Sam is the driving force behind the strategy, vision, and organic growth of Corl. He is passionate about FinTech with an extensive background in the marketplace lending industry. He has over 10 years of experience leading the definition, development and go to market strategy of innovative FinTech products and solutions in the payments and marketplace lending industries. He started in Montreal as the Head of Product at IOU Financial, a leading FinTech SMB marketplace lender, and supported the company to originate over $500 million in loan originations across the United States & Canada through continuous product development and innovation. Sam is an Advisor at TrustedIn Trading, Lend Mart & Fundica. Sam holds a Master’s degree in Quality Systems Engineering from Concordia University.
The security token industry is here, and it's still not too late for you to get involved. Coming up on this episode of Security Token Insight, it's lights, camera and action for Hollywood's first security token.
Plus Corl is in this week's STO Spotlight. We'll chat with the founder and CEO. That and much more is coming up on this episode of Security Token Insight.
Hey, everybody. I'm Adam Chapnick.
And I'm Amy Wan. Welcome to Security Token Insight, brought to you by the Security Token Academy. The security token industry is gaining momentum 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.
Coming up on today's episode of Security Token Insight, in your security token investing news, security tokens take center stage in Hollywood, details on the MovieCoin security token offering. Corl is in this week's STO Spotlight. We'll chat with the co-founder and CEO, plus industry leaders share their predictions for the security token industry at the CryptoMondays meetup in San Francisco. We'll take you there, and learn about the events taking place during Security Token Industry Launch Week this October.
Now it's time for your security token investing news. Never one to be left behind, Hollywood is getting in on the security token action. Christopher Woodrow, CEO and founder of MovieCoin, is also the producer of Oscar-winning films, Birdman and Hacksaw Ridge. Woodrow has a vision to bring blockchain technology to Hollywood, and wants to disrupt the way movies are funded. MovieCoin is a new cryptocurrency-backed financial technology company, which aims to utilize blockchain and digital assets in the film industry. MovieCoin will launch a MovieCoin Smart Fund token with a cap of 250 million dollars in order to finance 60 movies over the next six years. Each token will represent and ownership interest in the fund, which invest in films and other entertainment assets.
In other news, cryptomining center, Coinmint, has announced plans to partner with Securitize for a security token offering. Coinmint plans to issue tokens, which will carry a value of one terahash of bitcoin mining power. A new 1,300-acre, 400-plus-megawatt Coinmint mining site is currently underway in New York. One of the most interesting aspects of this new STO partnership is the ability to produce daily returns to investors. The co-founder of Securitize, Carlos Domingo, had this to say. Quote, "Securitize is proud to have developed a highly innovative dividend payment mechanism that allows token holders to immediately realize the benefit of Bitcoin mining without any of the hassles or complexity of other environments." Unquote.
Now it's time for our Security Token Spotlight. This is where we will introduce you to a security token offering that has launched or will be launching in the future.
Corl was in today's STO Spotlight. Corl's a financial technology company that invests in startups using artificial intelligence and shares in their future revenue. Before we meet the co-founder and CEO, let's learn a little more about the company.
Banks have tight repayment schedules, expensive terms, and rarely lend to startups, while raising venture capital forces businesses to give up ownership and control. After relinquishing equity and board seats, startup founders find themselves under tight, compromising repayment schedules. Globally, this had led to a four-trillion-dollar deficit in small business funding that continues to grow each year. Corl is revolutionizing startup financing by aligning the interests of entrepreneurs and investors.
With the Corl token, businesses get access to fast, entrepreneur-friendly capital, while investors participate in growth through revenue sharing. Qualified businesses receive funding within two weeks, and benefit from a flexible repayment schedule that's based on revenue. Best of all, Corl does not take equity or board seats, so businesses grow on their own terms. Visit Corl.io to learn more, and join us in changing the way businesses raise capital.
I had a chance to discuss Corl's security token offering with the company's co-founder and CEO, Sam Kawtharani. Take a look.
Sam, thanks so much for joining us today all the way from Montreal, Canada.
Thanks for having me.
So, first, tell us what is Corl, exactly.
The top question of the year. So, Corl is a royalty investment platform backed by big data and machine learning, which we're building basically as a platform that allows startups and small businesses to raise capital in an entrepreneur-friendly manner that is less dilutive, or actually not dilutive at all, faster and more efficient way, without giving up equity, board seats, or even control at any form or way.
Got it. So, the problems that it's handling are sort of the pain that startups encounter when they're casting about for money. You named a few of them. Can you go through more detail, the problems that it solves?
Yeah, for sure. I mean, if you look at the startup ecosystem right now, the way you can raise capital, it's a six-to-nine-months process between identifying which VCs to go after, and is it a good fit, and the due diligence on reaching out. Cold calls don't work anymore. So, we're taking that six-to-nine-months pain point of raising money, where you should be focusing on building your business instead, and providing a new way of raising capital through a revenue sharing or royalty investment.
If you look at the gap in the market of startup and medium-size businesses in the growth stage, it's around 3.8 trillion dollars worldwide. Canada and the US have a big chunk of that, and that's where kind of our bread and butter is, but what we've done is instead of chasing those venture capital or angel investors for six to nine months, we've built a platform that allows you within five to 10 minutes apply, connect all your data, get a preapproval within less than two weeks, and even approval up to funding within two weeks. In that manner, you're kind of getting the funding you need to grow your business without wasting six to nine months chasing the money while you should be growing your business instead.
Got it. Amazing. So, how exactly does it work sort of behind the curtain on your part?
So, the secret sauce that everyone's asking about, usually, as I mentioned, you have a five-to-10-minute application process. You connect your banking data, payment gateway data, for example, banking, financial, social media, online presence. We kind of capture all that data about each business, almost 10,000 data elements. So, that five-to-10-minute application onboarding process allows us to gather that kind of data set and gives us an idea of who you are as a business, who you are as an owner, get that quick analysis about each business to say it's a yay or a nay, and then we're able to give you funding up to eight times your monthly recurring revenue.
So, at the end of the two weeks process, we've underwritten your business, we have looked at your qualitative and your quantitative assessment of things, and you'll get the decision you need from a funding point of view. Behind the scenes, basically, for you it's just a simple application where you're connecting your data elements, and then once approved, we'll look at your monthly recurring revenue through your account, whether it's banks or accounting systems, and then we'll take a percentage of your revenue on a monthly basis, and that percentage is pre-approved from the day we sign the term sheets with you.
Interesting. It's a different approach. So, how about ... You mentioned some of the ways that you select the projects. It's very data-driven. I guess, what do you call revenue, would be one thing, and then how did you come up with the 8X, and anything else you can tell me about that, how you select your projects. Is it all just your data, or do you have any sort of ... Go by feel?
Obviously, like any investment, there is that qualitative side, so that's why I said there's a quantitative side, which is the data, the AI we are building, and then there's a qualitative side, which is basically a human. So, right now it's 50/50, where we rely on data 50% of the time, and then the rest of the 50 is basically an investment committee that we have internal at Corl, from the founders, from the management team, our advisors, that gut feeling, get to know manner of the founders, get to know the company more, following that gut feeling you have about each business.
So, in a way, you kind of have a hybrid way of looking at things the way a bank would look at it and the way a venture capital group would look at it, so that's the way we look at each investment. As our machine learning and AI matures, that 50/50 is going to grow to 70/30, 80/20, and at one point, you're making a decision completely based on AI because now you have enough data to make that decision if this is a good deal or a bad deal.
What constitutes revenue is, basically, we look at your top line revenue as a business. We don't look at net revenue or gross. So, we look at the gross. Sorry. So, let's say you have 10 customers that have subscribed to your product this month. Each paid you a hundred dollars, so that's a thousand dollars that you've made in revenue that month, and then that's what constitutes the revenue that we take a percentage of on a monthly basis as form of payment.
You also said that you use that number to determine the amount that you're willing to lend me, right? Did you say 8X? Is that right?
Yeah. Yeah. Exactly.
How did you come up with the 8X?
So, if you look at what the needs of each business and our exposure to risk, that's what kind of drives that number. So, the minimum we'll approve or the minimum requirement for a business needs to be $10,000 of monthly recurring revenue. So, if you look ... Okay. If you have 10,000 of monthly recurring revenue, what's the minimum amount you need to kind of scale your business? So, if you look at the 100,000, 75,000 range, the 8X factor kind of ... If you have 10,000, you could qualify up to $80,000 of revenue sharing investment or royalty investment from us, which will allow you to kind of scale your business to the next level, and then at another time you can request another amount.
So, that 8X factor is we do up to 8X, but it could be 2X, 3X, depending on the state of each business. Obviously, for example, if you're doing a hundred thousand MRR or monthly recurring revenue, it could be just 3X of that, so you'll be getting $300,000 from us, not 800,000. The maximum check we'll ever write is a million dollars, but that factor of 8X is driven by your gross margins, your month-over-month growth, and your revenues, how well you're adopting your customer and converting your customer. So, there's multiple variables that play into the structuring and the fee structure of the whole investment.
Yeah. It's interesting. So, there's a lot of great things here that you're solving the startup community. What about the fact that you say revenue, but if someone's out spending their revenue for their growth, does that matter, or do they need to be in profit?
So, you don't have to be a profitable business, but you do need to show a path to profitability. Right? So, we do require, though, a minimum gross margin of 30%. So, we have specific criteria that you need to pass through the door, so basically you'd have $10,000 monthly recurring revenue. You need to have a 30% gross margin, and you need to have at least six months of consistent sources of revenue. We also look indirectly at a 3% month-over-month growth as a business, but at least the criteria that kind of cuts you through the door is a gross margin of 30% and $10,000 MRR.
Amazing. This is going to be pretty exciting for a lot of people. Now, shifting gears a little bit, tell us a little bit about how you guys are raising funds for your fund. You're doing an STO. When did that begin, and how'd you decide to do it?
If you look at the whole industry, how it evolved from venture capital to equity crowdfunding, peer-to-peer lending before then, the industry's been evolving from a fundraising point of view. I've been personally involved in the peer-to-peer lending space with the whole Fintech revolution, and I've seen how access to new capital started emerging in the market. At one point, looking at how the ICO space starting booming and superseding, surpassing, sorry, venture capital in 2017 by a big amount, we said, "Okay. Now, there's a lot of hype in the ICO industry. There's a lot of bad projects out there that have given the industry a bad name. A lot of them don't even need to be on the blockchain."
When Derek, my co-founder, and I kind of went back to the whiteboard and said, "Okay. Well, how can we introduce a royalty structure to the crypto community in a way, giving non-crypto folks access to a crypto investment, which is not that volatile, based on an equity, for example, or giving the existing crypto community access to royalty investment and startups, which are kind of underserved by mainstream finance, who can't get access to royalty investment anywhere or that quick?" So, that's where the whole concept of the Corl token came to life, and we started this whole STO. So, the Corl token basically represents an equity in our company, and as a token holder, you're indirectly investing in those royalty investments through the startups, and then we pay back a percentage of our profits as quarterly dividends. So, now you're earning crypto on your crypto, because we pay our dividends.
Got it. Okay. So, here's a little bit of a deep question, but if it's all royalty share, but then you're saying we're getting a percentage of your profit, so if I were an investor, do I get a piece of the upside if you have exits from those companies, or I guess, is that relevant when you're a lender, or no? How does that work?
This is exactly the point. So, what we do is our royalty structure have a warrant component, so we take 2% warrant on each business that's exercisable within 10 years. If one of those warrants are exercised, that's a profit and revenue for us in that quarter, and we pass those profits as part of your dividends. Right? So, if you made one-million-dollar profits that quarter, you're giving 10% in dividends. So, if you made 10 million of profits, you're giving 10% of that. So, obviously whatever exits we have, or if there's an early repayment or buyout of our royalty, that's still part of our profits, which we pass along to all of our token holders as royalty, sorry, as dividends.
That's terrific. That's sort of the best of both worlds. So, for people watching-
Yeah. You're getting your short-term return and your long-term return. Right?
Yeah, yeah. That's terrific. So, for the folks watching, how are you structuring your raise? Who can invest in your STO? Is it ...
So, that's what interesting about the Corl token, we decided to take the long way instead of the short path, kind of launching the ICO or STO, if you want to call it. We went the full regulatory approach. What Corl is doing is we're effectively going public, so we're gonna be the first public company in the world to trade through a token. We pre-filed our perspectives, which is the document you need to go public with the Canadian regulators, specifically AMF, and are going back and forth just to finalize the perspectives and become a public company.
What that means is that because you're a public company, retail investors can participate. Just the way you can buy an Apple stock, any investor can buy that. Obviously, because it's a crypto investment, we still have to enforce certain limits on retail investors, which we're working on finalizing with the regulators, but this will be open to retail and accredited or accredited and nonaccredited. NDS, though, during the initial issuance, we only have a Reg D, which allows only to deal with accredited investors. So, the US will be focused on accredited investors.
Got it. How much are you looking to raise, and what do you guys want to do with those funds?
So, our full STO amount is 25 million dollars USD, which we'll be announcing the structure and the pricing once we have full regulatory approval. We're just basically trying to adhere to all the compliance and the non-solicitation rules pushed on us by the regulators, and we're happy to comply with that. But yeah, so we're raising 25 million USD. 95, if not even a bit more, is fully dedicated to investments in the portfolio. Corl has done some private placements with the angel investors. We've raised money from certain venture or VC groups outside the token space, so that's why the 25 million we're deploying or we're raising in the STO, I would say 95% is going complete to portfolio investments as royalties, and 5% is just going to kind of fund operations and scaling the company.
Got it. So, since you've done an STO, what do you find is the benefit of doing that versus sort of the old model?
I mean, non-STO or just traditional fundraising?
Yeah. What do you think you'd get?
So, a lot of people ask us. Yeah. I mean, a lot of people ask us that question. Right? Considering all your STOs in equity, you are giving up equity after all. Why do this in STO? Well, first of all, there's a philosophical factor the Derek and the whole team in the company believes that the financial industry and the securities industry is heading towards tokenization of assets. Tokenization allows you to have liquidity. Usually, if we've done this as a private deal, our investors won't have a path to liquidity unless someone comes in on the secondary market somehow.
Two, efficiency and compliance. We believe that from an investor having sovereignty over our own investments, and us having sovereignty over our own investor ledger makes it easier for us to kind of control those investments and manage that, whether it's an audit point of view, a compliance point of view, a regulations point of view. I mean, if you think about the traditional way of a company going public, you have the Compushares of the world that hold certificates, and then you have the ADX that kind of do the whole processing in Canada of all transactions. Now there's a smart contract that does that. Right? All those transfer agents, all those custodianships that kind of need traditional ways are replaced and being found on the blockchain. So, that's one.
Two, now your share certificate, you don't have to issue paper that could be lost or stolen tomorrow. Your share certificate is your token. So, especially when you're paying dividends, imagine that I have, I don't know, 5,000 investors around the world, and I have to do FIA transactions around the world. Now, for my dividend payout, I just send one transaction as a smart contract, and everything is remitted accordingly. Right? So, there's different aspects to that. One is philosophical. The other is operational, compliance, and just belief from us that this is where the industry is heading.
That's terrific. You covered the whole gamut. You got the philosophy, you got the operational. I love it. You're the oracle of crypto. I like it.
Well, you got to believe in what you're doing. Right? I mean-
... I think that's one of the reasons why a lot of projects kind of fail. They try to ride the hype of the ICOs because that's the next big thing, or that's the easy way to raise money, but do you really need to use ... I mean, we believe that's where the industry is heading. The security token industry's starting to boom, and we're going to start hearing more about STOs and less about ICOs, and if you have a way of kind of expanding your opportunity, your investment opportunity, and involving people that are usually not able to participate in that kind of investment, because if you're doing traditional IPO, your initial people who can really come in on your IPO are the wealthy individuals with the pockets, which are still part of our audience at the STO.
But you also want to open up to the people in, I don't know, Third World countries. We have a lot of people who are followers in the Philippines and India and Pakistan, and there's a lot of countries, for example, that are interested in what we're doing, and if it wasn't for tokenization of that security or our security, they wouldn't have had access to that in the first place.
Yeah. Oh, obviously at the Security Token Academy, we believe the hype. So, Sam Kawtharani, co-founder and CEO of Corl, thank you so much for stopping by and chatting with me today. It's been great.
Thanks for having me.
For more information on Corl, be sure to visit their website, Corl.io. That's C-O-R-L dot I-O. We wish their team all the best of luck.
The Security Token Academy is on the leading edge of the security token movement. We've held and attended security token meetups and conferences from coast to coast, and we were just at the latest CryptoMondays meetup in San Francisco. Everyone there was talking about it, you guessed it, security tokens. Here's some highlights.
Well, I think the security token industry is looking more and more like the traditional finance industry. I say to people it's kind of more like buying preferred stock. Right? You're buying in equity. You have a performance piece. Plus there's visibility and viewability of it. So, I think for real companies that want to tokenize their assets, security tokens make a lot of sense. Hopefully you'll have some more price stability, but tokenizing an existing asset and making it available to more people in a more controlled way I think is a good thing.
I think in 2019, we're going to see a lot of security tokens that were started in 2018 come to the market. They all need a place to land. They've already done some of their primary issuances, and now they need a secondary trading platform.
The way the security exchange is being built out, like starting Q4 this year and then continuing next year, I think that's going to make a big difference for all the security tokens and tokenized assets out there.
Well, over the next 12 months, I think there are going to be several security token exchanges, obviously, live in trading. I think there's going to be a flight to quality. People are going to be looking for real businesses that make sense to tokenize. I've been working with several that are in the real estate business, in the secondary market business, even cannabis, solar. There a lot of these businesses that have cashflows that aren't really great fits for traditional finance, but I think will really make a lot of sense to have distributed ownership, distributed governance.
We see that tokenization of assets and tokenization of securities across the globe is a very big opportunity. Now, here in the US, I think the conversation's been much more around which of the ICOs should actually be called securities, and which shouldn't, and why, which is a totally different aspect, and there we don't have much clarity from the SEC yet, apart from, obviously, Bitcoin and Ethereum being utilities, and everything else is kind of something else, which is part of the unknown.
The tokenization of assets I think is going to happen going forward. I think it's going to2 be a gigantic market in '19 and 2020. It's not going to be for every single security out there or every single asset, but certain assets and certain securities and funds, it makes perfect sense, and what I see is the tokenization of that security or that asset, the technology is actually relatively easy. It's the legality of it. It hasn't been tested in a court of law whether a smart contract, a digital security, the contract is legal and enforceable, but transferring a paper contract onto a digital contract is actually relatively easy. What's hard, though, is again, the legality of it, and ultimately, the liquidity of it. Where are we going to find the buyers of these security tokens?
As soon as you provide liquidity for an asset, it just kind of takes on a different character and life. So, you get different types of owners into it, you get other types of investors into it, and usually there's a premium that comes out of that. So, all of a sudden, an asset that's worth X is worth X plus 20% or 30%, because now there's liquidity. It can flow much more freely through different types of buyers, and that's valuable.
I think the custodian aspect is a big challenge right now facing a lot of companies in the space. We're partners with US and that's one of the challenges they're working with now. The problem is there's no qualified custodians, so in this space, and that's also one of the challenges for institutions right now, is the custodian problem, because right now there's not really any qualified custodians in scale that can handle above starting limits. Above 150 million of assets, institutions have to have certain requirements they'll have to fill, which right now there's not a clear solution for that.
Don't forget to join the Security Token Academy as we celebrate the launch of the security token industry. We're hosting a free meetup to kick off Security Token Industry Launch Week. The meetup takes place Monday, October 1st at 6:30 the evening, inside Maggiano's at The Grove in Los Angeles. Mix and mingle with security token experts and enthusiasts, all while enjoying complimentary drinks and hors d'oeuvres. The event will feature a talk by Tatiana Koffman, chief token officer at Full Cycle Fund. We will also have a panel discussion on security token regulations and so much more. Visit the Security Token Academy's meetup page for all the details, or head to our website and click on the events page.
Remember, Security Token Industry Launch Week kicks off the first week of October. To mark the occasion, we also have events taking place in New York City. Come together with security token leaders, experts, and enthusiasts to celebrate the opening bell of the security token industry. Our event will feature industry experts, including ERC-20 creator, Fabian Vogelsteller, and David Weild, former vice chairman of NASDAQ. Highlights include a cruise on the Hudson River on the Spirit of New York yacht during our special networking event, to be held on Thursday, October 4th.
On Friday, October 5th, you'll hear from leaders in the security token industry during our conference at the Conrad New York City as we dive into the core foundations of the security token industry. Tickets are on sale right now. Just visit our website and click on the events page to learn more about the events taking place during Security Token Industry Launch Week. We hope to see you there.
The Security Token Academy hosted the first ever security token summit in New York City back in June. It was the first conference to focus on the emergence of security token trading organizations.
This groundbreaking sold out event brought together the key players in the industry. There were keynote addresses from David Weild, former vice chairman of NASDAQ, and Bruce Fenton, CEO of Chainstone Labs, plus panel discussions, interviews, and much more.
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. I'm Amy Wan.
Want to learn more about security tokens from the top leaders in the industry? Well, be sure to visit our website, securitytokenacademy.com, and click on the interviews tab so you can stay tuned in.
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