Dave Hendricks is the CEO of Vertalo, a connections, compliance, and cap table company for digital asset issuance. Dave started his career at Arthur Andersen & Co. where he built securitization and remediation databases for real estate and other clients. After Arthur Andersen, Dave led tech teams at a JE Robert-Goldman Sachs joint venture than securitized real estate assets seized by the Resolution Trust Corporation. Before founding Vertalo SEZC parent company SeriesX in early 2017, Dave was the cofounding CFO, President, Treasurer, and Corporate Secretary of LiveIntent, a $100 million ARR people-based marketing firm headquartered in New York, where he led the company through 6 major fundraising events, culminating in the company’s latest $35 million Series D.
Vertalo is a liquidity enablement platform that was founded by a team that was frustrated with the difficulty of complying with and managing wallet and KYC data for its own security token holders. So we decided to build the system ourselves. Informed by our own experience, and by our team’s knowledge of securities law, Vertalo built a platform designed to take the pain out of managing a crypto cap table.
The Vertalo platform is designed to be used by issuance platforms, issuers, broker-dealers, ATS’s, exchanges and the market participants that integrate with and depend on them, like Custody platforms and KYC/AML providers. Vertalo’s easy to use system makes managing security token investor data easy, and helps security token investors access the liquidity providers that they need.
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. Coming up on today’s episode of Security Token Insight, in your security token investing news, Black Manta Capital debuts a $12 million STO. We have an expert interview with Dave Hendricks, CEO and cofounder of Vertalo, and in our Security Token Stories podcast you’ll hear from Dan Doney, founder, and CEO of Securrency. That and more is coming up on this episode of Security Token Insight. Now it’s time for your security token investing news. Up first, Black Manta Capital Partners out of Germany has launched a $12 million security token offering for the Berlin real estate market. The new offering came to light as a collaboration between Black Manta and German real estate company Tigris Immobilien and will feature approximately 2,000 square meters of real estate property consisting of individual small apartments.
Token holders must invest a minimum of 500 euros with a maximum investment of 2 million euros. Token holders will have security participation rights, they’re going to earn 20% of all profits made off the sale. Construction is scheduled to be finished in the next 48 months. Up next, US regulators have succeeded in pressuring Telegram, the popular encrypted messaging app, to delay the release of their Gram tokens until spring of 2021. Investors learned of the delayed release via a letter from Telegram officials once they learned they would not meet their previous deadline of April 30th 2020. Due to the delay, investors have the option to receive a refund, but only for 72% of their original investment. Investors also have the option to convert their money into Telegram shares, which would then be accompanied by a 10% bonus.
And finally, digital transfer agent Vertalo has partnered with Advantage Blockchain and tZERO to tokenize $300 million in real estate. The newly tokenized portfolio of properties is owned by Real Estate Capital Management out of Pennsylvania. The tokenization will be unveiled in phases, beginning with office and hospitality real estate worth $90 million. The properties are located in Costa Rica and Pennsylvania. The partnership has an additional 55 funds queued up waiting to be tokenized. Well, either way Vertalo is a gold corporate member of the Security Token Academy. To learn more, go to our website, securitytokenacademy.com and click the directory tab and select corporate members.
Hey, have you listened to our latest podcast? Make sure to check out our Security Token Stories featuring Derek Schloss as he sits down for one-on-one interviews with security token industry leaders. Derek recently sat down with Dan Doney, CEO of Securrency, to discuss the new tools Securrency has built, including its compliance aware framework and identity solutions tools. Take a listen.
We’re going to jump into the tools, some of the tools Securrency has built. I specifically want to talk about some of the compliance aware token framework that you’ve built, along with some of the identity solutions that you’ve built. But before we do, I’m curious, do you envision a world one day where Securrency is really operating within the DeFi framework? I know these two worlds have really been siloed and segregated out to date, but with what’s happening this week and just listening to you talk, Dan, it almost feels like these two worlds will start to coalesce and intermingle more quickly now. I just don’t know if that ... I know that the ethos of the DeFi spirit has really been different than what I think a lot of the folks in the security token industry have been building for. But these worlds in many ways are umbrellaed by a legal air. And at some point I think these two things will mix together. I’m curious how you think about that.
Yeah. So we do, and I’ve often thought that lending is the real killer app for blockchain. It’s the place, and particularly securitization, securitized lending, is the future of this industry, I think actually even in the short run, but especially over the long run. And here’s why I say that. So I do believe these things will come together in important ways, but it’s important, just as I think the blockchain industry has learned a lesson, that you shouldn’t ignore compliance, they should also similarly in the DeFi model not think that asset management and asset management responsibilities can be ignored. That the existing rules which govern these things are, again, there for a specific reason. Here’s the good news for everyone involved. DeFi is right. It is substantial. This is the direction things should go.
I’ve written about this in the past. There’s articles out there about how the 2008 collapse occurred. This was largely due to lack of transparency. The same lack of transparency that I’m criticizing the DeFi industry for, in this case was rampant in 2008 with residential mortgage backed securities. But here’s the good news for everyone. Blockchain offers full transparency if it’s used properly. Unprecedented transparency, you can’t cook the books. And so this again is the big, we believe fully transparent, self-processing loans in full self-processing securitized pools are the future. That that’s where you can get yield. That’s where you can get easy access to liquid capital. That’s where this is going. And it can avoid the problems that led to the 2008 financial crisis because you have fully instantly reporting, completely transparent models for how these things run. We believe the industry will go there, and we believe we have the tools to help the industry go there.
So we’re excited about the future. The old way, the old models aren’t, cannot be transparent at the scale that’s needed. 2008 was a demonstration of that. But new models which don’t expose this kind of data are not better. So let’s make the better models, the ones that do expose, for example, the extent to which you have your assets covered, that allow an investor to actually see exactly what’s happened with the value that they’ve deposited or that they have invested.
Dan, tell me if I have this right, but it feels to me like you’re advocating for public permissionless networks, and for really that sovereignty over the asset, that sovereignty over the contract as an individual to be able to have with these public permissionless systems. Is that right? Am I understanding this correctly? And also, assuming that that is the future, what kind of role, looking back over this last week, do you think Securrency could have played in preventing some of the incidents that have happened in DeFi?
Yeah, yeah. Great questions. Let me unpack these in reverse order. So the first question is really, how would we work with DeFi? We’ve actually got a token strategy. We built a framework that allows, effectively, tokens to be assets to be embedded into a fund structure that is self-reporting. The assets can really be any kind of assets. They can be loans, they can be treasuries, as is the case we’re looking for for Wisdom Tree and directions that they’re going. Or any other, it could be equities, it can actually be interest in other funds. We’ve got a nested structure which allows for self-reporting in that model, such that if you own, if you’ve made a deposit into a DeFi, if you’re earning DeFi interest, you are effectively a shareholder in the overall DeFi structure. And you can see as a shareholder what is being done with your deposits and exactly how much is covered.
So we have those structures, and those are things, we haven’t published those broadly into the market, but you’re going to see a lot because we’re about to begin showcasing those models. And those can be used for DeFi. So more on that, let’s do another session in three to six months and we’ll actually walk through specifically those tools, because we intend to open source them for other folks to use broadly.
Now, of course, transaction logic, as you know, Securrency’s built a pretty powerful framework. We can go into this, I suppose, a little bit more a little bit later. For transaction logic associated with any instrument of value, whether that’s a securitized pool of DeFi loans, it’s an individual loan, it’s equity in a startup, or it’s a publicly traded share, we have the ability to create the policy, attach the policy to the token that governs it under its regulatory framework anywhere in any regulatory jurisdiction that’s been mapped into this framework. And the token knows what it’s allowed to do. And it ensures that the transactions that occur with the assets are legal. And they can have other rules as well, where, for example, you prevent a loan that would cause you to fall below your required reserve, et cetera. So it’s a generic policy engine, it allows you to create and maintain policies to govern smart contracts in terms of the way they behave. So a lot of what we’ve done applies in this and any other industry in terms of our policy engine.
Go to our website, securitytokenacademy.com, click the interviews tab, and select podcasts to listen to the full episode. The Security Token Academy is proud to present an expert interview with Dave Hendricks, CEO and cofounder of Vertalo. I sat down with Dave to discuss what Vertalo’s been up to lately. Take a look.
So obviously it’s a tough time for everybody, and specifically the financial markets also, because of the coronavirus. Are you seeing any way that it’s impacting the security token world in particular?
Well, I can’t see how it’s affecting the broader security token world. I can tell you that Vertalo specifically is busier than it’s ever been.
Yeah. So we’ve actually dramatically accelerated our growth in the last, say, two months. Some of it was coincidental because of some new programs and new approaches that we launched. But I think that we’re all affected in this industry by a couple of things. We can’t meet up any more so we can’t go out to conferences, so we don’t get to meet people by serendipity any more. That’s happened to us.
But I think we’ve also all been impacted by the way that business is changing rapidly. And one of those things, which is probably the main feature or benefit for security tokens, is liquidity. And there’s nothing like a market like today where the value of liquidity is brought into higher relief than it is right now.
Yeah. That’s a good point. And I know that’s one thing that you guys particularly address, so it’s appropriate you bring that up. You guys had a great big announcement recently. You talked about a license deal you had with Advantage Blockchain, which is a real estate focused team in Philly. And there was a little bit of a mention as well of your tie-in with tZERO. Can you tell us a little bit about why you teamed up with Advantage in Philly?
Yeah, so we noticed a ways back that there were some assets that worked really, really well for tokenization, or at least would work well for tokenization, and some assets that were not maybe as good to tokenize. Real estate, specifically private real estate funds and to some degree private rates, are a huge asset class by themselves. Real estate is the biggest global asset class other than debt. And it suffers from one thing, and that one thing is illiquidity. It just really, really hard to buy and sell interests in real estate funds. It’s a cottage industry, it’s very fragmented.
But everyone wants the same thing. A lot of that that they want is passive beta. They want to invest in something and get income. So as we started working over the last couple of years and looking at all kinds of different issuers to work with and assets that these issuers were working with, we really started thinking that real estate had such an acute problem with liquidity, and it was so big and it was already funded that that would be the ideal kind of asset to work with. If you’ve already formed a fund and it’s been around for a while, that fund could be brought into a platform such as Vertalo, an analog fund, digitized, and then made more liquid using the features and benefits that come with digital asset tokenization.
Yeah. It’s something, I know I feel like now all I’m doing is blowing smoke for you, but something that I admire about how Vertalo has quickly iterated under your leadership is that you’re looking at where the friction is in the adoption, real world, people. And you’re seeing something that we in the space have been talking about first, was, “Oh boy, people are going to be able to issue on tokens, and yay.” But nobody got it and there’s all kinds of user friction. And what you’re talking about now is really getting to the crux of it. And it’s kind of what I was talking about about entrepreneurship. It’s seeing that the user has this need and this pain point, and you’re going right to it.
And so it’s that liquidity pain point that you guys are addressing. There’s all these moms and pops and wealthy folk who have these pieces of assets that they wish, especially now, they’re like, “God, if I could just get another $100,000, it would be quite nice. If I could just get $50,000, but I can’t sell a piece of my thing.”
I think it’s brilliant that you guys are in this space applying the technology to that pain point. So bravo.
Well, let me tell you about how you can do that.
Getting to that liquidity requires simplicity up front. So starting two years ago we started simplifying UX and UI. The first thing that we did was we started working on simplifying wallets. And so a year ago we made it so that you didn’t need to know how to use a wallet. So we developed keyless custodial wallets so that investors wouldn’t have to figure out how to use MetaMask or wallets. And for the issuers, we figured out how to tokenize at extremely low cost and high speed. So they didn’t have to understand about tokenization and just knock down the cost. We abstracted tokens.
Sorry to interrupt, but I think I actually saw you tokenize in real time at a conference on stage, to just put a point on that. Yeah.
Yes. Yeah. And so none of these small mom and pops, some of which are running $100 million real estate funds, or the investors in those funds want to bother with that nerd stuff. It’s too complicated. It’s just friction. They want to get right to the benefits. And so what we’ve done is we’ve sought to remove friction so that you can put a high relief on the outcome, the benefits, the results. And that’s helped us because these folks are, they don’t want to become experts in another industry. They want to just be good at what they do.
We have the full interview with Dave Hendricks on our website. Be sure to check it out. Did you know that you can get the latest industry updates in our free weekly newsletter, the Security Token Edge? The newsletter is 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 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.
You can find more information on our website, securitytokenacademy.com. 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] You can also learn more by visiting the frequently asked questions page on our website by clicking on the FAQ tab. Our frequently asked questions page is packed full of security token industry terms and concepts.
Today’s term of the day is design space expansion. So what is design space expansion? Well, security tokens will allow us to build in contractual features to securities that have previously been impossible to execute. For example, features can be built within the digital wrapper of a security token to help shape corporate governance. The longer you hold the stock, the more votes you may able to get, or new forms of access rights. A minority owner of a restaurant could gain access to priority seating or off menu items. With security tokens, new forms of value could be unbundled and re-bundled to blockchain based securities. Get it?
All right, that’s it for today’s episode. Be sure to follow us on Twitter, Facebook, Telegram, and Medium, and don’t forget to subscribe to our YouTube page so you don’t miss out on any of our videos and expert interviews. And a big thank you to all of our gold corporate members as well. We invite you to learn more about our gold corporate members and all our corporate members by clicking on the directory tab and click corporate member. I’m Adam Chapnick. For everyone here at Security Token Academy, thanks so much for watching. Stay sanitized.
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