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.
Welcome to Security Token Insight, brought to you by the Security Token Academy. The Security Token Academy provides insights about this new era for security token enthusiasts, investors and issuers.
The Security Token Industry is here and will provide a key foundation for the evolving financial internet and you can get involved.
Hey everybody, I’m Adam Chapnick.
And I’m Amy Wan, thanks for joining us. Coming up on today’s episode of Security Token Insight in your Security Token Investing news, find out why Security Token platform Harbor has partnered up with Gemini. We’ve got an expert interview with Dave Hendricks, the founder and CEO of Vertalo. Plus, details on our Security Token meet-up in London this summer. That and more is coming up on this episode of Security Token Insight.
Now, it’s time for your Security Token investing news. We begin with news from Swarm. The asset tokenization platform is bringing security tokens to the TRON blockchain. Swarm did this to help simplify the process of tokenization and selected TRON because of faster transactions speeds and fewer fees. Issuers will be able to offer security tokens on TRON’S Blockchain and allow investors to use TRX and USDT TRON to purchase security tokens.
TokenSoft is in the news this week. TokenSoft is a primary issuance and compliance platform, enabling the issuance and distribution of tokenized securities. The company has just announced that it will no longer restrict clients to using one of its previously vetted and approved law firms. These firms were carefully selected and shared the belief that digital assets should follow security’s regulations. According to Mason Borda, the CEO of TokenSoft, if issuers have been working with a law firm that does share that same view on following SEC regulations, they can continue working with that firm.
And in other news, Harbor has formed an exclusive partnership with Gemini. Users of the tokenization platform will be able to invest in offers using Gemini’s stablecoin: the Gemini Dollar. GUSD is a stablecoin created by the Gemini exchange. Its founders are, of course, Tyler and Cameron Winklevoss. Strict regulatory compliance was a determining factor for the partnership.
By the way, both Harbor and TokenSoft are Gold Corporate members of the Security Token Academy. To learn more, go to our website: securitytokenacademy.com and click on the directory tab and the corporate member homepage.
The Security Token Academy attended Crypto Invest Summit in downtown Los Angeles last month. The event attracts security token and crypto enthusiasts from around the world. The Security Token Academy team was there interviewing some of the biggest names in the security token industry.
That’s right. Amy and I also had the privilege of moderating panels in CIS. We met a lot of great people who were excited for the future of security tokens.
I was fortunate to catch up with Dave Hendricks, the founder and CEO of Vertalo. Vertalo’s a crosschain platform for security token issuances that enables broker dealers, issuers and investors to visually manage portfolio data related to communications and compliance. In this interview, Dave and I discussed why venture capital firm Andreessen Horowitz decided to make a change to its business model to become a registered investment advisor. Take a look.
I always love talking to you as you know and today, we actually have some interesting stuff to chew on, we’re going to dive right into. What did you want to start with?
Well, I wanted to start with some news that came out of Silicon Valley a couple of weeks ago. There were two interesting events which kind of came through the news. They didn’t come together, they came over the span of a couple of weeks. Specifically, Andreessen Horowitz decided to change their entire business model. Do you know who Andreessen Horowitz is?
Yes, I do.
Yeah, Andreessen Horowitz is kind of a big deal, right? Besides being one of the largest and most successful VC firms in the valley, they’ve also really gone all in on Crypto. They’ve made some big investments, they invested in issuance platforms like Harbor, they’ve got a partner Chris Dixon who’s really pretty dedicated to Crypto. And so, when they make an investment in the space, people take note. So, the big news about Andreessen Horowitz was they have decided to forsake being a venture capital firm, which is weird. Why don’t you want to be a venture capital firm anymore, right? And what are you going to be now? They’ve decided to be a registered investment advisor. So, they registered all hundred and fifty of their employees. It’s a really, really interesting development.
Now, in and of itself, it’s kind of weird. It’s like, “why would you do this?”, because you’re doing a pretty good job at being a VC.
Yes, they are.
Well, a couple weeks before that, news had leaked that they were leading a 300 million dollar round in Carta. Do you know who Carta is?
So, Carta is a cap table company. They’ve been building cap tables for venture funded firms for the better part of a decade. Now, Vertalo’s also a cap table company. We happen to put our cap tables on Blockchain, which we think is a great technology for creating a connection between issuers and investors. Carta does theirs behind a firewall, and so a little different than ours. They’ve got a head start.
But Blockchain does solve a very particular pain point around cap tables. I can say from experience in start-ups, that’s a huge headache that just having it on the ledger would really help.
Right, well it’s about provable ownership, right?
And if you’ve ever not owned something that you thought you owned, that is kind of painful. So, when these two items, with Andreessen Horowitz leading around in a cap table company and becoming a registered investment advisor really struck me as not a coincidence. And the reason is this: this enables Andreessen Horowitz to start buy-and-selling secondary offerings. By being a registered investment advisor, those companies that are on the cap tables managed by Carta, can now be sold more easily through the CartaX exchange enabled by the team at Andreessen Horowitz. So basically, Andreessen Horowitz has the ability now to make these private VC investments more liquid.
Now, liquidity is obviously a really, really, big topic.
Yes, it’s the Holy Grail in some ways.
It’s the Holy Grail. Liquidity is the whole reason for security tokens.
Right, well, a major- yes.
It’s the whole reason to me, okay? The reason for security tokens is taking private assets and making them more saleable. Not absolutely liquid but just more liquid than they were before. And the way that they do that is by having your ownership of the private asset on chain. It’s easier to connect them to sources of secondary liquidity. Sources of secondary liquidity are exchanges and broker dealers or ATS’s. So now you’ve got Andreessen Horowitz that has made their team into basically a broker dealer: registered investment advisor. They have, now, a connection to Carta, which has all these private companies assets. Now, maybe do you think that they’re going to try to take some of those private assets and make them more liquid?
So that, to me, in the last month was really the most interesting news and it wasn’t like someone had a fireside chat at a Crypto conference about it. These guys just went and did something really massive. Qualifying a hundred and fifty people is not something that you do casually.
What an indicator, that’s very strong indicator for the space. And it’s funny cause we’re here, as I mentioned in CIS, and yesterday, there was a security token focused event just on the issues surrounding security tokens and the question that came up on almost every panel is, “How are we going to get to liquidity?” And this is really interesting. It’s an indicator on how we’re going to get to liquidity.
And the way you get to liquidity is, you’ve got to be able to connect the cap table, the ledger of ownership, to a source of secondary liquidity. You need to make it so that someone who owns something doesn’t have to go through a really, really painful process that could take months to sell what they own. And they also need to know what they own.
Oh right, yeah, that’s important.
And so, people say when liquidity, right? And yesterday, I gave a keynote at the conference and I wanted to focus on the concept of whales.
Okay great, yes, let’s hear it.
So, Andreessen Horowitz is a whale. So let’s talk about the sperm whale. The sperm whale has a 15-month gestation process, okay? It takes a long time to make a whale. And then, a whale lives for a really, really long time. Basically what we’re doing here is, it takes fifteen months- maybe eighteen months- from the beginning, when you think about doing a security token offering, to when it trades. So, you’ve got to do all the work with the bankers and the lawyers, then you got to raise the money, okay? Then, it sits there for a while until you can sell it, okay? So, it takes a long time to make a sperm whale. And so, that’s the same thing with security token liquidity.
My mother always said this to me.
So when the whale is born, it becomes the king of the sea and it lives forever.
So, that’s what we’re building. We’re building assets for the long term, you’ve got to be patient but the mechanisms, the purveyors, the techniques, they’re all coming together now and look at Andreessen Horowitz for signals of imminent adoption.
Be sure to check out the full interview with Dave on our website. Vertalo is a gold member of the Security Token Academy. To learn more, go to our website: securitytokenacademy.com and click on the Directory tab and the Corporate Member homepage.
We have exciting news to share with you right now. The Security Token Academy is going across the pond. The Security Token Academy is honored to host its first London meet-up in partnership with Fincross International. Join us on Wednesday June 12th from 6 to 9 in the evening at the illustrious, 12 Hay Hill Club for an evening of networking, insightful discussion, food, and drinks. Admission is free. You can find all the details on our website securitytokenacademy.com.
We hear the Security Token Academy strive to educate you on the evolving security token industry. Colleges are now starting to educate their students on security tokens, as well. One of those colleges is UCLA, the University of California, Los Angeles. I spoke with UCLA professor, Alex Nascimento, about his new security token seminar and why he believes security tokens will revolutionize the business and financial industry.
Not only are you a teacher, and not that we don’t love all teachers, we do, God bless them all, but in our world at the Security Token Academy, we have a particular soft spot for teachers like yourself who teach Blockchain technology. So, can you tell us a little bit about what you specialize in and what you confer upon the youth of our nation?
For sure. So, I teach two courses at UCLA. One is Blockchain Business Application, which is mainly reviews of the concepts of Blockchain and actually use cases in different industries like retail, real estate, how Walmart is using Blockchain to track pork from China and mangoes from Mexico, so, different real use cases. Obviously, touching on FinTech as well. And then now, we are doing the first security token seminar at UCLA and I’m going to do a shameless plug here.
May 3rd and 4th, please Google ‘Blockchain UCLA’, you’re going to see the course offering. It’s open to the public, that was one of our biggest focuses at UCLA Blockchain lab was that we could offer courses that were not only restricted to UCLA students.
And then, on that seminar May 3rd and 4th of this year, we’re going to review how security tokens are going to revolutionize the business world in the financial industry.
Wow. Well, without calling it a spoiler, what do you think is the promise of a security token in the business and financial industry? How do we think it’s going to be a revolutionary impact?
There are many things that I think are going to be revolutionary but some of the low-hanging fruits are, obviously, you’re going to significantly minimize the cost of back office and paper transaction, which is huge for financial institutions.
You’re going to have democratization of investments or you can bring venture capital deals or start-up deals to retail investors, that just because they don’t have the connections, they’re not at the conference circuit, like myself and yourself, they just don’t have the connection to those deals, right? And then, obviously, tokenization of different assets that are naturally or traditionally illiquid assets, or assets that don’t have a lot of liquidity; like art, collectable cars, real estate or capital intensive projects, like building a commercial building.
Got it, okay. So, what are the barriers to achieving some of these revolutionary effects, do you think?
So, I think that the biggest barrier is not a barrier, it’s just a factor of time. We’re still at the very beginning of the industry, which is great for anyone that wants to join because it’s a fabulous industry with a lot of potential to really revolutionize the entire way we look at money and investments. So, there is a lot of space for bright minds out there to join the industry, I’d like to welcome everyone. And, I think that what we’re trying to do at this point is glue the different parts that are necessary in the industry, which mimic traditional markets. So, you’re talking about custody. Custody is necessary for you to bring institutional investors. After custody, you need to have legal teams that understand that compliance is necessary of issuing a security token on the Blockchain. Then, we should look at issuing platforms. Are they issuing under one common standard or does everyone has their own standard? Then, you’re going to get that token and you’re going to throw it in on exchange, that needs to have a good number of investors to buy and sell to generate funds.
Analogous to the traditional market, you will also need a broker dealer to be able to sell securities, compliantly. And in the end, you will need to verify the investors, just like we do it every day with equities and bonds in the entire world. I think that right now, we are at a time in the security token industry where we’re trying to connect these blocks. So, it’s just a matter of time but it will happen.
It’s inevitable, we feel. No matter that. Okay, so, where do you think is the most likely first vertical that this will become common place?
That’s a really good question. I would say that, traditionally, real estate is a low-hanging fruit. I’m sure you interviewed other people here, like my friend Ben Sai, who is a big proponent of that because you need capital. The people who invest in real estate projects are accustomed to writing large cheques and via a tokenized share of a real estate project, you can disperse the way you do fundraising for a project, you can facilitate the payments and the distributions of that projects and you can easily provide a lot more liquidity to the first investors.
Yeah. And I think something about real estate- I agree with you, I think that’s the obvious. We’re already seeing it happen. But, I think the reason may be that it looks a lot like the old way. There’s a thing and a lot of people own in and you have to go through some compliant offering to get them into it. It’s a little different but it’s sort of a different flavor of the same ice-cream. Whereas, if I want to fractionalize my Van Gogh, there’s no analog for that, so it’s going to take a while, I think.
So, what about at UCLA? Where are you guys going with the Blockchain lab? What can we expect in the coming year from you guys?
So, we founded the UCLA Blockchain lab, which now evolved to student-led organization that is a Blockchain at UCLA. They have over a hundred students involved in it.
We’re also looking to start a own Blockchain club with Andy Anderson’s school, which would
Anderson is the Business school.
Is the Business school, yes, where the MBA program is held. And that was originally where we founded the UCLA Blockchain lab, which was an effort of alumni and faculty like myself, and then it evolved to be a student-led organization. So, we’re trying to get also a effort down at the business school so that we can push UCLA to continue to be the forward-thinking, technology, bedrock of Southern California.
Be sure to check out our interview with Alex on our website. And for more information on Blockchain at UCLA and upcoming college courses, visit: blockchainatucla.com.
Right now, 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]
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 is our new behind-the-scenes series with the team’s 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 out more information on our website: securitytokenacademy.com.
In the first of its kind multi-city webinar on tokenization of commercial real estate, Crest, a project of 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 co-working companies, such as WeWork is a major new trend. Also, the appearance of technology companies that strive to approve 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 as we cover the tokenization of the St. Regis Aspen Resort.
I wanted to help our viewers take a closer look at this iconic hotel. So, while I was there, I had the opportunity to meet with the hotel’s general manager, Heather Steenge-Hart. 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. And then we also have 25 residences: 2 and 3 bedrooms, which are fractional ownership pads.
Fantastic. What else should we know about this property?
Well, the rooms and our public spaces were designed by Lauren Rottet, and she was wanting to make sure that we’re bringing the outside light into the hotel, that it was like mountain side manor, that it was contemporary, very, very comfortable because after you go skiing, you just want to relax. So, I think she really did a lovely job in portraying those goals overall.
Regarding this specific property, you had the listing at JLL and sold it to Stephane and elevated returns. What’s the back story on that?
In 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 and Stephane in 2010.
And the 19 million dollars of tokens that were raised, what were those funds used for?
Well, I mean, that was a return of capital to the owner. So effectively, the tokenization is a true 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 percent, 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 REIT shares interest out of the partnership and you capitalize the REIT through the sale of smart contract. Smart contract is effectively a digital share certificate, so rather than to have your fashion paper share certificate, you have 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 global product trading multiple exchanges.
We got involved with Elevated Returns, first helping Stephane in trying to liquefy in different format, in a registered format, a traditional listed weak 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 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. 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, of course, free.
Back in October, the Security Token Academy held events around the nation to signal the kickoff of the security token industry.
We held security token meet-ups in Los Angeles and also in New York City. Attendees who purchased tickets to our 2-day cruise and conference in New York boarded the Spirit of New York yacht from Chelsea harbor for an evening cruise along the Hudson River.
And that was followed by the security token industry launch event inside the Conrad New York. Hundreds of people were in attendance as industry leaders rang the opening bell to signal the official kickoff of the security token industry.
To view all of the videos from Security Token launch week, go to our website: securitytokenacademy.com. Click on the events tab and select launch event video library. The best part: it’s free and contains a wealth of information.
All right, that’s it for today’s episode and 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. I’m Amy Wan.
And I’m Adam Chapnick. 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 page on our website. For everyone here at Security Token Academy, thanks for watching.
You want to learn more about security tokens from the top leaders in the industry? Be sure to visit our website: securitytokenacademy.com and click in the Interviews tab so you can stay connected.
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