Alon is Co-Founder of Crypto Invest Summit. He is an investor, speaker, host, and leader of one of Southern California’s largest group of investors and entrepreneurs, 805 Startups, with a laser-focused eye on building and supporting startups and entrepreneurs...
A pioneer in the crowdfunding space, Alon had been involved in over $200 Million Dollars in online investment transactions. He has developed technology that powers websites and financial transactions for Fortune 500 companies and well-known foundations such as Coca-Cola, American Express, ATB Financial, and Global Philanthropy Group. InvestedIn, Alon’s previous company, created a white label fundraising portal for individuals and businesses hoping to crowdfund ventures independently of major platforms. Later, his support of the JOBS Act, online media expertise and day-to-day interactions with venture funds, investors and financial professionals inspired him to create a solution to market hedge funds, real estate funds and venture funds to investors over the internet.
Before InvestedIn, Alon worked for entertainment tech giants such as Amazon, IMDb, and MySpace where he managed customer experience, product development, and support. InvestedIn was named “Best Marketplace Platform” by the Los Angeles Venture Association in 2013 and he was named to the Socaltech 50 for his work with InvestedIn. Alon is a thought leader on social enterprise, venture capital, and crowdfunding, and has spoken at SXSW V2V, Kingonomics and many other conferences and been featured in prominent publications including Forbes, WSJ, Washington Post, TechCrunch and VentureBeat.
Welcome to Security Token Insight, brought to you by the Security Token Academy. The security token industry is here and will provide a key foundation for the evolving financial internet. The Security Token Academy provides insights about this new era for security token enthusiasts, investors and issuers. The security token industry is here and you can get involved.
Hey everybody, I’m Adam Chapnick. Amy Wan is on vacation. Coming up on today’s episode of Security Token Insight in your security token investing news, details on TokenSoft’s newest business feature, KYB. Find out what that means coming up. Plus, we’ve got an expert interview with Alon Goren of Goren Holm Ventures, and how you can attend our next security token meetup in New York City. That and more is coming up on this episode of Security Token Insight.
Now it’s time for your security token investing news. Securitize announced that it has listed its 10th on-chain digital assets. As many of you know, Securitize is an end-to-end technology platform built for issuers looking to tokenize securities. Securitize’s latest offering comes in the form of the Curzio equity owner token, also referred to as the CEO token. The new equity based offering represents ownership in the Curzio research newsletter business.
Prime Trust recently unveiled a real time settlement network named PrimeX, which allows asset transfers to occur instantly. PrimeX grants Prime Trust’s clients with the ability to immediately access their funds when engaging in cryptocurrency and Fiat transfers. The new service is free of fees and available 24/7 to their clients.
TokenSoft announced that they have launched a know your business feature to increase due diligence for token issuers. The new service will help clients during the onboarding process by streamlining the process. Mason Borda, the CEO of TokenSoft, says he’s excited to introduce a level of automation to the process to bring this processing time down to just a few hours. In addition to the KYB feature, TokenSoft also offers support to their clients via faster onboarding, cybersecurity and enhanced compliance protocols.
Securitize, Prime Trust and TokenSoft are gold corporate members of the Security Token Academy. To learn more, go to our website, securitytokenacademy.com. Click on the directory tab and then corporate member.
The Security Token Academy is proud to present an expert interview with Alon Goren. Alon is founding partner at Goren Holm Ventures. He’s also co-founder of Crypto Invest Summit and Los Angeles Blockchain Week. Our own Amy Wan sat down with Alon at the GHV meetup in Los Angeles for a preview of CIS and predictions for the security token industry. Take a look.
It’s going to be incredible. What’s very cool about this one is October turns out to be the biggest one every year. We actually do two a year, one in April, one in October. October is great because we do LA Blockchain Week. We always have a security token track, we always have enterprise, blockchain tracks. We have all these great partnerships. So, LA blockchain week this year already has about 30 side events separate from a CIS that’s happening that week. It’s going to be really exciting.
October 15th and 16th, we have the Draper Venture Network, which is one of the world’s largest network of venture capital funds, has sort of joined forces. It’s going to bring all of their members to the event [crosstalk 00:03:30] private lounge. And you’re starting to realize that these traditional venture capitalists and investment funds are participating in this space and legitimizing it. It’s very exciting.
That is great, and you guys are a venture capital firm now. So tell me, what are you investing in these days? What’s your investment thesis?
We love sort of both ends of the spectrum. On one hand, we think that the way rules and regulations are, are not exactly the most fair things in the world. Not just in the United States, but around the world. Participating in various deals creates hurdles that makes it tough to participate, right? So we love companies like Vertalo, full disclosure there, a portfolio company of ours. We created a company with one of our longtime friends in the industry, Ami Ben-David, called Ownera, that’s going to help streamline those kinds of processes. It’s really, really exciting.
Now, on the whole opposite on the spectrum is the whole DeFi movement, decentralized finance. And so companies like Total, people who are basically allowing everyone in the world to participate in a decentralized fashion, is very exciting to us too. It goes completely around regulation where the other side is let’s use technology to streamline dealing with regulation.
Can you give me some insight into the state of the security token investing industry? What are security token infrastructure investors looking at and looking for right now?
I think that first and foremost always, they’re looking for good deals before security tokens, right? It has to be a good deal first. If the reason that they’re looking at it is only because of security tokens, it still has to be a good deal. They’re looking for real estate deals that are tokenized, there’s funds that are tokenizing a lot, there are startups that are doing it. I think that the startups have to just be careful that there is a reason they’re tokenizing. Then the more important side of the whole spectrum, in my opinion ... sorry, I’m losing my voice. I think I just cracked it ... is existing assets.
The United States has a $7 trillion a year alternative investment market that’s already in existence. I’m not talking about invested in those companies every year, but $7 trillion is sitting in alternative assets just in the United States alone. Less than 10% is digital. That’s the market we need to go to because we’re going to take existing securities, we’re going to make them more efficient, we’re going to make them easier for people to trade. That’s why you see NASDAQ CEO saying that he’s excited for digitizing securities. That’s why you see all of these large organizations participating. They see that market, and it’s much bigger than the market of small deals fundraising.
It’s exciting to us because we love investing in startups. We like looking at startups and we love the new, novel stuff. But at this stage, it’s still harder to participate in a tokenized deals, it’s still harder to tokenize your deal. So it’s not necessarily the best companies doing it every time, it’s companies who feel desperate to use some new, novel way to raise money. Unless of course, like I was saying, you’re a company who benefits from it or has some tie into it where it makes perfect sense for you. Then all of a sudden, instead of doing something that’s a new, novel thing that’s just a bell and a whistle on the deal, it’s actually integral to the deal and it helps you raise money.
What do you think are the challenges that the security token industry currently has, and what is needed to overcome those challenges?
Well, I mean, I guess it was today where the first Reg A+ tokenized security was approved.
Actually, there’s two. It’s Blockstack and YouNow.
Yes. So yes, there was two of them and they were both approved today. One challenge is that the government wouldn’t even approve it until now, and so now we’ll see what happens. But in general, that’s sort of almost a little ... an indicator, right? Because not it doesn’t necessarily have to be a Reg A+ deal. It could be at one of the other forms of deals and people could have still tokenized, but it’s just showing ... it creates unnecessary hurdles. And if you give startups and small companies or small funds, all of these extra hurdles and these extra costs, the number one reason they fail anyway is running out of money. So if all of a sudden I need audited financials or special financials or special things that cost me more money just to stay alive, you’re shooting yourself in the foot as a company.
I think those things are definitely probably the number one hurdle, and then just investor education. Security Token Academy exists, in my opinion as an outsider ... I’m not a part of the company, but exists to basically turn that around for all of us. That’s why I love you guys and you’re always invited to CIS. Investors need to learn about this stuff so that when a deal tells them, “Oh, we’re tokenizing,” the investor doesn’t go, “Cool, what does that mean?” And then all of a sudden you’re talking about what this thing is instead of talking about your company.
You should be talking about why you have the best deal in the world, not the piece of paper it’s written on or the type of digital thing it’s on, right? Nobody goes, “What’s this email thing you talk about? You’re going to send me an email with your documents?” They know what an email is, right? But maybe 25 years ago that investor didn’t know. So we’re overcoming that education hurdle, and thanks to you guys and a lot of great people like you.
Thanks for the shout out. Well, anything else you want to add in terms of what we should plan to see in the security token industry in the future?
I think that we’re going to see some really exciting existing securities come on board. We’re going to see some projects like ... I’m biased, like Ownera. But let’s say Polymesh, if they build it and they execute, things like that, that will allow us to actually do things in the way we want. Right? Because right now we’re digitizing something, but we’re creating a digital token for a piece of paper that exists somewhere else. We’re not actually digitizing the deal. The actual terms of the agreements for all the tokenized funds-
You don’t have to. You don’t have to.
... are not in the thing. And the people who are participating have to go offline or have to go off various white lists and different things like that to participate. That’s super inefficient. So you’re taking something that should make easier transfer and you’re complicating it because the technology doesn’t exist yet, but it will exist, whether it’s Polymesh or Ownera or something else. It will exist. And when that happens in the next few months, few years, it will make it much easier for people to participate.
I know, because I’m behind the scenes on one of those, that were literally discussing these things with regulated financial institutions around the world. The whole point of the way Ownera is at least, is to let those regulated financial institutions participate so that it can grow and so it actually happens, because they’re the ones holding those $7 trillion in assets in just the United States. Now let’s go to bonds, now let’s go to all the rest. So, it’s going to get really exciting.
We have the full interview with Alon on our website. Be sure to check it out. Now live on the Security Token Academy’s website, a new expert video series, Global Capital Markets and Security Tokens with David Wield. Part one covers the state of the market. David is the founder of Wield & Co, and is the former vice chairman of NASDAQ. He’s also a 30 year veteran of Wall Street. In this new series, we cover the growing intersection of security tokens and traditional finance as well as the benefits of tokenization. Here’s your preview.
In your mind, what are the applications of security tokens? How do they fit in with today’s finance world?
Well, I think first and foremost, I think where we’re going to be able to strip out costs from the issuance of securities and the trading of securities in general. When you do that, you also enable certain kinds of securities that here to fore have probably been cost prohibitive. What I mean by that is I think the frequency of distributions can be increased very significantly. Why is that important? It’s important because retail in particular values higher frequency distribution.
So if you look at a traditional bond, it may pay twice a year. If you look at a closed end bond fund, there are two forms, one’s that pay quarterly distributions versus monthly. The monthly ones that trade on the New York Stock Exchange and NASDAQ actually trade at about a 4% or 5% premium to those that pay on a quarterly basis. So I suspect that what we’re going to see is the tokenization of certain kinds of assets in a way that they will pay weekly distributions, maybe even daily distributions at some point.
That’s interesting. It’ll be interesting to see how that curve is shaped when you go from quarterly to monthly to weekly to daily, in terms of the premium you were describing. What do you think about that?
Well if you’re a retiree, you’re going to live week to week, you’re managing your budget that way. So having something actually hit your account ... a distribution hit your account on a weekly basis is something that I think that retirees would really value. I think it will happen. I think it’s just a question of time, and I think that that it will be highly valued by at least some subset of the market.
Yeah, no doubt. So why is this a preferred method as opposed to issuance of traditional securities? What benefits does the security token have over traditional security?
Well, you can hold it directly in a cyber wallet if you so choose, as opposed to through a traditional security account, which would be held by a broker dealer. But I think that the real advantage is that there are a number of ... in certain markets, there’s an application layer that is wedded to the token. And so for example, you can automate all of the legal and compliance checks that are done in private markets to be able to trade securities in private markets, stripping out a lot of the costs and some of the constipation from having tokens or securities, if you will, move from the hands of one investor to another. There’s a big uptick in ease and efficiency for certain kinds of applications. And so, my suspicion is, is that that’s where we’re going to see most of the early adoption.
What are some of the real world uses where security tokens offer an advantage over traditional securities?
Well, if I was apply it to asset classes, if you drive down the cost of tokenizing or securitizing an asset for instance, we might be able to ... we’ve already actually seen the beginning of this. Tokenize a particular building, and it would then allow ... instead of somebody having to buy a basket of buildings through a real estate investment trust, you might be able to actually say, okay, here’s an interest directly in the Empire State Building or in the Sears tower. You can then ... the old cliche, which is location, location, location, it will actually allow investors then to put together portfolios that are very much location based type of real estate.
So for example, whether it’s warehouse facilities or multifamily residential or office properties. So as a consequence, I think it will create greater overall efficiency of capital allocation to the real estate market. I think it’s the beginning or the dawn of a brave new world in certain types of asset classes as opposed to forcing you to buy a big basket of properties where you don’t have control over the actual building selection within a portfolio.
Got it. Now when it comes to issuers, what do you generally recommend? That an issuer issue a security token, or start with a traditional security and maybe tokenize later?
Be sure to check out this new video series on our website, securitytokenacademy.com. Did you know that you can get the latest industry updates in our free weekly newsletter, The Security Token Edge? The newsletter’s packed full of insightful information about the security token industry. To subscribe and get your free weekly copy, go to our website, securitytokenacademy.com.
We also invite you to check out the Digital Wrapper on Medium. It’s our new behind the scenes series with the teams building out the security token industry. These are in depth interviews covering a wide variety of topics. You can view these when you follow us on Medium, and you can find more information on our website, securitytokenacademy.com.
The Security Token Academy invites you to save the date for our next security token meetup. It’s taking place Thursday, September 26th in New York City. The meetup will be inside the Sunset Terrace at Chelsea Piers from 6:30 until 9:00 in the evening. Join security token experts and financial services professionals for an evening of informative discussions, networking, food and drinks. Seating is limited. The event is free. To learn more, visit our website, securitytokenacademy.com.
In a first of its kind multi-city webinar on tokenization of commercial real estate, CREST, a project of the Security Token Academy, provided a detailed case study on the tokenization of the St. Regis Aspen resort. Learn how the webinar explored the disruptive forces that are emerging in commercial real estate, or CRE financing. Here is your preview.
Disruption in commercial real estate has been appearing in lots of different ways. Certainly in the office category of commercial real estate, also known as CRE, the appearance of coworking companies such as WeWork is a major new trend. Also, the appearance of technology companies that strive to improve property operating efficiency through prop tech, or property technology, is another area of CRE disruption. But there’s a new type of disruption emerging in the area of CRE financing. It’s a way to raise money via a new solution which is compliant with US SEC regulations. It’s called tokenization, and it is based on security tokens. This wave is barely just beginning but examples are starting to emerge, and that’s why we’re here today, is we cover the tokenization of the St. Regis Aspen resort.
I wanted to help our viewers take a closer look at this iconic hotel. While I was there, I had the opportunity to meet with the hotel’s general manager, Heather Steinhardt. Let’s take a look at what she had to say.
This is a gorgeous property. Can you tell me a bit about it?
I’d love to. We have 179 guest rooms, 30 suites. This is one of our three specialty suites. Then we also have 25 residences, 2 and 3 bedrooms, which are fractional ownership has.
Fantastic. What else should we know about this property?
Well, the rooms and our public spaces were designed by Lauren Rote, and she was wanting to make sure that we’re bringing the outside light into the hotel, that it was like a mountain side manner, that it was contemporary yet very, very comfortable, because after you go skiing you just want to [crosstalk 00:19:30] relax.
I think she really did a lovely job in portraying those goals overall.
Regarding this specific property, you had the listing of JLL and sold it to Stefan in elevated returns. What’s the backstory on that?
Yeah, 2010 we had the property on the market and we had reached out to a number of offshore investors, and had gotten in touch with OptAsia. We had been in touch with them on previous transactions before, and we sold the asset to OptAsia, Stephane, 2010.
And the $19 million of tokens that were raised, what were those funds used for?
Well, I mean that was a return of capital to the owners. So effectively, the tokenization is a two sale of ownership into the property. So the current owner decided that the maximum they were willing to give away at that valuation was 18.9%, so that’s what we put for sale, and we were happy enough to fill up the entire stack. So the way that it works is that you actually sell the property into an operating partnership. You create interest, out of the partnership, and you capitalize the read through the sale of smart contract. Smart contract is effectively a digital share certificate, so rather than to have the old fashioned paper share certificate, you have a digital form of it. It’s a beautiful instrument because all the securities regulation are actually embedded into the contract itself, and it’s cheaper, it’s faster to transact, and it offers also the ability to have a global product trading on multiple exchanges.
We got involved with elevated returns, first helping Stephane in trying to liquefy in a different format, in a registered format, a traditional listed read format, the St Regis Aspen, and then helped him transition his project to a tokenized solution. Prior to helping Stephane, we’ve also been very active in the whole idea of creating liquidity around non-traditional liquidity solutions, around single asset real estate, and so it was a natural for us to help Elevated Returns and Stephane with their project.
Everything is going to get tokenized. Your identity will be tokenized, your title will be tokenized, your mortgage will be tokenized, your equity will be tokenized. I mean that is the future, when everything is running on this integrated, efficient, immutable Blockchain system.
To watch the full webinar, just go to CREST.io to register. Registration is free. I want to remind our viewers that if you have any questions about security tokens, be sure to email us and we could answer them right here on a future episode of Security Token Insight. The address is [email protected] Be sure to include your name with your question. One more time, the address is [email protected]
All right, that’s it for today’s episode. Be sure to follow us on Twitter, Facebook, Telegram, and Medium. And of course, don’t forget to subscribe to our YouTube page, so you don’t miss out on any of our videos and expert interviews. And before we go, a big thank you to our platinum corporate member, Merrill Lynch, and all of our gold corporate members as well. We invite you to learn more about our corporate members by clicking on the directory tab and click corporate member. For everyone here at Security Token Academy, I’m Adam Chapnick. Thanks so much for watching.
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