<aside> ⚔️ As one investor aptly put it, we’re “fundamentally a risk management job with a consumer frontend”. We’re not naively blazing a trail, hoping to work out the risk & regulatory pieces later. Managing risk lies at the heart of our thesis, it’s where we began.

Our meticulous attention to risk mitigation is what has allowed us to succeed where so many efforts have failed. As the market melts around us, many protocols are going up in flames. Helios is emerging like tempered steel, strengthened by the heat and pressure.

</aside>

Our business is complex, spanning crypto, solar, emerging markets and international regulation. While this forms a considerable moat to competitors seeking to replicate our success due to the interdisciplinary expertise required, it also means we must deeply understand each industry and the risks associated with each.

We’ve grouped risk vectors by industry below. We optimized for concise summaries encapsulating the key factors of each risk, happy to dig much deeper on a call.

Solar Risks

• Default on PPA
  • Each solar installation is backed by a Power Purchase Agreement (PPA) which specifies the terms at which our commercial customers will purchase power from us. If a customer defaults on this contract, our APY is adversely affected.
  • Our primary method of mitigating this risk is by working exclusively with well-capitalized, cash-flowing businesses with more than 10 years of operating records. In South America, our solar developers go even further, working only with larger multi-national corporations (like Nestle, Walmart, & Teva) bearing high reputational risk should they fail to make repayments. Our solar developers in India have a ~3% default rate across 200+ projects. In South America, that rate drops to 0%.
  • In the event of a default, we not only have legal recourse, we can also physically relocate the installation to another customer for ~10% of the initial cost. Worst case scenario, we’re still above water.
• Operational / Performance Setbacks
  • To maximize APY, we want our installations running at peak performance every day, year round. The two most common setbacks are weather and construction.
  • Solar panels require strong, consistent sunlight, free of adverse weather conditions, to operate at maximum efficiency. We specifically target regions with favorable climates for our installations. While a single developer is constrained to a region, we operate globally, allowing us to choose only the most choice sites. We also use cutting edge technology for 24/7 oversight of our installations, ensuring any problems are addressed immediately.
    • Bonus: If you read Solar - Developers & Projects, you’ll know about the incredible robot used by our South American partners to clean installations daily, improving performance by >20% and reducing millions of liters of water use per year.
  • If you’ve ever hired a contractor for just about anything, you’ll know that completing a project on time is rarely a simple task. This is why we work with top solar developers leaning on deep relationships with PV panel producers and EPC firms to ensure that our projects are completed according to schedule.
• Project Pipeline
  • Building and maintaining a strong pipeline of projects is critical to long-term success. Without well-sourced projects, you’re dead in the water.
  • Here is where our decentralized model really shines. Working with reputable solar developers around the world, we’re able to select projects specific to our needs at any given time, a privilege which we pass directly on to our users. Helios users can optimize for environmental impact, social impact, geographic diversity or maximum yield, or a mix of them all. Our ever-expanding project pipeline has already exceeded $150M.

Crypto Risk

• Liquidity / Bank Run

  • Perhaps the greatest fear of any DeFi protocol; what happens if everyone decides to pull their money all at once? This is a really important risk so this section will be notably longer.
  • To begin, let's discuss the core functionality of Helios: Investors deposit funds into pools. All funds are transparently deployed to fund the development of solar infrastructure (we build and own solar installations). As a result, we're not as liquid as many other protocols; a small price to pay for stable, double digit yield uncorrelated with crypto or public markets (+amazing climate benefits). Traditionally, this would mean a 5-10 year lockup on funds. For the casual investor, this is far too long. Large treasuries have longer time horizons but would still benefit from enhanced liquidity.

  So here's how we enable liquidity and address bank run concerns

  • Large capital providers
    • Long term investments by larger institutional clients will form the foundation of Helios, providing deep capital pools able to withstand sizable withdrawal requests by smaller users (for example, if TVL is $1M and someone pulls 250k, that's a problem. if TVL is instead $20M, a 250k withdrawal is no longer an issue).
  • Repayments
    • This one is a bit more complex. We receive monthly payments from the solar installations and distribute these funds back to users (yield). By default, we offer the ability to automatically reinvest your earnings back into Helios, earning more yield and funding more solar. Einstein called compound interest the 8th wonder of the world, we strongly agree.
    • However, we're not able to immediately invest this capital due to solar project timelines. This creates a temporary cushion of funds that can be utilized to payout withdrawal requests. In that case, User 1 seeking to reinvest their earnings would immediately assume the revenue stream now vacant by the withdrawal of User 2, actually increasing efficiency of the protocol while enabling liquidity.
  • Our protocol dramatically increases liquidity of a traditionally highly illiquid asset class. Efficient, real world use case for web3 tech - ✅.
  • In the event of major market turbulence, we are able to limit withdrawals subject to available liquidity. During this recent bear market, Maple Finance has proven this strategy is very effective when executed correctly.
  • Finally, let’s imagine the absolute worst case scenario, all of our liquidity providers demanding immediate repayment. In this case, we could sell off our solar installations to companies looking to meet their net zero requirements. In this case, we would still make a respectable profit as a solar development middleman, we’d repay investors and deposit the rest in the treasury, enabling us to invest in more solar installations, keeping the protocol alive indefinitely.
  • Important Note: Helios is meant as a vehicle for long term investment. Climate change isn't an issue we're going to solve overnight. It requires massive sums of capital invested over very long periods of time. If your goal is to make a quick buck flipping tokens or farming airdrops, Helios likely isn't the place for you. If instead you wish to build long term wealth while doing your part to create a hospitable planet for the generations to come, then we welcome you with open arms. This is something we want to be fully transparent about with both investors and users.

• Crypto Asset Risk

  • Crypto assets are known to be volatile and in rare cases can implode entirely. It’s critical that we protect our deposits and treasury from shifting asset prices.
  • Deposits can only be made in stablecoins pegged directly to USD. This avoids the vast majority of volatility. As illustrated by Luna/Terra, even stablecoins are not completely insulated from risk. That’s why v1 of the Helios protocol only accepts USDC, recognized as the most transparent stablecoin.

• Smart Contract Risk (Hacks)

  • Hacks are all too common in the crypto world, largely as a result of nascent technology, decentralization and the significant financial incentives. The last thing we want is a hacker draining our treasury.
  • Helios’ backend is composed of battletested open source components from Maple, Compound and OpenZepplin. We believe the composability of web3 is one of its greatest strengths. These contracts have undergone multiple audits and through real world use have proven their resiliency. We’ve also beginning the process of auditing our contract to ensure maximum resiliency.
  • As our core business is investing in real world assets, we actually hold comparatively few crypto assets in our treasury. Capital and returns are continuously deployed, there simply isn’t much for hackers to steal.

Emerging Market Risk

• Currency Risk
  • Operating in emerging markets means investments and yield are denoted in local currency. As USDC is pegged to the US Dollar, we’re exposed to volatility between currencies.
  • We utilize currency hedging contracts from banks like Citibank to lock in a set devaluation rate which we bake into our APYs upfront. While a notable Competitors displays APY in the local currency, obscuring the 5% devaluation rate of the South African rand, we believe it’s important to operate transparently.
• Government
  • Governments play a sizable role in the renewables sector, providing subsidies and tax incentives to promote the development of clean energy. In emerging markets, these governments are especially volatile.
  • Operating in the Commercial & Industrial (C&I) space, we limit the government exposure as compared to utility-scale by working solely with private enterprises. We see C&I as the sweet spot between residential and utility-scale, offering the scalability of utility-scale without the government dependence while avoiding the high operational costs of residential.
• Repatriation
  • Similar to currency risk above, our returns are denoted in local currency which means we have to convert them out into USDC.
  • Helios funds projects through a Limited Liability Partnership (LLP) in the target country. Repayments are made as drawings with no repatriation limits on the available profits. Foreign partners can be paid in US dollars directly from local bank account. These funds are then converted into USDC via OTC crypto exchanges.