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Circle CEO Discusses Pending Acquisition of SeedInvest

Jeremy Allaire, CEO of Circle


 

Jeremy Allaire

Founder, Chairman & CEO of Circle

  • Previously Founder, Chairman & CEO of Brightcove ($140MM Revenue; 2012 IPO)
  • CTO of Macromedia; Co-Founder & CTO of Allaire Corp. ($120MM Revenue; 1999 IPO; Acquired by Macromedia 2000)

Mr. Allaire brings two decades of experience building and leading global Internet software platform and online service companies, including Allaire Corporation, where as co-founder and CTO he led the company’s product and GTM strategy. The company was a pioneer in the use of the Web as a platform for commerce and business applications, and grew to serve over a 1M customers around the world, and as a profitable $120M revenue NASDAQ public company, until the company was sold to Macromedia in late 2000. At Macromedia, Mr. Allaire became the company’s Chief Technology Officer, and co-led products and strategy focused on re-inventing the experiences and rich, transactional applications that were possible on the Web with the Flash Platform, which became the most widely adopted piece of software in the history of computing. After leaving Macromedia in 2003, Mr. Allaire embarked on building Brightcove, a new online service aimed at disrupting the traditional television and video distribution industry. Brightcove grew rapidly adding thousands of major enterprise customers around the world, and today powers video operations on nearly 25% of the top 10,000 websites in the world, reaching ~250M unique viewers each month, and operating as a cash-generating $140M+ revenue company. Mr. Allaire brought Brightcove public on NASDAQ in February of 2012, and after promoting his President and COO to the CEO role, became Chairman in January of 2013. From 2003 to 2014, Mr. Allaire served as a Director at Ping Identity Corporation, a high-growth, industry leading software and online service provider for securing identity on the Internet whose clients include many of the largest financial institutions in the world.

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SeedInvest is a leading equity crowdfunding platform that provides individual investors with access to pre-vetted startup investment opportunities. SeedInvest has funded over 150 startups and boasts a rapidly growing network of over 200,000 investors. SeedInvest has had over 30,000 startups apply to raise capital since inception and has accepted less than 1% of those companies to feature on the platform. All securities-related activity is conducted by SI Securities, LLC, a wholly owned subsidiary of SeedInvest, and a registered broker-dealer, and member FINRA/SIPC.

Transcript


 

Adam Chapnick:

What was Circle’s vision at the outset? Then maybe we can piece in some of these acquisitions and how they fit.

Jeremy Allaire:

Sure, yeah. When we started Circle about five and a half years ago, we were very excited about cryptocurrency technology. Having built companies for the past 25 years, in other internet industries, the software industry, the media industry.

Adam Chapnick:

Brightcove right?

Jeremy Allaire:

That’s right, Brightcove is the last company I founded. We saw a pattern of open decentralized networks, open protocols, and open standards changing how different industries work. So, when we saw Bitcoin specifically, and then the broader kind of technical and architectural pattern of crypto, we became immediately convinced that this would become the new foundation for how the global financial system works. And that you could, over time, take fundamental building blocks like fiat currency, financial contracts, and rebuild those on top of, what we now talk about, as tokenized assets and smart contracts. Back then, that wasn’t really technically possible. But there were technical proposals, there were white papers, there were other ideas for how that would happen. We were convinced that over five to ten years that those things would become possible and that gradually we’d be able to build this foundational platform for the financial system. The markets that are needed to actually have that run, but in an entirely digitally native form. Then ultimately, the consumer products that allow people to get the benefits out of that.

Adam Chapnick:

So, you have several of those. I think I’ve counted four now, but I might have been missing some. You’ve got Circle Pay. You’ve got Circle Trade. You’ve got Circle Invest. Then you added Poloniex in February, as Aubrey mentioned. That brought you into the cryptocurrency space. With SeedInvest, what was the thinking there? How did that fit into the original vision? How does that make you stronger?

Jeremy Allaire:

About a year and a half ago with Ethereum’s production readiness, we got very excited about the idea of taking existing assets and tokenizing them. We had built originally, a payment system that directly converted between dollars and euros and bitcoin, and allowed bitcoin to be the settlement that worked. Ethereum made a huge improvement in what was possible. We wanted to rebuild what we did around that. One part of that was basically creating fiat tokens. That was something that we launched last week, which is US dollar coin. Which is a ERC-20 token, but it’s a whole asset backed token model. Which obviously will relate to security tokens, as we talk about in a minute.

The growth and ICO’s were really a pivotal moment because it was this concept of, how can businesses issue digital investment contracts directly over the internet? Allow individuals and institutions, but individuals from all around the world, to invest in those. It’s an incredible experiment in crowdfunding. It was an incredible experiment in, how do you apply token and smart contracts as a new capital formation model? We got very excited. Our belief was that the technology was getting close to a point where we would see what we like to say as, the tokenization of everything. Where, essentially all kind of assets, whether they be existing assets like a dollar, a share of stock, a piece of physical property. But also newly, truly, digitally formed assets. An investment contract written entirely in code that doesn’t have an external share agreement or something that, truly digital native assets would be born. And that there would be marketplaces for those and that those marketplaces would create platforms for businesses to form capital, to grow. Obviously that would create significant opportunities for people who want to invest.

We acquired Poloniex in February of this year. They were really innovative in being one of the very first marketplaces for all these alternative assets in the United States, and grew very fast. They needed help scaling and growing the business. That was the first key step in building a token marketplace that can support a really broad range of digital assets. From currency assets to commodity assets. To ultimately what we would like to see, is the trading of security token assets as well. That led us to Ryan and the SeedInvest team. Really wanting to have a primary issuance platform for raising capital for businesses to form capital. To marry that with the crypto infrastructure that we’d been building out, to be able to allow businesses and ultimately even individuals. We hoped to issue digital securities over the internet and allow investors with accredited and unaccredited investors to invest in those. Ultimately, to provide global secondary liquidity platforms for those as well. Which is a really tremendous opportunity that crypto makes possible.

Adam Chapnick:

You mention primary and secondary. How is that going to appear in the ecosystem?

Jeremy Allaire:

Today, obviously we have crypto exchanges. Primarily those are, at least in the United States, trading currency like assets and commodity like assets. That’s significant. We think there’ll be a lot more of both of those. Utility tokens, consumer tokens, things like that are going to be a major phenomenon that continues to grow. We continue to issue ... list those. That’s a secondary trading platform. People who are launching block chain projects, people who are forming those ultimately need those tokenized assets to trade on exchanges and we provide one of those secondary venues. I think SeedInvest, obviously to date, has built a very nice business helping hundreds of businesses raise capital directly over the internet. Issuing securities over the internet and pioneering the compliance models, and working with the governance models and regulatory models to do that. Really we look at things like security tokens, crypto, and equity crowdfunding platforms as, really, kind of make for each other. In terms of where, ultimately where we see the democratization of finance going.

Adam Chapnick:

Yeah, they’re cousins for sure. How in term ... you mention, the navigating the regulatory jungle. How will you deal with the blue sky law question?

Jeremy Allaire:

Sure. There’s obviously a lot of open questions about which exemptions will allow people to trade and which venues. What time frames and so on. I think there’s a lot of attention on this right now. At a national and a state level. I think we’re hopeful that we’ll see waivers or exemptions that ultimately allow certain classes of registered securities offerings to trade on ATS’s and other secondary venues. Obviously there’s a process that has to unfold for that to all transpire, but I think everyone sees the benefits of that. I think they see that we now have the ability to convene these digital asset marketplaces on the internet. That’s a tremendous opportunity for businesses, for individuals. If we can marry the technical possibilities with some of those improvements in the regulatory environment, it’s very significant we think.

Adam Chapnick:

Yeah, amazing. What about one of the catch words that we’ve heard today’s interoperability? How are you envisioning tackling that challenge?

Jeremy Allaire:

It’s really critical. I think the whole benefit of rebuilding the financial system on crypto infrastructure is that you’re building on open platforms and you’re building on open rails. It’s sort of like, my last company was about online video. Completely different but, when you have open standards then you can publish video and have it reach any device, anywhere in the world, instead of having to cut a deal with Comcast. Open networks interoperability are foundational to what makes the internet achieve the network effects that it has. If you can apply those same principles in finance, that’s really revolutionary.

What we did, even just last week, we launched US dollar coin. That’s an open standard protocol, and an open source project, and an open standards body called center, which is designed for enabling interoperable issuance of fiat over block chains. From our perspective, really critical that you have fungibility and interoperability for any type of financial asset. Fiat is a kind of base layer, if we don’t have standards for fiat then we can’t do anything else, basically. Things like security tokens, we’re very encouraged by things like ERC-1400, 1410, and a lot of the early ideas that companies are pursuing to standardize interoperability for compliance securities. There’s a lot of good work. I think it’s key that industry players work together on that cause that’s how we’re going to get this to blossom, and not just for the US market but globally.

Adam Chapnick:

Yeah. Tell us more about the SeedInvest prognosis. Where do you see that fitting in? How is it going to change Circle? Or how is Circle going to change it?

Jeremy Allaire:

Yeah, like I said. I think, we see it being a very, very complimentary match to the broader set of things that we’re doing. I think when we think about tokenization, and we think about this idea that we’re on the cusp of completely new forms of capital formation and value exchange. First and foremost, we know that a lot of those forms of securitization are going to happen in a regulated context under broker dealers, and trading and regulated context. It’s critical that we be able to do that.

I think the second is, the internet has made multi sided marketplaces work for an incredible range of businesses. When the internet got started, the notion that you would go on a marketplace and buy something from a random person who you’d never met before and trust that they’re going to ship it to you. Ebay, Amazon etc. That was crazy. The idea that you would just take out your phone, and a stranger would pull up, and you’d get in their car, and they drive you somewhere, completely nuts. You used to feel that’s like hitchhiking, right? You’re going to get killed, you’re going to get cut in pieces, whatever. The idea that you would just randomly go stay at some person’s apartment for the weekend cause they said you could. Those are really crazy things.

I think that multi sided marketplaces enshrine. They deal with information asymmetries and trust in really powerful ways. If we can apply those same principles to how businesses raise capital, it’s going to be possible for investors everywhere in the world, in every corner of the planet to make decisions about investments and investing in investment opportunities in ways that have just never been possible. Liberate capital, allow for a much broader free flow of capital formation. Ultimately if we can connect through the open internet model of crypto, billions of people to common platforms where they can exchange value directly over the internet. Freely exchange value without any toll extracted for payments. Do that with billions of people and connect them through economic contracts that are mediated by block chains. I think it is pretty dramatic. I think it will make the web look like a cute experiment, comparatively speaking, in 10 or 15 years.

Adam Chapnick:

Yeah, I think you might have a little business there. When you look into your crystal ball, and you look ahead 18 months, where do you see this environment? The STO environment? Is it still going to be wrangling with regulation to get on its legs? Is it going to be taking off? Are we all going to be fractionalizing our neighbor’s houses and getting in on their house? What are we going to be doing?

Jeremy Allaire:

Yeah, there’s a lot of hype and a lot of excitement. It’s all very justified. I think with a lot of these kinds of things, ultimately the impact of these things is actually far, far greater than any of us anticipated. It’s applied in ways that none of us can even image. It actually ends up taking longer to get there than we think. I think this is one of those areas. What I would say is, really, ever since we moved into acquiring a crypto exchange ... from the early days of Circle, have worked closely with government and regulators cause it’s key. We have spent a lot of time with securities regulators in the US and globally.

What I’d say is, there’s a real openness to this space. There’s a real understanding that this isn’t just a bunch of Ponzi schemes or fraudsters. There are absolutely bad actors, but this is fundamental in terms of what’s possible. Regulators want to work with industry to get this right. They want to figure out how, if there is square peg, round hole problem, how to ultimately reconcile that. I think at the end of the day, there’s a lot of work to do for industry to work with regulators and supervisors to figure this out. To figure out how we manage the risks that people care about, protecting investors, the integrity of the market itself, and get through that. I think we will. I think we’ll get through that and I think we’ll come out the other side in 2019 seeing a lot of new platforms. A lot of new offerings. A lot of new, very real use cases, that are getting going. Hopefully it accelerates from there. We’re cautiously optimistic about that. Obviously, have a very long term vision which we think is exciting too.

Adam Chapnick:

Can you give us a little hint into your long-term vision? Anymore than what you’ve already described?

Jeremy Allaire:

Certainly, it touches on a lot of the things that we’ve talked about here. I think ultimately we’d like to see a world where an individual, or a small business owner, is able to securitize their output, whatever that might be. To offer that security in a very seamless way, easily online. For that security to be offered in a marketplace and surfaced in ways that are really straight forward for investors to participate in and understand from every corner of the earth. To do that, nearly instantly, with virtually no cost and to connect the economy in those kinds of ways. We think that’s on the horizon. Certainly in the next three to five years.

Adam Chapnick:

Thank you so much for taking these few minutes to come and share with us what you’re working on, what you’re up to, and about your SeedInvest big move today. We really appreciate it. We know how busy you are. We’re rooting for you.

Jeremy Allaire:

Thank you.