Strategy Discussion
  2. DeFi Chain Launch
  3. Cashflow for 2020
  4. User Security Fund
  5. OKRs & No-List for Q2 2020

You can find the details and discussion points on the pages below.

Looking at the status quo and all the tools at our disposal, I feel we are very well-equipped for the upcoming quarter. Please find below the details of my own highlights and in the CEO directives you will find my personal thoughts on the upcoming quarter. I am looking forward to a fruitful discussion with you during the board meeting.

Regards,

Julian

ATTENDEES

  • Julian Hosp — Executive Chairman
  • U-Zyn Chua — Executive Board Member
  • John Rost — Non-Executive Board Member
  • Bettina Hosp — Secretary
  • Howard Fineman — Investor & Non-voting Observer

DATE & TIME: 9 am on 8th of April 2020 (SGT) = 9 pm on 7th of April 2020 (EST)

VENUE: Zoom (link removed)

AGENDA OF APPROX. 2 HOURS

Section 1 — Approvals (5 minutes)

  • Brief recording (only this session and the very end will be recorded!) of attendance and statement of time & date
  • Approval of Minutes — Q4 2019
  • Approval of Agenda
  • Next Board Meetings:
  • June 19th, 2020 9 am SGT (2020 Q2 board meeting): Certified Accounting Discussion
  • Sep 18th, 2020 9 am SGT (2020 Q3 board meeting): Marketing Strategy Discussion
  • Jan 15th, 2021 9 am SGT (2020 Q4 board meeting): Budget & Remuneration Discussion
  • Mar 19th, 2021 9 am SGT (2021 Q1 board meeting): Business Strategy Discussion

Section 2 — Reflection on Executive Summary (25 minutes)

Section 3 — CEO Directives (80 minutes)

Section 4 — Assign Action Items & Follow Ups (5 minutes)

Section 5 — Debrief (5 minutes)

  • Brief recording (only this session and the very end will be recorded!) of attendance and statement of time & date

Adjourn Meeting

ATTENDANCE CONFIRMATION

Beginning:

I (full name) & (title) hereby confirm that I am attending the beginning of the Cake Pte Ltd board meeting at (date & time & timezone) via (technical medium or in person) and I have a clear line to understand (and see) what is being discussed and I can be heard (and seen).

End:

I (full name) & (title) hereby confirm that I have attended the entirety of the Cake Pte Ltd board meeting’s agenda at (date & time & timezone) via (technical medium or in person) and I have had a clear line to understand (and see) what was being discussed, and I was able to be heard (and seen).

EXECUTIVE SUMMARY Q1 2020

OUTLINE

  1. Finance
  2. Sales, Marketing, Communications & Community
  3. Engineering
  4. Product
  5. Operations
  6. Legal
  7. Compliance
  8. Human Resources
  9. Business Development
  10. DeFi

1. FINANCE

Last quarter review

  • Balance Sheet in SGD -> removed for public version
  • Balance Sheet in USD -> removed for public version
  • PnL in SGD -> removed for public version
  • PNL in USD -> removed for public version
  • Node & revenue summary -> removed for public version

Next quarter review

  • We have over 12 months of runway
  • Cashflow positive is possible in Q2 2020

Challenges

  • No Fundraising necessary right now

2. SALES, MARKETING, COMMUNICATIONS & COMMUNITY

Last quarter review

GENERAL REVIEW:

  • Focus on Week over Week user growth
  • Continued Partnerships with coins
  • Built and grew Social Media Presence

USERS:

User details removed for public version:

  • 36% user growth in Q4 2019
  • 60% user growth in Q1 2020

Week over Week user growth:

  • Q2 & Q3 2019: not representative
  • Q4 2019: 2.6% week over week user growth
  • Q1 2020: 3.9% week over week user growth
  • Target Q2 2020: 5% week over week user growth

Percentage of users with deposit:

  • End of Q2 2019: not representative
  • End of Q3 2019: 50% of total users had deposits
  • End of Q4 2019: 47% of total users had deposits
  • End of Q1 2020: 36% of total users had deposits

ASSETS UNDER MANAGEMENT:

Details removed for public version:

  • Q2 & Q3 not representative
  • 48% AUM growth in Q4 2019
  • 258% AUM growth in Q1 2020
  • Target in Q2 2020 is 5% WoW AUM growth

Average deposit per user:

  • Q2 & Q3 not representative
  • Q4 2019: 5% growth in average deposit per user
  • Q1 2020: 191% growth in average deposit per user

SOCIAL MEDIA:

Details have been removed for the public version

Next quarter preview

  • Launch of Affiliate program
  • Focus on SEO
  • Get to 15% week over week growth like PayPal
  • Grow the English & Chinese community stronger
  • Continue Partnerships with Coins
  • Setup of API Emails to target Users better and more efficient
  • Build and grow Social Media Presence
  • Listing on more DeFi & Staking sites

Challenges

  • more user diversification
  • Paid marketing

3. ENGINEERING

Last quarter review

  • Expansion of engineering team with 2 new members (we let 1 go)
  • Went through a long series of interviews and candidates.
  • Team is stable now — with room for 2 or 3 more engineers, but we are no longer in dire need of engineering resources.
  • We are not in urgent need for a SysOps engineer. It is more impactful to have engineers than SysOps engineer at this stage.
  • Migrated key portions of codebase to TypeScript
  • Established Cake’s own internal engineering team for DeFi blockchain to enhance the engineering capability of our blockchain engineers andto provide a better release management and code review process.
  • Conducted a third-party security reviewer to perform system security audit.

Next quarter preview

  • Further additions of engineering team with 2 to 3 more mid-tier to senior engineers.
  • Not in urgent need anymore, but we will always hire when good developers come around.
  • DeFi blockchain financial dencentralization application (dapp) development
  • Tokenization support for DeFi Chain
  • Decentralized exchange with the goal to achieve decentralized lending by end of 2020.
  • Engineering focus will be largely around supporting DeFi chain mainnet — questions, articles and tooling expansions.
  • Engineering effort to support our increasing usage: e.g. more accounting tools, better integration with marketing tools, more automated fund management with adequate risk control.

Challenges

  • DeFi blockchain team building
  • Very hard to locate and hire developers with open source blockchain consensus understanding — most blockchain developers are devs working on the higher level (dapps), not low consensus levels.
  • Will continue to look out for experienced blockchain developers

4. PRODUCT:

Last quarter review

Pool

DeFi Blockchain

  • Completion of PoS and Bitcoin anchoring milestone.
  • Undergoing final stage of review and tooling setup.
  • BTC airdrop integration
  • DeFi blockchain public open source codebase published
  • Testnet is up
  • DeFi desktop UI design and frontend development is done

Next quarter preview

Pool

  • Launch of ETH Lapis
  • Integration of our affiliate program
  • Chinese version
  • Staking of DFI on Pool

DeFi blockchain

  • Mainnet launch
  • BTC airdrop program launch
  • DeFi desktop UI integration

Challenges

  • Integration of a USD stable coin regarding regulatory uncertainty

5. OPERATIONS

Last quarter review

Admin Dashboard

  • New Revenue Page with Filters to enable easy view on revenues per month in USD and Source Coin
  • Detailed Access to user information (Account Balances, KYC Status, Previous KYC, Access to KYC Data)
  • Withdrawal Dashboard: Filter for open withdrawals only to reduce risk of double sending funds
  • Lapis Product Page: Batch creation, settlement, trading
  • Live BTC Holdings overview to enable segregation of Funds

Hiring

  • Hired a team assistant to assist with Customer Support, KYC, Chinese Translations and Lapis Product Trading Settlements

Most frequently asked questions:

  1. What is Lapis?
  2. How is Lapis secure?
  3. Which coins should be used for Staking?

Knowledgebase FAQ/Website

  • Extension of Knowledgebase to support BTC Lapis Product
  • Full Translation of Knowledgebase into Chinese

Next quarter preview

  • Translation and Setup of Chinese Website
  • Full Trading Overview with gain/loss calculation

Challenges

  • Scaling
  • Diversification of Risk
  • More insights into Customer behavior

6. LEGAL

Last quarter review

  • Legal review of T&Cs, Staking & Lending
  • Getting Kenneth Oh as Legal advisor

Next quarter review

  • Hiring a Head of Compliance & Legal

Challenges

  • General uncertainties around crypto legal

7. COMPLIANCE

Last quarter review

  • BTC Lapis
  • KYC process finished
  • Applied for Digital Payment Token license in Singapore -> needs to be finished until end of Q2

Next quarter review

  • Finish Digital Payment Token license in Singapore

Challenges

  • General uncertainties around crypto compliance

8. HUMAN RESOURCES

Last quarter review

Next quarter review

  • Have stringent hiring limits for new team members
  • Negotiate with WeWork to start later in case Singapore does not open up before May
  • Human Resources Tool for better tracking of absences & leave planning
  • Health Package for Employees (Alternative to insurance)

Challenges

  • With the coronavirus crisis the tides have turned and now we have many potential team members interested in Cake

9. Business Development

Last quarter review

  • Lapis partners integrated

Next quarter review

  • Removed from public version

Challenges

  • Separating the good from the bad

10. DeFi

Last quarter review

  • Technical details for DeFi chain
  • First public code release of DeFi chain
  • DeFi chain client-side decentralized app (dapp) mockups and planning

Next quarter review

  • Launch of DeFi Chain
  • Integration of DeFi chain with Pool
  • Staking support
  • Tokenization support on DeFi Blockchain

Challenges

  • Marketing

CEO DIRECTIVES FOR Q2 2020

1. Annual Marketing & Business Strategy Discussion

Background:

With the launch of Bitcoin Lapis in Q1 2020 we now have a strong base to attract numerous users for Cake. Q2 will be the first quarter that tech and product are not the limiting resource anymore, but we can blaze full speed ahead.

So far, we haven’t done any paid advertising and most of our users came from our existing audience. Going forward, we have to find strategies to grow this user base exponentially.

Looking at some companies with incredible growth, PayPal comes to mind, which grew 15% week over week during the peak times. While this is not sustainable in the long run, it should be our goal to get there at least for shorter sprints in order to blitzscale.

In Q4 2019 we had a week over week user growth of 2.6% and in Q1 2020 it went up to 3.9%. The goal for Q2 2020 should be at least 5% week over week.

Since we have not done any paid marketing we do not have any CAC Customer Acquisition Cost yet.

We will add our affiliate program in Q2, which will help us with a push as well.

Here are a few of our direct and indirect competitors:

At the moment, we are smaller than all of them, and we do not have the financial capabilities right now to compete with them on a 1:1 marketing budget.

Discussions Results:

A few points and to decide on are the following:

Going for a blitzscaling 15% week over week growth, which metric should we actually use?

  • It was decided to use user growth WoW as the KPI

Which marketing channels and tactics should we use?

  • Social Media
  • SEO
  • Affiliate marketing
  • Performance marketing

2. DeFi Chain Launch

Background:

  • All on the DeFi Blockchain can be found on: www.DeFiChain.io
  • At the moment it is not possible to run Decentralized Finance (DeFi) on top of Bitcoin, only on Ethereum.
  • Ethereum and ERC20 tokens accounts to only <15% of the total crypto economy. The entire DeFi space today is missing out on the rest of the 85% of the crypto market.
  • Decentralized Finance would allow users to stay in control of their private keys while Cake would be the user-experience-platform
  • With DeFi Chain we plan on bringing the entire crypto economy, esp. outside of Ethereum to a dedicated DeFi blockchain secured with Bitcoin.
  • We have been working on it for the past 9 months and are now ready to launch
  • We are not the only team trying to achieve something like this. The main competitor is Rootstock, who wants to bring full Turing completeness to BTC, which has similar issues as ETH. https://www.rsk.io

Discussion Results:

  • We will launch DeFi Chain on (date removed from this version)
  • DFI can be staked through Pool
  • New token is emitted at an estimated rate of rate 200 DFI every 30 seconds (10% of that goes to community fund) for the first year. [~210mil new DFI in a year]
  • Emission rate will be lowered after 1 year according to the schedule.

3. Fundraising 2020:

Background:

  • Looking at our burn-rate, we have a runway of around 1 year, excluding any marketing-cost.

Discussion Results:

How should we proceed with our funding situation for Q2?

  • No need for any fundraise for now.

4. Security Fund

Background:

  • The larger we get, the more risk we have in case anything goes wrong with our funds.
  • So far, we have limited the batches in order to take a risk based approach.
  • Many companies such like Binance or Coinbase entertain a security fund, where a certain % of all their revenue moves in to cover potential losses (for example Binance had no problems covering 60 Mio USD in June 2019, when they were hacked)
  • The suggested name could be: “Secret Cookie Stash SCS”: Cake’s emergency insurance fund.

“To protect the future interests of all users, Cake will create a Secret Cookie Stash (SCS). Starting from Q2 2020, we will allocate a certain percentage of various fees received into the SCS to offer protection to our users and their funds in extreme cases. This fund will be stored in a separate cold wallet.”

  • This solution would allow us to offer something, without any obligations and would bring peace of minds to users.

Discussion Results:

  • It was agreed to start this fund

5. OKRs & NO-List for Q2 2020

Reminder of agreed OKRs from Jan 1st 2020 for the year 2020 (Objectives (=WHY) & Key Results (=WHAT)) and let the Executive-Team work out the HOW

2020 OKRs Cake Pte Ltd

OKRs for Q2 2020 (Objectives (=WHY) & Key Results (=WHAT)); let the Executive-Team work out the HOW

Q2 2020 OKRs Cake Pte Ltd

No List for Q2 2020 🚫

  • NO fiat Gateway -> later in 2020
  • NO full refactorization of the codebase -> later in 2020
  • NO selling of Shares to other coins -> later in 2020
  • NO corp account acceptance -> later in 2020
  • NO revamping/redesigning of website -> later in 2020
  • NO token launch platform -> later in 2020
  • NO other language than English, German, Chinese -> later in 2020
  • NO app -> later in 2020

We are looking forward to your feedback and questions in the comments.

For more info please visit: https://cakedefi.com

If you have any questions, please join our English Telegram group: https://t.me/CakeDeFi_EN

We will keep focusing on our mission to bringing you cashflow from any type of blockchain asset in the most transparent and most attractive way possible in order to build a one-stop platform for you to manage all your finances in an automated AI-supported manner — be it crypto, real estate, stocks, gold, and much, much more.

We appreciate your trust and business.

Your Cake Team

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