Digifox is a mobile app that makes it easy to buy cryptocurrencies and send/receive money across the globe. Another benefit is that it pays a relatively high interest rate. Oh, and something else: You can now invest in Digifox, as the company has launched an equity crowdfunding campaign on WeFunder.
The founder and CEO of the company is Nicholas Merten, who has bootstrapped the operation. Before this, he started DataDash, which is the largest YouTube channel for cryptocurrencies (there are more than 343,000 subscribers).
That experience enabled Merten was able to try out a lot of fintech apps and he came out of those trials mostly disappointed with what he saw. “The industry is riddled with middlemen, outdated payment networks, and hasn’t kept up with the rest of the world,: Merten observed. “We’re here to bring finance into the 21st century, with better yields, more opportunities, and friction-less payments.”
How Digifox Works
With less than $60,000 invested, Merten has done a lot. Consider that he has created fully functional apps on the Apple (NASDAQ:AAPL) Appstore and Alphabet’s (NASDAQ:GOOGL, NASDAQ:GOOG) Play store. They are both based on a sophisticated blockchain system and have robust security systems. For example, users need to use two-factor authentication for account registration.
It does not take long, though, for onboarding — say five to six minutes. A big reason is there is no need for configuring the wallet for “seed phases” (these are a key for the funds). Rather, the company has a smart wallet technology that allows for non-custodial handling of the assets.
The result is that the Digifox approach has much lower costs. Note that a merchant could realize savings of 50x compared to traditional approaches for consumer spending. Or, with a wire transfer, the savings could be as much as 900x cheaper.
In terms of the traction — which is certainly essential for anyone thinking of investing in Digifox — there have been more than 3,400 registrations. The company is also targeting the Generation Z category, which has a population of about 68 million. This is a group of digital natives who are looking for alternative approaches to their personal finances.
Then what about the business model? Well, Digifox takes a 1% cut for lending and borrowing transactions and 0.49% for trading. There are also no membership fees or upfront costs.
Invest in Digifox?
So far, Digifox has raised more than $287,000 from more than 384 investors. The proposed valuation is at $18.1 million.
Consider that the investment structure is a SAFE (Simple Agreement for Future Equity) instrument, which means that equity is not allocated until there is a trigger event. This is usually an acquisition, subsequent funding or IPO.
Those who invest in Digifox and are also users of the app, get a bit of the “eating the dogfood” experience. It comes with perks that are based on the amount invested. For example, if you commit to more than $1,000, then your lending fees drop to 0.1% and the trading fees are 0.25%. There is then a personal 30-minute call with the founder.
How will it use the proceeds of its fund raising? Digifox plans to put 72.5% for hiring, 10% for marketing, 10% for legal and 7.5% for intermediary fees.
Now, as is the case with any early-stage investment, there are significant risks. After all, Digifox is not generating any meaningful revenues. There is also emerging yet well-established competition, such as from Wealthfront, Square (NYSE:SQ) and Robinhood. What’s more, the crypto market’s regulatory status remains uncertain. Keep in mind that it is possible that the company could ultimately be subject to the U.S. Bank Secrecy Act as well as other federal banking rules. If so, this could mean heavier expenses and compliance requirements.
In other words, before making an investment, it’s advisable to do your own research and make sure the equity position is consistent with your diversification requirements.
Tom Taulli (@ttaulli) is the author of various books on investing and technology, including Artificial Intelligence Basics, High-Profit IPO Strategies and All About Short Selling. He is also the founder of WebIPO, which was one of the first platforms for public offerings during the 1990s.
As of this writing, he did not hold a position in any of the aforementioned securities.
Investing through equity and real estate crowdfunding or asset tokenization requires a high degree of risk tolerance. Despite what individual companies may promise, there’s always the chance of losing a portion, or the entirety, of your investment. These risks include:
- Greater chance of failure
- Risk of fraudulent activity
- Lack of liquidity
- Economic downturns
- Dearth of investor education
Read more: Private Investing Risks