Good morning, Maarten, and welcome to Commodity Conversations. You are the CEO of Vosbor, a digital agricultural marketplace. Could you tell me a little about yourself and your career so far?
I am from the Netherlands and started my career in 2009, working in M&A with an investment bank in London. I covered financial institutions, many of whom were in difficulty because of the subprime mortgages on their books. The Icelandic government hired our firm to advise on the restructuring and capitalisation of the country’s banks, which became my first project.
It was common for analysts like me to work 100 hours a week in the office, but I liked M&A a lot. It was challenging, competitive and financially rewarding. I wasn’t planning on a long career in investment banking, though. I remember doing an all-nighter in the office, and my manager – twice divorced in his mid-forties – walked in at 7 am. He asked me if I had spent all night in the office. I replied that I had, but the report he had asked for was on his desk. I thought he would thank me, but he said I looked terrible and told me to go home, shower, and be back for a meeting in an hour. I realised I could end up like him if I stayed in M&A.
In 2015, I got together with some friends and formed Vosbor to trade niche commodity products. We focused on the Black Sea, where we sourced durum wheat, barley, and other feed ingredients and shipped them to East Asia. I loved it. In 2019, we switched direction to what we are doing now.
While preparing for this interview, I found little information about you on social media platforms. Is that intentional?
As a trader, I learned the value of keeping success quiet. We are still in beta mode as a platform, so we have been operating somewhat in stealth. We plan to go live this quarter, and you will soon hear more from us. We will start a media campaign and do more interviews before the launch. Yours is the first one.
What led you to transform your little trading company into a platform?
One of the things I realised when I started Vosbor was that the business happens almost entirely offline. I didn’t understand why. Few markets still operate offline. If you want a pair of shoes or need a new washing machine, you go online and get it delivered.
I understood that secrecy can help traders, but the flows are already transparent. Keeping trade offline just made it less efficient. When we started Vosbor, we did our business over the telephone and by email. We frequently had misunderstandings over details communicated over the phone or misinterpreted via WeChat. Sometimes a set of shipping documents was too big, and the email didn’t arrive. These sorts of inefficiencies made no sense.
As a small trading company, we also understood that we could never compete with the grain majors. We had no infrastructure and little trade finance, so we mainly did back-to-back deals. We realised that we had to find our competitive advantage. We identified it in technology.
The latest information I found is that you have six employees, offices in Amsterdam and Singapore and a valuation of $7 million. Is that up to date?
No, it isn’t. We have over 30 employees now. We have offices in Amsterdam and Singapore, but we also have people working for us in China. We do not share our valuation, but we raised $7 million in the last funding round.
How did you eat while you were setting all this up? Did you live on your savings?
Yes, I lived on my savings for nearly two years, but we managed to raise funds when more groups started participating in our beta phase.
You have a former president of Cargill and the ex-CEOs of Viterra and Bunge on your board. How did you meet them, and to what extent are they involved in the company?
I met Chris Mahoney about three years ago when he had recently retired as CEO of Glencore Agriculture – now Viterra. I pitched the project to him, and after some time, he joined with one condition: to have skin in the game as an investor. I reached out to Soren Schroder after he left his position as CEO of Bunge. He also came on as a director and an investor. Both Chris and Soren are actively involved in the project.
Our Chairman, Bram Klaeijsen, is a former President and Regional Director of Cargill Asia-Pacific and has been a supporter from day one. Another director, TC Ong, also worked at Cargill and was previously a board director at COFCO. They bring a wealth of experience, great networks, pertinent opinions and determination to add value!
Aryan van den Blink was also on our board. He was ex-Cargill and my trading mentor for years. He quickly became one of our most fervent promoters. Without him, Vosbor would probably not exist. He sadly passed away in December.
You have venture capital backing. How difficult was it for you to obtain?
It was difficult at the beginning. VC investors can’t get their heads around the commodity trading business and don’t understand that it takes place offline. However, VC investors love large addressable markets – and the physical agricultural commodity market is enormous.
It took us many months to convince the first investors, but the interest from the grain majors helped. Getting VC funds involved in the last fundraising round was more straightforward.
Imagine you meet a potential VC investor at a conference; what do you say to him? What is your elevator speech?
The most important trade, the agricultural commodity trade, takes place almost entirely offline. It is a fast-growing $250 billion market, with international grain trade doubling in 20 years and oilseed trade nearly tripling. By digitising the physical commodity trade, we’ll be the first to capture real-time commodity price benchmarks that no one can access today, enabling us to transform the $30 trillion agri commodity derivative trade.
Trading will become more efficient, transparent, and cheaper. We are now in beta mode with nearly 70 different groups from the industry – the leading players included – and over 180 individual beta users.
Will you charge a transaction fee on trades?
No. We want to build liquidity quickly. If we charged transaction fees, we would become a digital broker, which is not our goal.
So, how will you make money?
When liquidity builds, we will automatically generate price benchmarks for the physical markets in grains and oilseeds. These benchmarks will be valuable for traders and anyone interested in agriculture, from farmers to financial investors. More specifically, they will enable us to build swaps and synthetic derivatives for, say, Black Sea wheat or Brazilian soybeans. The CME has tried to launch these products but failed to create strong liquidity.
Once we have launched derivatives, we must match bids, offers, and counterparties and collect margins. We are already building the infrastructure for this. When we take on this active role as an exchange, we will start charging commissions on these derivative trades — in the same way that futures exchanges do, but at lower rates!
It sounds like you intend to become a PRA – a Price Reporting Agency.
We see value there. PRAs are sensitive to manipulation in less liquid markets. Having real-time trades visible on a platform reduces the possibility of manipulation. Our platform will show volumes and market depth, which the current PRAs can’t provide. This aggregate data has value. However, we will never share client or trade-specific data.
Will you have to register as an exchange?
We are in discussion with the relevant authorities, but as a physical commodity exchange, we don’t need to register until we start to trade derivatives.
Where are you now?
We are still in beta mode with our users testing the platform, but we plan to go live in the first quarter of this year. We will launch physical and paper trade in 18 grain and oilseed products, mainly focusing on Asia, where most of the buyers on our platform are based. On the other side, we have sellers covering all the major supply markets.
Is the paper market cash settled?
Yes, but with a possibility for physical delivery.
How does Vosbor work – is it Blockchain based?
No, it is not Blockchain-based, but we use zero-knowledge proof, a cryptographic method to verify information without sharing the data. Its origin is in Blockchain, but Blockchain technology is challenging to scale and does not offer much advantage over the cloud. Zero-knowledge proof allows us to build credit in the system without participants having to share what they are trading.
How does it work?
If you wanted to buy a cargo of soybeans from me, it would be difficult for me to assess whether you are a suitable counterparty quickly. Using zero-knowledge proof, I can send an enquiry to the system to ask, for example, whether you have traded soybeans in the past on the platform – and in what volume. If you agree to share that information, the system will confirm whether you have traded a similar volume to the quantity you seek without sharing the details of what you have traded. It is a great way to get feedback on your counterparty without them having to share sensitive, confidential information.
Trust is the basis of physical commodity trading. Is this the way you create trust?
Ultimately it is all about trust, and zero-knowledge proof allows us to build that initial trust.
How else do you build trust?
We have a functionality where you can place indicative (not firm) bids and offers on our system. You can send this to an environment we call our Exchange, where everyone can see all the bids and offers. Once you accept my Exchange bid or offer, I still need to accept your acceptance.
Or you can send it to a second environment, called OTC (Over the Counter), where you only see the bids and offers made directly to you and the ones you made directly to others. It is like a dark pool in the equities markets. It replicates how the physical commodity business works today. You don’t share your bids and offers with everyone – you send them to your preferred counterparties.
You can also request performance bonds. We have various functions to limit counterparty risk for our users.
We, as an exchange, need to earn trust. We have put a lot of effort into cyber security and risk mitigation. Some of our team come from the IT departments at major banks covering derivative markets, where they learned how to build ultra-secure software and manage access in a regulated environment. In addition, we have regular security audits done by leading security firms. It costs a fortune and slows our development down, but the investment will pay off.
There is a lot on your website about food security. How will your platform help in that regard?
Food security is positively correlated with trade because of a widening mismatch between where crops are produced and where they are consumed. Complex geopolitics, climate change and economic uncertainty have made the role of traders more crucial than ever. We contribute by adding liquidity to the market. The more liquidity you have, the better markets function – and the better for everyone.
Traceability is a big issue for traders, and there have been various initiatives, like Farmer Connect, to allow users to track their ingredients. Can your platform aid in following the value chain from farm to fork?
Yes. Consumer goods companies struggle with traceability when sourcing from smallholders, but on our platform, they can track provenance via a string, providing the seller does so too.
Brokers are active in the physical agricultural commodity market. Do you welcome brokers?
We welcome broker participation. Our platform is no different from the futures markets, where brokers intermediate on behalf of traders, some of whom are exchange members who could place orders directly. Brokers know their customers inside out. They add value to the market.
Have you built an AML – Anti-Money-Laundering – safeguard into the platform?
Yes, we allow participants to do their AML and KYC (Know-Your-Client) procedures in a secure digital data room where you can chat and share information in private. You can track who shared what document and when it was opened or downloaded.
There have been various attempts to move physical agricultural commodity flows onto an electronic platform. Why and how do you think you will succeed when others have failed?
I compare it to quitting smoking. Everyone who smokes knows it would be better if they stopped. Everyone in the physical commodity industry knows it would be more efficient to embrace digitisation and put the supply chain onto an electronic platform. Nevertheless, it is difficult to give up smoking, and it is difficult to give up a method of doing business that you are used to – especially one that has existed for centuries.
It is a bit of chicken and egg – you need liquidity to attract participants, but you need participants to build liquidity in the first place. To do that, you must create a solution that is not five times better than the existing model but is fifty or one hundred times better. People won’t give up on their old habits unless you do.
When we started, people told us that we should focus on only one part of the value chain and build an execution or quotation system. However, we realised that for it to work, we would have to cover all the needs of a modern trader.
I think an essential part is ensuring that digitisation doesn’t disrupt the relationship angle of commodity trade because, as you said, it is all about trust. Therefore, we put a lot of effort into building integrated communication tools.
At the same time, everyone has different needs. Buyers, sellers, or third parties – like shippers or surveyors – have unique pain points. We identified critical supporters within those groups and determined what drove them to our product features. We analysed feedback to convert on-the-fence users into fans. We doubled down on what these users love and addressed what held others back. I wanted to avoid creating something that many people want a small amount, but rather build a product that a small number of people want a significant amount. That is how you turn fans into fanatics.
We spend a lot of time with our beta users, focusing on improving our product/market fit rather than growing our user base. When CBOT went digital, or ICE started, there was resistance too. They convinced significant players, who then helped them launch their platforms successfully. We take a similar approach.
To what extent are you competing with Covantis?
Although there is some overlap, we’re solving different parts of the same puzzle. Our focus is on the market, both pre-trade and trade. Covantis services post-trade operations. Our platforms are complementary, and Covantis shareholders participate in our beta.
Covantis plays an essential role in getting the industry to commit to digitisation. We have a good working relationship with them, and it will make sense for our two platforms to communicate with each other as we develop liquidity.
Do you handle payments?
Transactions can be either basis CAD (Cash Against Documents), TT (Telegraphic Transfer), or L/C (Letters of Credit). We do not currently handle payments, but we plan to address them later. Our CTO (Chief Technology Officer) was previously CTO at KOMGO, a trade finance platform, and he has excellent ideas about integrating finance. As a trader who struggled to get financing, I’m keen to make it easier for non-traditional lenders to finance the commodity trade.
Turning to your role as CEO and Founder, what are your challenges?
Time is a big challenge. I would love to spend more hours with clients, understanding their concerns and how best to address them. It involves a lot of travel, which is time-consuming. Travelling has been challenging over the past few years with all the Covid related restrictions. I was in China in November, where I spent fourteen days locked up in a hotel room before meeting anyone!
Nevertheless, Covid didn’t slow us down – on the contrary, it has helped us because it showed the industry that they need to digitise.
Recruiting and training IT developers is also challenging. You won’t find any IT developers with a history in trading, execution, or related business. We do internal workshops to teach our teams about trading, but it is a steep learning curve and takes time. We are a fast-growing company and constantly looking for new talent. If any of your readers are interested in joining us, don’t hesitate to get in touch with us through our website.
Thank you, Maarten, for your time and input, and I wish you every success with your project.
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