E24: Silta Co-Founder: Blockchains for a sustainable future

0:10Welcome, everyone. This is Kevin from the YearLab Podcast. If you're new here, every week we invite fascinating guests to cover the topics of investing, entrepreneurship, and well-being. Our guest today is Ben Shepard, co-founder at Silta Finance. Silta provides DeFi solutions for investing in the$3 trillion real-world infrastructure asset market. The protocol supports diligence, financing, and monitoring of renewable energy, utilities, and more. it's powered by a global community of transaction advisors driven by a passion for building a more sustainable future and world ladies and gentlemen before we start don't forget to subscribe to our channel and turn on the notifications to never miss one episode and also keep in mind nothing shared or discussed here is financial advice obviously and now that we've covered the basics on to today's episode.

1:02Ben, why don't we start with some context about your background. So what are the key turning points in your life that define who you are today? Hi, Kevin. Great to be on the show. Hi, everyone. Wow, key turning points in my life that made me who I am today. Probably one of the biggest ones was what originally brought me over to Southeast Asia. So I did a sponsored bike ride, which is about 500 kilometers from Huchemin City to Nong Ben in Cambodia. And I basically rode all through the jungle and the back areas from Vietnam to Cambodia. And it was just a sort of life-changing experience. And along that journey, not only did I make long-lasting friendships with the people on the ride, but I also saw how people live and having spent all of my life today, living in the UK, everything that you need in life to then saying, wow, this is how the other side of the world lives.

2:10This is, you know, this is in desperate need of, of infrastructure, of more support, of access to education, of all sorts of things. It was kind of this life-changing experience for me. Um, and my My career up until that point had been on basically structuring transactions for toll roads and heavy infrastructure in Europe, where there's already a lot of that. So you did a project, but it didn't really make a material difference to anyone's life. But having been on that bike ride, I was like, wow, I need to get somewhere where it matters. So I went back to my boss and the company that I worked for at the time and I said, hey, I see that we've got an office in Vietnam.

2:52Can I move to Vietnam and work on projects for the World Bank out there building these big infrastructure deals? And he's like, well, Ben, we need to win a project there first. So I say, okay. So I fast forward 12 months. I win a project. It's a$3.2 billion US dollar toll road, about 260 kilometers in length, and two points in Vietnam. We won it. I go back to my boss. Can I move to Vietnam because we've won this project? Oh God, no. You've proved yourself at sales now. We need you here. I was like, oh, of course. That was the first point in my career where I realized I needed to be an entrepreneur.

3:33Anyway, he did let me go in the end. I did get to move to Vietnam. And ever since then, I've been really focused on doing things that make a material difference to people's lives. If I'm going to invest my time into my career, I want to feel like it's making a benefit to someone. And that has largely been around trying to get sustainable infrastructure built in places that matter to people. So that was one major event in my life that really sort of directed where I am today. I met my wife in the Philippines, so that obviously impacted on that as well. And then my first entrepreneurial experience of which there's been four startups has also been another significant point that sort of directed my career.

4:25And it's kind of seen me do lots of things in different jurisdictions, in different industries. And that's been another big turning point for me. Great. So you mentioned you worked for, I think, more than 10 years in transaction advisory. and what you're doing today has been shaped completely by this experience. So what are the key problems that you identified in the field? Yeah, so SILTA is a combination of what I did in my earlier career combined with the new experience I gained from working in Web3. And basically, the problem that we're trying to solve is there's too many sustainability-focused projects that never see the light of day.

5:13And the reason for that is because they can't get access to finance quickly enough. And that's just completely unacceptable in my view. If there's a project out there that makes a difference on a climate change angle, on a social angle, whatever it might be, if it's making a significant difference to the world for the better, it should get access to finance somehow and it should be readily available. But it's not. And that's the reality of today. And the reason for that? The reason is the small projects consume a lot of DD work, due diligence work that's needed by a bank before they can make an investment decision.

5:50And the banks only have a finite amount of resource to review these opportunities. And they have targets to meet. And so they focus on the bigger deals, the ones that are gold-plated with government and parent company guarantees and all sorts of protections. And so these other projects that might make a meaningful difference don't quite make it. The$8 billion coal-fired power plant versus the$14 million solar micro-good project, it's kind of like, which one does the bank want to go for? Which one's going to make more return over a longer period of time? Well, it's all about numbers and it's the other one.

6:24So this is what we're trying to change. We're trying to make it so that banks in TradFi, family officers, foundations in TradFi, and also DeFi protocol, DAOs, stablecoin projects can all far more quickly understand whether this sustainability focused project that needs finance is a bankable project. What are the risks in there? What's the returns? What's the impact? And to get that information in front of people more quickly, we'll do that through something called the Cilter School, which is our due diligence tooling that we've been building in Cilter. So before we dive into that, which is the key point today and super, super interesting and innovative, what made you decide to go all in on building crypto infrastructure in the decentralized finance space?

7:15because there's a difference between being an investor, kind of dipping your toes and then saying, I'm just going to go all in and actually build. A lot of people have a normal job and invest in the space because it's less risky. So what was your thought process to just decide to go all in?

7:38It's kind of, well, I found the space particularly forward-thinking and innovative. And the traditional infrastructure industry couldn't be more different. It's like chalk and cheese. It's just completely conservative typically and very slow moving. So the fact that there was this kind of like tribe of people that are trying to do something different through decentralized finance, I found really appealing. And I found a lot of like-minded people in terms of mindset that just want to be able to do things more efficiently, better, quicker, whatever it might be so that that was one of the things that attracted me to to web3 the other component of it was that you know what i want to do in terms of making these sustainability impacts getting these projects through there's a lot of resistance like the banks that are already out there because they want to focus on these on these bigger projects as i've originally mentioned so to actually actually get them to make the step change is quite difficult and it takes time so it's kind of like if i want to move at the pace i want to move that i need to be surrounded by people in an industry that are able to move at the same pace as what i want to move out and that happens to be web three but i wouldn't say that we're only deep buy focused i think silta doesn't just want to tap liquidity and defy it wants to tap liquidity and tradify and brilliant example so last night We were on a call with Goldfinch.

9:07We were talking about the borrowers in our pipeline. We were talking about what would be the right sort of fit deal for perhaps Goldfinch. And they were saying, well, most of our lenders like loan tenors that are quite short, double-digit sort of interest rates. So, you know, 90 days, 180 days, maybe a year in duration, interest rates in the banks they like that too but they also like products that are much longer in duration and fixed interest rates and and low amounts of risks that go with it so with silta there's this amazing opportunity where we can help the borrower go through a journey of okay we can help them get started by looking at getting you something called bridge financing with say a defy protocol so this is a shorter term loan, higher interest rates, but it gets you started on the construction of your project.

10:02Meanwhile, working with our banking clients, we can then work on a larger size loan that might have a duration of 10, 15 years, lower interest rates, but ultimately allows you to finish the project. And so we can actually use the sort of benefits of both these different financing partners to actually build a better solution for a borrower as they go cradle to grave through the project they're trying to construct and operate, which I think is amazing. It's using the best bits from both sides of the industry to allow borrowers to do the thing that makes the biggest difference, which is that sustainability impact.

10:41So if you had to explain Cilta to your grandmother, what is Cilta and how does it solve the problem that you identified in your previous career? Yeah, so Cilta, first and foremost, is a due diligence protocol. So we analyze opportunities from infrastructure developers and determine what are the risks associated with the project that they're trying to build. And we present that through something called the Cilta score and a due diligence report that then financing partners can express interest and make a financing offer to the borrower. So if the financing partner then successfully closes that deal, we then monitor the borrower as they go through construction and operations of the asset and make sure that the loan is getting repaid as it should do.

11:35So SILTA in a nutshell does three things. It's diligence, finance in marketplace, and monitoring during the loan tenor. And that's the services that we basically provide to the borrower and to the financing partners. So my grandma, if she cares about sustainability, which she does, would say, oh, so does that mean that I can invest in solar projects now? It's yes, absolutely. You can do it through one of our BeFi partners who would showcase a deal that the grandson's assessed and says, this looks all right, but here's the risk. Maybe you want to consider it. And you could then go to Goldfinch or Centrifuge or one of our other partners and actually invest directly in that project.

12:19And you can make a return as well as feeling good about the fact that you're making a difference to people in Vietnam or the Philippines or Brazil or Colombia or wherever it might be. Yeah. One of the key kind of innovation and central point here is tokenizing a credit score or tokenizing a due diligence. Why does it make so much sense if you compare to traditional finance and what's happening? Yeah, because it can't be tampered with. Every industry has its own little nuances that you need to be wary of. And I strongly believe that by bringing these scores that we come up with that actually rates the project on chain and having them there immutable, I think it's very powerful to have that.

13:11And over time, as borrowers apply for more and more finance, we can use this as a track record to see how their score is changing and how they performed on previous loans and whether they can then be perhaps accelerated for eligibility for finance more quickly in the future. The other part to that is if you're a borrower seeking finance and you've got a group of, say, 16 different banks that are all interested in working with you, each of those banks might want to have their own lender's advisors. So that means you're paying for 16 lots of different advisors for each financing party that's interested in you.

13:55well that's just a hell of a lot of cost and it's completely unnecessary in the May because ultimately they're doing the same piece of work but perhaps the bank doesn't want a certain piece of information shared about where their thinking is going or whatever it might be so I don't really agree with that philosophy and I think just like when you want to go to get a new credit card you can go to a creditcardcompare.com site and look at Oh, there's all these different credit cards. These are the terms. These are the rates, et cetera, et cetera. I think exactly the same. Here's a project. Here's the shelter score.

14:35Here's the DD report. This is all the information you need about that. And then here's all these financing partners that are PQ'd, and they can then use that DD report to make that decision. But the exercise has only been done once instead of the borer having to pay for that multiple times over and over again. Now, depending on where the financing party is from, they might have their own nuances within how they assess the deal. We in Cilta will basically calibrate our model towards regions in the world. So severe weather conditions in the Philippines is a massive issue because of tsunamis, tornadoes, earthquakes, volcanoes, everything.

15:20They've got everything over there. We're super lucky. Compared to perhaps, I don't know, Germany or the UK or somewhere like that, where, yeah, there's severe weather conditions, but it's not known for earthquakes, tornadoes, tsunamis. So we would calibrate the model towards different regions of the world to try and take into consideration those points and make it a better fit for those financing partners. Is it only linked to the regions or is there also some... some ways that these different banking partners want to see their due diligence? Or is there kind of international regulation, what a due diligence looks like, that forces these different banking partner to look at the same thing?

16:07In other words, is it really possible to have one due diligence shared across everyone? There's different nuances in there. Political stability is another one, for example. So depending on where you're working in the world, political stability in our SILTA score would have a much higher weighting than it would in other regions. Like Philippines, previous president, that would be a significant factor to consider. Perhaps it would have been in America with the previous president as well. So there's certainly things in there. But ultimately, what we produce should be enough the banks to then use that and with their own internal model calibrate to be able to then make a decision so where the banks have a different opinion on certain weight on certain risk groups they would be able to take the outputs of our report and feed that into their own model and calibrate as well so we've kind of we've brought the horse to the water and they can do the last bit of basically getting the horse to drink the water so to speak so it's it's taking it a long way along that journey, rather than it being, there's a project we know nothing about.

17:20It's, here's a project, here's loads of information that's already been assessed. Now take that and make your own internal investment decision. Can you tell us more about the kind of projects that you focus on? Yeah, so we've got 300 million US dollars worth of deals in our pipeline. The vast majority of them are solar. We've got some wind farms in there. We've got social housing, one of which is super interesting. So if there was a severe weather event and people's homes were flooded, they would need somewhere to live. So there's basically these modular homes that can be erected super quickly for people to basically take refuge in.

18:08and if the flood comes back again these homes float they get seat refuge on the roofs of these homes so there's all sorts of cool stuff like that's coming into the pipeline um the first few deals that we're doing are all solar focused and the one that we've just finished dd on um is in the philippines it's 16 solar mini grids that will give power to i think around 30 000 filipinos was on the island of Palawan with an organization called We Energy. We're now looking to help them get financing for that deal, or at least part of that deal, because it's quite a large one for us. So there's lots of cool stuff in there like that, that when you finish doing the DD and you sit back and you're looking, you're like, wow, if we managed to now help these guys get financed, this makes a real difference to someone's life in the future.

18:57because at the moment they either have limited access to energy or no access to energy or they're reliant on a coal-fired power plant that might be very expensive or whatever it might be or even diesel generators. So it's really motivating to be able to do work like that as well. Yeah, I was going to ask, why do you focus so much on sustainability and social impact? Because it's so important to you. Mainly because of my son. I want his children one day to grow up in a world that is like it is today or even better. I want them to be able to run around in a forest. I want them to be able to breathe clean air.

19:42My wife's from the Philippines. So my son's half Filipino, half English. And we lived there for four or five years. I've traveled all around the country. I spent a lot of time in Mindanao, the so say pirate part of the Philippines. I never had any trouble there. The people were lovely and took me in at the fishing port very well. But I also got to see what it's really like in those places. And for me, that really struck the heartstrings. I want to be able to spend my career investing in things that make a difference. And the same in Vietnam. I lived there for a couple of years and we complain that, oh, electricity bill's gone up.

20:21Oh, it's getting expensive in the supermarket. well shit at least you've got a supermarket you can go to at least you've got a switch to turn the power on you know my heart bleeds for you it sounds terrible to reach people's problems yeah exactly yeah yeah entirely let's talk about some more personal questions so you built a successful startup before silva infrastructure you were i think you told me about 34 years old. You got interviewed on CNN in the Philippines. You lived in the Philippines in a six-bedroom house. You were literally living the life. You had a private cook, you had a private driver.

21:03And then overnight, your life changed completely. Can you tell us about this story? What happened? Yeah, so it's my first startup, Frontier Law and Advisory, that I founded with Stanley. He was actually a co-founder in Silt. Um, and, uh, yeah, we had, uh, it was the first one. We, we were frustrated at the time, um, that the projects that we were winning with world bank, there wasn't enough money to complete the studies that needed to be done. And a large reason for that was the big engineering firms and law firms and finance firms that worked on it just had too high overhead. head. So we were like, we need to find a better solution to this because for a million dollars, you should be able to complete a feasibility study and still have money left.

21:53Why is it for a million dollars? We've overspent. That was just not right. So we came up with this idea of frontier law and advisory and launched that company. Ended up winning projects with Rockefeller Foundation, and Bloomberg philanthropies with various different developers around Southeast Asia. And this thing took off. And in the space of 15 months, it had really grown quite rapidly. But there was a problem with that organization in that I'm not a lawyer, Stan is. And basically, our business model only works in a limited number of jurisdictions. So I said, let's then, I'll leave this. You can grow this into more of a law firm.

22:38and I'll go and shut up a new startup that's specifically on the finance and engineering aspects of PPP. We can just collaborate for our own startups. That's what we did and had quite a successful exit out of that, launched this new one. It was growing. I think we got up to something like 18 people working for us. New president comes in in the Philippines, President Duterte, and says, right, no more PPP projects. So this is where private finance is used for infrastructure. We're like, okay, that's just killed the entire business, that's our bread and butter business. And he killed it because he wanted to take loans from China and Taiwan and places like this instead of using the local money that's already readily available to build infrastructure.

23:31So that died. I was like, okay, we're okay because we've still got business in Malaysia, in the UK, and a few other countries. About two months later, the same happened in Malaysia. So all of a sudden, we've gone from having everything you could really dream of. Life was okay then. I'm actually happier now, and I've been happier since not being quite as well off, I guess, because you kind of start to live in a bit of a bubble. But yeah, one would think, you know, with all those things, you know, life, life couldn't get any better. It's not really the case in my opinion, but anyway, that, that business died.

24:12Accrued some debt. In fact, trying to cover people's salaries, trying to keep the thing growing. I remember sitting in front of the laptop one day and I was waiting for this client to email and I had the songs playing, I say something I'm giving up on you. I said, my wife and I sat there like, do you think they'll email? I was like, I don't. They emailed. We got a deal in. It was enough to cover the wedding and for my son to be born. So it carried us just through those bits to cover the hospital costs and for my wife and I to get married. And then towards sometime after that, 2016, crypto came alive and I started to see these different projects appear.

24:55And one of them caught my eye. I bought a few tokens, wrote to them, didn't think anything more of it. They wrote back and said, we like your ideas. Could you come to Finland and talk to us about it? And I was like, okay, sure. And came over, ended up staying three months. Then they said, can you stay a bit longer? I ended up staying about four years, I think it was, in this project. And that's how I got into crypto as well. But that first startup, having those luxuries, it wasn't when I was at my happiest. It wasn't until after I lost all that and had to start again and build it back up. But I actually found real happiness.

25:41How do you explain that? Have you thought about it? Have you thought about how you were behaving when you were kind of living in abundance? like what are the how do you explain that all these things that people strive for all their life reaching these numbers these material things the thing that we're all basically working so hard towards is actually not the thing that makes us happy why I think part of it's down to who you associate with and as you become more affluent And the people that you associate with drive you down a particular route. And when you're in a place like Philippines, the expat community is there.

26:29And you can very quickly be around people that are reasonably well off, excuse me, and sort of start to take on more of those luxuries of having the cook, having the drive and everything else. but for me the the biggest issue was like we had dogs but i would find that the drive the dogs and then i will the dogs and the washing up someone else would do that tidying the house someone else would do that the cook would cook and before long you've lost touch with all these things that you normally do and actually whilst they don't well walking the dogs of course brings happiness but we're cleaning the house doing other stuff when you've got all those luxuries um you know you think you think that would bring you happiness but then you lose touch with reality you start to live inside this bubble if you like and you become lazy as well and you expect everything to be given to you on a bit more of a plate then you kind of i suppose you get a bit arrogant you get a bit above your a bit above your station and then it's not until you start to lose some of that you get to be brought back down to life and i'm so happy it happened to me now because i think the mindset i was in before perhaps and the way that i acted before would not have been the environment i wanted to raise my son in whereas moving to finland really getting brought back down to earth by how the finnish culture is and living in a small apartment but ultimately being super happy because I've got my family around me and we're getting to do stuff and we're experiencing somewhere new and then on to staying in a similar situation.

28:19I'm so much happier now and I teach my son so many more things now and my wife and I have a better relationship now and I left my dog and I get to walk my own dog and do all of this stuff. When you get to that point of having wealth, you lose touch with those things. You lose touch with reality. I actually wasn't very happy. I was depressed. It took me into depression. That combined with the company going down, I had counseling. I'm not afraid to say it. It was a good thing. It helped me to reconnect and rebalance my thinking. So when I look at Siltra now, I'm like, okay, if this thing's successful, there's potentially this big upside.

29:02Anyone who's invested for me, you know, the opportunity is there. My wife and I talk about it. It's like, but what would we do this time if we had that opportunity again? And we're both very much agreed we would never go back to the lifestyle we had before. Sure. We might move into a nicer apartment or a bigger house. We might, you know, get a car, do those things, but we wouldn't want to go back into the lifestyle that we had before because you just get too disconnected from reality. So you mentioned counseling. What did you do to readjust your life in those really hard moments? Quit alcohol for six months.

29:44Did a lot more sports. Took active steps to surround myself with people that would support me as I come out of those difficult periods. Because there's those friends that are like, come on let's just go and have a beer it'll be all right and there's other friends that are like you shouldn't have a beer you should get your mind right you should think differently about things you should you know let's go and do something else let's take a bike ride let's go for a run yeah so i took quite active steps on that stuff i spent a lot more time kind of investing in me as well and understanding more about me because my life at that point had just been a thousand miles an hour working working working and then more working working working they just seemed to be endless i was a workout well i still am a workaholic but i don't think that part will ever change but it was to a degree where it was unhealthy before yeah i think i was never an alcoholic but i certainly drank a lot more when i was stressed and quitting alcohol for that six months allowed me to readjust.

30:52And now I have the odd beer now and then when I catch up with friends. But if I'm depressed, I don't drink. I have a completely different view on how to handle that now. So I wouldn't drink now when I'm stressed. I don't go out when I'm really stressed. Instead, I'll go to the gym, I'll play some sport, I'll take my dog for a walk, I'll play football with my son, do something with my wife, and just try to get the mind clear. Or listen to audiobooks. And there's lots of different audiobooks I listen to, to kind of bring me back around and give me that grounding again when things are getting too stressed.

31:32So you changed your life completely for about six months, but then you wouldn't say that you kept this complete new lifestyle going. You probably kept some of these things, but at least you developed a series of tools to deal with any kind of hard situation that you developed during this bad time. So you are actually much more equipped to go through the hard moments that are coming in the future. Yeah, I went from one extreme to the other. And then I found a happy place in the middle and had surrounded myself with people that genuinely care about you. Just having that sort of genuine friend support network around you is a super valuable thing.

32:13And luckily for me, some of those people working in Siltra as well, we've got each other's backs when we need it. We actually spend a reasonable amount of time talking about mental health in Siltra. Whether it's me and another one of the co-founders or one of the other guys in the team, we have those conversations and it's really good. It's really positive. What do you do in that department? Which is really interesting, especially amongst probably more men in this industry. industry so what do you talk about and what do you actually advise people to do in your company to make sure this part is kind of in check yeah i mean we we talk about everything from like a health concern or relationship stuff or if a new baby's on the way things to think about and you know i don't want to get into the details of the things that we discuss because that's That's personal to them, but it's kind of those topics, but it's very honest.