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Stephen McKeon

Chief Strategy Advisor, Security Token Academy

Stephen McKeon is an Associate Professor of Finance at University of Oregon and Chief Strategy Advisor at Security Token Academy. His research focuses on cryptoassets, security issuance, and M&A and appears regularly in top finance journals and major media outlets. His professional experience includes six years as a chief financial officer and involvement with several venture backed start-up firms and token projects as an advisor and board director. He has co-founded a venture fund, a real estate development firm, and Skyward, a commercial drone software company, which was acquired by Verizon. Prof. McKeon teaches valuation, FinTech, and venture capital at Univ. of Oregon, as well as blockchain regulation in UC Berkeley’s Blockchain Unlocked program.

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Ryan Alfred

Founder and CEO of Framework

Ryan is the Founder and CEO of Framework, a real estate marketplace built on distributed ledger technology. Ryan co-founded Distributed Global, a digital assets investment management firm, and has a seat on the firm's Investment Committee. Formerly, Ryan was Co-Founder and President of BrightScope, a financial data and technology company (acquired by Strategic Insight, November 2016). In 2012 Ryan was named to Forbes’ Top 30 under 30 in Finance and to the Smart Money Power 30. Ryan received his bachelor's degree in Economics from Harvard University.

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Carlos Domingo

CEO and Co-Founder of Securitize

Carlos is an entrepreneur, investor and co-founder/CEO of Securitize Inc. Prior to Securitize, Carlos co-founded SPiCE VC, the first liquid, inclusive and transparent tokenized VC fund on the blockchain. Previously, he was the President and CEO of Telefonica R&D and CEO of New Business and Innovation at Telefonica Digital. He also co-founded and sits on the board of Wayra, one of the world’s largest corporate accelerators.

A self-described crypto-capitalist, he is the founder of Sling Ventures, an angel-investment fund co-invested by the European Invested Bank; a founder of Dubai Angel Investors; and a venture partner in THCAP VC. Carlos has also been a CTO, CEO and board member for multiple tech startups.

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Securitize An end-to-end platform for issuers that are seeking to tokenize assets

 

Gregory Keough

Founder, Institute for Blockchain Innovation (IBI) & CEO, Finova Financial

Mr. Keough is founder of the IBI and a pioneer in the Security Token Industry. Keough is a sought-after speaker and a leader in using the blockchain in the tokenization of assets. Mr. Keough is the creator of the JOBS Crypto Offering (JCO) a compliant open source initiative to raising capital on the blockchain.

As CEO of Finova Financial, Keough has raised over $100M from Silicon Valley VCs and private equity firms and driven the company’s mission to transform the future of global banking through the creation of fair and affordable digital financial services for consumers outside of formal financial systems.

Finova is now working to transform the traditional capital raising process through the creation of digital equity securities (equity tokens) to be traded in cryptocurrency on the blockchain through the JOBS Crypto Offering (JCO) backed by numerous pioneers in the blockchain and crypto space.

Keough is a serial entrepreneur who previously served as CEO of a MasterCard Telefonica joint venture for global Mobile Financial Services, and over the last 20 years was founder and CEO of multiple venture-backed companies going back to the early days of the internet.

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Transcript


 

Stephen McKeon:

Why don’t we start by learning a little bit about each of your projects and then we’ll just move into some general questions and go from there.

So why don’t we start on the end, Ryan, Framework ... it was referenced actually on the real estate panel earlier. Why don’t you tell us a little bit about that and also your background with Distributed Global and how that fit in?

Ryan Alfred:

Sure. So I’ll actually start with the background piece.

Stephen McKeon:

Perfect.

Ryan Alfred:

It’ll kind of go right into the framework side. So I’m a co-founder of a firm called Distributed Global, we’re a crypto asset management firm, more of a VC. We invest in tokens, we also invest in equity. My two partners set up one of the earlier crypto-funds back in 2013, 2014. Same vintage as firms like MetaStable and Pentira. They were based down in LA. I actually came from largely outside the technology community and just started going to Bitcoin conferences. I got really fascinated by the technology, fell in with the crowd that were trying to build on top of Bitcoin, projects like counter-party, et cetera who eventually said, “Hey we can’t do what we want to do on top of bitcoin,” ultimately try to launch other project, so they were early backers and supporters of the theorem project and a bunch of other projects like that.

I was actually at the time not involved, running a fintech firm, and became an LP after I sold that company, and eventually came on full-time to start the next version of the fund. Back then it was called something different, but we relaunched it as Distributed Global. Now we run a fund that’s a predecessor ... that fall under that fund, fund two, which is basically a $75 million token fund, and then we also have a VC vehicle as well.

We structured all of that a little differently than most straight investors. We said, “This is a really interesting category. This technology will unlock some really unique applications. It’s going to be very difficult to predict what those applications will be.” And in some cases, we might have a thesis for the space where we couldn’t find a team that we could invest in, where we would try to go out and recruit a team, and educate them on the potential for the opportunity and the space.

We structured the whole business as a holding company, rather than as a fund. We, in a couple of cases, have started businesses in the space, recruited management teams, help them raise capital, help them hire teams, help them hire engineers, landed them their first handful of clients, so we’ve done that a handful of times over the last couple years.

And the most recent incarnation of that is a platform called Framework, which is commercial real estate issuance platform in investment bank, and that is just getting off the ground now, should have something new announced here in the next of weeks. But I think that market is super interesting, which is why you see a lot of activity there. Because it is a category that historically hasn’t had much liquidity and there’s certainly a lot of interest globally in investing in high quality commercial real estate assets.But people who have largely been locked out of that market.

That’s a category that we’re particularly excited about, and it aligns with our overall vision for the space, which was that what we’re really building here is a new financial system built directly into the internet that allows you to transact in any scarce real world asset. That’s what Framework’s all about.

Stephen McKeon:

Fantastic. And after you do the intros, we’ll dive into the thesis and what sort of assets you’re looking at, but we’ll move onto Carlos. I remember my very first call with Carlos Domingo a long time ago ...

Carlos Domingo:

A year ago almost.

Stephen McKeon:

Around SPiCE VC and I remember blockchain capital had come out, and Carlos Domingo called about SPiCE VC and I was like, “Wow, this is gonna happen. It’s gaining some momentum.” Why don’t you tell us about SPiCE VC, and then of course, you work with Securitize as well.

Carlos Domingo:

Good. Yeah. The idea of SPiCE VC came when we ... I was doing for like two or three years more enterprise blockchain related works, so I became familiar blockchain and started looking at the ICOs.

A friend of mine, Brandon Ike had done the Brave ICO, which was kind of an eye opening for me. And then in the past, I had done a lot of VC investments myself, I have a finance bank we’re invested in by European investment funds.

I was keenly aware of the issue of the lack of liquidity in the space, so when we saw what was happening with the ICOs, we kind of saw the opportunity of why don’t we create a liquid fund?

We started discussing this around April timeframe, and then as you said, I saw in May that blockchain capital actually did it, and I was like, “Wow, this is great. These guys have the same vision.” So we look in detail about how blockchain capital did it, and kind of found some holes in the processing, how the token was assigned, the platform they used to actual issue the tokens ... I weigh myself on both, tokens from the secondary market, with my email. And this is security so it’s obviously something you should be doing.

Then they also got trading Ether, you could even buy without email, just with MetaMask. So we went around, when we wanted to talk with SPiCE VC and we started looking at who could actually provide the token issuance services and couldn’t find anyone that had a platform or a product ready. There were companies talking about it, but no one actually had products.

Then we decide to basically hire a bunch of engineers, a CTO and then started organizing SPiCE ourselves and started building the technology platform. At the time I remember you started talking about the real world tokenization of assets and we used to have a quote from your first paper in our presentation. So we were real excited about the project. And in October of last year I went out, wrote a couple of Medium articles about how we have improved the model of blockchain capital with SPiCE VC, and about how it was the investment process in SPiCE screenshots of the platform. Lots of people contacted me and said this is very cool, so who is providing the platform.

I say, “It’s my platform, and we build it ourselves.” So companies started approaching us and my co-founder for Jamie Finn had been an early investor in the fund, and we decided then this is a good opportunity. We have a liquid fund that we’re moving forward with it, but then the technology we built could be used by other people because at security tokens we believe that’s going to be a very big thing. So we spun out Securitize a separate project. The company was founded in November and launched publicly in January. Since then, obviously the industry has completely changed.

When I started talking about security tokens, back like a year ago, it felt very lonely. People were telling me why do you waste your time just do a utility token and say to investors what about global compliance? I was like well, I don’t want to go to jail so I think it’s better if we do it this way. So now the industry is very different. There’s a conference dedicated to this. We have dozens of customers, exchanges are finally launching, which is a missing piece. So I think it’s very good to see how this early vision we had about tokenizing real world assets is becoming a reality.

Stephen McKeon:

Great, so Greg, I met at BlockFin on stage talking about the ICO around Finova Financial. And why don’t you take us through starting from there and then of course the newer entity, the Institute for Blockchain Innovation and the way they’re looking at potentially fundraising, that type thing.

Gregory Keough:

Yes, so it’s funny, I chuckled with Carlos, cause yes it was very lonely two years ago and I would actually get hate mail suggesting we should have some sort of compliance around this because I think it could be a problem. I’ve been a fintech entrepreneur for the last 40 years, done most of my stints running venture backed companies. I kind of got into blockchain. The one corporate gig I did was I was a CEO for a joint venture between MasterCard and telephonic and random global-mobile financial services and at that time I have five kids, live in Florida, and my eldest is a big gamer. It’s like 2012. He had really good platforms and I said you know why don’t you mine Bitcoin with these platforms.

He got a bunch of him and his buddies together to mine Bitcoin, I’ll never forget all the parent would call me up and say, “What are these kids doing? Is this illegal?” And of course at that time nobody really cared, I said it’s a good thing to learn or something. So fast forward to today, all those parents, I’m their best friend because they paid for their college and their house and everything else.

That’s kind of how I got involved. So when I started Finova, went down the traditional venture path. We’re basically a consumer finance company that does everything digitally. We’ve raised like over $100 million in traditional venture capital and private equity. But when the whole ICO stuff was happening, again I think a lot of us had the same ah-ha moment, this is really a huge change. But unfortunately I think it’s going to be ruined because there’s people doing things that are certainly not compliant with laws and probably not set this industry up.

So myself at that time, Jeremy Gardner, who did one of the first ICOs, Steve and a bunch of other folks, got together and said let’s figure out if we can’t put a framework around this ICO concept, add the benefits, but do it compliantly. And that’s how the Institute of Blockchain Innovation came about.

It’s kind of weird because everybody says, “What do you guys do?” And Carlos Domingo is a member and we announced the other week that we now have a lot of the main security token folks and all the platforms, Chris and Trevor from Poly map, and Mason, who was just up here is a member. And the idea was pretty simple, put together 100 people on a global basis and just discuss this stuff and try to figure out how this framework should work. It’s that simple. We’re not starting conferences. We’re not trying to sell stuff. We have meet-ups.

That was the first initiative that we had and we’re going to open source the documents, the legal documents. I imagine we’ve spent about a million at this point just setting up the legal documents. But the idea was to open source this through the JCO to other folks. And then fast forward to today, we looked at another problem, or what we see as an issue ... I think the security token space is between two worlds. One is the hardcore crypto world, which we have a lot of people in the IBI who are from there, the I want 10,000 percent return and I want it in the next 30 minutes.

Those return days are probably over. Most people have realized that. But still everybody loves those days. And those were good days. And then we have traditional investors who kind of heard this blockchain crypto stuff, but they’re not exactly sure, but I think they are interested. And I think security tokens sits in the middle. So to sit in the middle, I think one of the biggest things is you have to have a very compelling value proposition to the investor to do it because there are other financial products available.

And so with the IBI one of the things we learned or found out, one of the potential apps for this is private credit, but high-yield secured private credit. And the reason we say that is because this is an asset class that’s been restricted to billionaires and private wealth managers. So with Finova we had the guy who’s president of Apollo hedge fund, provided the capital to us, so he would fit that category. But you could democratize that where it would be available to everybody. And so one of the initiatives with blockchain crypto partners we’re working on now.

Stephen McKeon:

Yeah, I thought this open sourcing of the legal docs was such a key piece because I come from a startup background and start-ups a lot of times don’t have a lot of capital so making these available is really key. I want to continue this thread of democratization of ownership and just chat about if the concept of this panel is where is the money coming from. Let’s talk about institutions versus retail. When you went through this process with Finova, then maybe we can go right down the line and talk about where are you seeing the money come from. Was it a reg D offering so it was only accredited? How did you see institutions versus individuals and maybe those were accredited individuals?

Gregory Keough:

So, I guess the first thing that is a misconception, putting security token on something makes it easy to make money. That’s not true okay. We have lots of Silicon Valley VCs, private equity guys, and they keep telling me, why are you doing the security token, we’ll just write you a check for the series C and it’s over.

I was like you’re right, but there is a fundamental change going on here. I’m an old man at this juncture, most of the people are young, and so I do think this is a fundamental change. I think though we’re seeing people now talking, especially like family office et cetera are looking to allocate a small portion of their asset allocation to this. And I think we’re at the very beginning. And I think we’ll see this grow exponentially. And I also think that at the very beginning days ... Carlos, I don’t know if you remember Ryan, is that VCs basically, as much as they tell you that they’re not interested at all in anything with ICO or blockchain or token. Now all of the sudden everybody is.

If you went back two years ago they were all telling you you’re crazy. So I think that’s changed a lot too.

Stephen McKeon:

So, Carlos you’ve seen a lot of offerings through secure ties. I’m interested in your comments on institution versus accredited.

Carlos Domingo:

I think today, I agree with Greg, it’s not necessarily easier to raise money as a ST over traditionally equity. But it’s true you raise from different sources. I think this is going to change even more. Certainly you get money from people you don’t expect and people that you’ve never actually met ... I’m remembering SPiCE when we opened up the security token offering for investment and suddenly you’re seeing someone send a few hundred thousand dollars in Bitcoin and you’re like wow I’ve never actually met this guy and he’s giving me all this money.

Of course they sign a security and it’s all legal but in a traditional way you never would have found this person. I really believe in the concept of democratizing access to capital. I think security tokens are like equity funding on steroids because they are global efforts for the most part which is a powerful thing. I think as Greg said the problem is meeting between. The crypto people are still skeptical of security tokens because they think the same returns are not going to there. And more importantly the liquidity is still not there. I think when the liquidity comes it will change the perception of people.

For traditional investors we have seen success with high net worth individuals, with entrepreneurs that have money, family offices. Except not really with funds yet, or with traditional LPs. And I think the reason is also the name. I’m putting here a proposal for the next year of the conference, don’t call it security token academy, call it digital securities academy because the word token is contaminated because of all the legal things that happen in the past and anyone institutional is afraid of this.

Even if you tell them, look this is securities, just this is on the blockchain, which happens to be a perfect platform, to digitize a security in a decentralized way, compared to traditional alternatives, there’s still the word token, the word crypto makes them think that this is a scam, that there’s no asset behind, et cetera.

I think that we could all benefit from calling this digital securities and make it more legitimate and more similar to traditional securities. But digitized with lots of efficiencies.

Stephen McKeon:

Right so Ryan, you have unique experience of having raised capital both for a fund focused on network assets, native digital assets, as well as now through Framework, something that’s focused on hard assets, on real estate. So maybe take us through the ... I assumed largely institutional money was coming in, maybe that’s incorrect. But to the degree that you can contrast those two experiences.

Ryan Alfred:

Raising money for a token fund is a unique experience because if you go down the well-trodden path of raising money for a venture fund or a private equity fund or any kind of fund you will talk to family offices, institutions, foundations, endowments. All the traditional players and you get all kinds of questions that you would not expect, for one. You’re basically trying to convince them of the merits of a relatively new asset class. And these are not folks who are generally comfortable taking risks. They don’t know how to understand an underwrite.

So it’s a big ask to ask them, step out of that comfort zone and trust your judgment on that new asset class. That sounds very technical to them and so it’s difficult for them to grasp that. So we ended up not ... a couple years ago it was really hard to raise from institutions. You’re starting to see some crypto funds raise money from endowments and foundations now. You’ve already seen a lot of family offices commit capital to this base. And so we’ve gotten a lot of people off of zero, but at the beginning it was largely high net worth individuals who were willing to take that risk because they viewed it as a venture bet more so on the people they were investing in than they were underwriting the actual merits of investing in Bitcoin.

A lot of those people weren’t in the position to do that. So that was a really tough sale and a tough sales process. I think one of the things that a lot of people experience, when you have this massive tailwind like in 2017, it was probably much easier to raise capital than when the first time they stared raising money in 2013 and 2014, when there wasn’t a single administrator who would look though this information. They didn’t understand what these exchanges were, they didn’t look like any exchanges they had ever been comfortable with. They didn’t know what tokens were.

Trying to find a lawyer, an administrator to button up the fund was incredibly different. In 2017 and 2018, you’ve got 20 different administrators to pick from. Almost every single law firm has recognized this is category that makes sense for ... we’re raising money for funds now, it’s become substantially easier, including funds that are investing directly in tokens because most people, most VCs who touch fintech at all have already put clauses into their LP agreement that allow them to hold tokens. And most investors I think have gotten comfortable with that.

So that, horror at the beginning has gotten much easier. Obviously raising capital for an entity that’s raising preferred priced equity round is significantly easier. Particularly, I think this last point is a really important point. For Framework, we don’t use token at all. When we talk to people in real estate we never use the word token. We abstract completely away from it. We talk about digital shares and we talk about liquidity. And frankly, the liquidity piece, since it doesn’t exist yet, they say point to an asset that’s an asset-backed token that has liquidity, that’s trading. And the answer is it’s hard right now to point to. They still say what’s the fundamental difference between this and the securities I already own. I think that will get easier when you have ATSs trading in volume with real liquidity and that will fundamentally change the capital raising side.

And that’s where you’ll start seeing investors who understand what that means for their business, start to demand that they get it in that form. But I think we’re still a ways off from that. We’re all early still in that cycle.

Carlos Domingo:

You’re going to see in two weeks that the first digital security, or security token, that we issue from SPiCE VC is going to be trading up in finance. And it’s a great thing and it’s a scary thing as well. Because we don’t know what’s going to happen to be honest with you and so, how much the liquidity is going to be there and whether everything is going to work without any problems. Whether the blockchain is going to scale if suddenly many investors come. People don’t realize the issues in term with scalability. We have just reissued the token for SPiCE VC using the full new version of the digital securities protocol. It’ll take us like 36 hours to deploy several million tokens on Ethereum. I think it’s great that things are happening. At the same time people need to understand it’s still early days, especially for these changes.

I think in terms of issuing platform and things like that, has moved a bit faster. But in terms of changes the next few months is when we know exactly what happens.

Stephen McKeon:

So just to clarify when it starts trading open finance it will be open to retail investors?

Carlos Domingo:

No.

Stephen McKeon:

It’s just accredited?

Carlos Domingo:

It was done under Reg D. Therefore, there’s one year lookup for U.S. investors and then for Reg S, will depend on the jurisdictions of each country. Because obviously you have to follow the jurisdiction of all the investors. So then the next, we’re going to list is blockchain capital, which very proud. We issued the token using our platform. And that one because it was issued more than a year ago it has no restrictions here in the US., which will give us another exposure to how liquidity happens for those type of tokens.

Stephen McKeon:

Yeah so essentially you could just go to the platform, you could register, you may need to show documents about accreditation. But for the other, it would just be kind of open to anyone depending on jurisdiction.

Carlos Domingo:

Correct.

Stephen McKeon:

Sounds great. So it’s sounds like the knowledge gap has closed a lot. All of you have raised a lot of capital around this space. What are the gaps in knowledge that still exist? And I know that’s different for different investors. But when you approach different investors, what are the myths you need to dis spell?

Gregory Keough:

Selling any product, there has to be a clear consumer value proposition. Why would somebody do this? Why is it better than the way it currently works? And if it’s just the same thing but digital and on the blockchain, it’s nice, that could be well, there could be some efficiencies there. But I don’t think it’s good enough to get this typical security token type investor because I think they’re looking for some benefit. And so that’s why, on the private credit side, if you look at ... Goldman Sachs has an offer going around right now on private credit, they’re looking, targeting ... you have to put in a million bucks, they’re looking to target about 80 percent. But you need a million dollars, you need somebody there at Goldman Sachs who’s going to do ...

So it’s very clubby and clique-ish, which I think is one of the big things we can do here in the democratization of the capitalizing. Why is it that the best deals are restricted to the guys up on top? It fundamentally is not fair. Everybody maybe should have a fair access to it. I think specific use cases ... and that’s why I keep coming back to secularized high yield, and the reason I do that is because globally, you go to Switzerland, there’s negative yield, right?

All investors, whether it’s a guy that has $50,000 in his bank account, the guy who has a billion, are all looking for some sort of secure return on their investment that’s consistent. So you can go to a retiree who has $100,000, I can’t get that flow I used to get. So I think that’s why we concentrated on that use case, with the IBI. I know it has global resonance. The idea with the IBI, just to be clear, is we’re just trying to do things, show they work and then let other people copy them. We’re not trying to become a big fund or anything like that. That’s not our goal.

Our goal but is to show actual real results of how it could work and then say perhaps other people could use this in other ways. And so that’s one of the things that checks off all the boxes for me as an investor, right? I would do it. I think a lot of people in this room, if you had $50,000 sitting in a bank and you said hey, it’s going to be in the U.S., it’s going to be secured by some physical asset with a good loan to value ratio, it’s targeting double digit return. That kind of adds up providing it’s legitimate, right? And I think that that’s one of the good use cases.

But there’s certainly more in real estate and other stuff as well.

Carlos Domingo:

I disagree with ... I disagree and agree on closing the knowledge gap. I think we’ve closed it. So we went from 100 percent of people not knowing what it is to 99 percent of people not knowing what it is. We closed it but it’s still far away. We live in this echo chamber of hearing to each other all the time and social networks do a very good job to always order the feed so I always get your tweets and you get my tweets so we think everyone agrees and knows what we know and that’s not true.

This is still very early days for the industry, which is great place to be because, especially as investors as well, putting on my other hat as SPiCE VC, it’s great to be able to invest now. This is where the industry is being formed and if you pick the winners this is when you will really make money, not if you wait until things actually happen, right?

Still the knowledge gap is there. The only thing that has improved I will day is that when you go out and talk to people, crypto is already known, and there is less fear than there was a year ago. Blockchain is already known and there is less fear than there was a year ago. But digital security you talking still, you have to explain what they are and you have to point to some of examples to start up here in the industry. And then the other thing is, how do you explain the advantages? It depends on the audience, right? For my experience, if people coming from financial service backgrounds or capital markets, it’s easier to tell them why this is a good thing, right? Because they understand the mess that they have with the clearinghouses, with the risk people, with transferring agents that register central depositors and you tell them look I’m going to collapse this into just changes and a compliance on the blockchain and that’s it. And they get it.

When you talk to people who don’t come from financial services industry and they’re ... but they know about start-ups, they just understand it because the start-ups don’t have those problems, right? They have the small cap tables, there’s no need for automation, there’s no liquidity anyway. So it’s more difficult to explain to those people.

Stephen McKeon:

So, we talked a lot about money flowing into the funds, let’s talk about money flowing out of the funds and how you’re thinking about assets. So maybe starting with the real estate, so you’re based in New York, will you primarily look at real estate assets in this geographical region or something wider?

Ryan Alfred:

So, to start in our go to market we will focus strictly on U.S. assets, but I will tell you, and I think the guys at Harbor would say the thing and I think you’ve probably seen the same thing, there’s demand globally. We’ve talked to people in Korea, in Mexico, all around the world. All different types of assets. And when I say demand, I actually mean supply. People who own assets today. It’s clear to us there’s a lot of pint up ... there’s a lot of interest in getting liquidity for real estate assets. There’s a lot of interest in the category.

A lot of it, it feels to me, people want to explore, and they want to understand it better. They don’t necessarily understand what it actually mean to tokenize an asset yet. There’s some legacy like hey maybe we’re going to tap into people who own lots of Bitcoin and I have to sort of disabuse them of that notion. I don’t think there’s going to be a lot of overlap between the traditional token investor today and a piece of commercial real estate.

It might be a little different for a VC fund, it might be a little different for some of the other categories. But in what we’re seeing, we’re not seeing a lot of that. I think some of the hardest work that’s going to be done for players in this space is frankly going to be on the demand side, the buy side. Who are going to be the buyers of these assets? Are they comfortable holding and custodying a token? If they’re not, what kind of custody solution can you provide to them so they’re not actually tapped into token in the beginning but still benefiting from the liquidity as it lists on a secondary market.

And then finding those interesting pockets of capital that are willing to go down that path. So I think a lot of our energy and effort is really going to be on the demand side because there’s no shortage of interest on the supply side.

Carlos Domingo:

I agree. The problem today is to find people who want to invest in this asset class, security tokens. People that want to securitize things or tokenize things, it’s crazy. We get 15, 20 per day.

Ryan Alfred:

It’s easy to get distracted. There’s a lot of that noise.

Carlos Domingo:

But you have to be very selective because there’s people with a lot of ideas that are never going to raise any money. SO you better don’t touch it. So, I think the good project that make a lot of sense, and that they’re also suitable for tokenization, which is not everything. A start up raising $1 million, I think they should just do a rec CF, go public or something like that and they’ll have an easier time raising $1 million and there is no need for them to have any liquidity. They’re not going to have any liquidity anyway on the secondary market, the automation piece of security token also doesn’t apply because they’re going to have small cap tables.

So I think you need to pick the right assets. My view is the bigger the better at the beginning because those will be easier for you to understand and you will get more liquidity and take it from there and token-ize the world but you know, in the next ten years.

Ryan Alfred:

I have a questions for you Carlos, because one of the things we have concerns about is you end up with ... listen there’s very little liquidity in small or micro-capped stocks.

Carlos Domingo:

Correct.

Ryan Alfred:

We might have a small building that has $10 million in equity and $20 million in debt. How much liquidity is there going to be at that end of the marketplace. We have our thoughts on that. But I wonder what your thoughts are for an LP interest of a fund. Are you going to actively pursue or try to recruit market makers or people who will be liquidity providers to the market place? How do imagine the liquidity will actually work in the beginning?

Carlos Domingo:

So, in terms of liquidity for security tokens, this morning the guy from NASDAQ said security tokens are not going to improve liquidity. I disagree with that statement. I think it will improve liquidity because they are going to be marketed globally. And that’s going to make a big difference because obviously you can tap bigger pools of liquidity and also a fractional ownership facilitates liquidity. So I’m a big believer that these asset classes will be more liquid and purely if you list a company on the small cap NASDAQ or something like that.

That said, liquidity needs to be there, and you need to bring brokers and market makers et cetera. We’re not actively trying to do that, we’re just trying to facilitate interest to those changes of the people that come to us to make sure they are the ones that work with those people to provide the liquidity.

And then from our side, what we’re trying to do now is try to be as transparent as possible in terms of communicating the value of the asset, the life of the fund, and things like that so people have a reference of what the liquidity is. And also be there. We have some provisions in our PPM that allow us to buy the token back if it falls below certain price compared to the NAF. So we avoid falling down too much and things like that.

I think that the responsibility of bringing the liquidity is not from the issuer, it’s from these changes, you know they got to make money with a trader, therefore they’re interested in having liquidity.

Stephen McKeon:

Great. Well we’re just about out of time. Let’s do one or to sentence, kind of final statement or forward looking statement. Go ahead.

Gregory Keough:

I think we’re at the very beginning. And as somebody else said, which is very true, having seen the internet get where it is, basically all the promises of the late ‘80s, early ‘90s of the internet that I was at conferences like this talking about, right now they’re true and you can see them. But that’s a long time. So I think there is going to be a huge, multi-trillion change in the way things work, the way capital is formed and traded, but we’re at the very early beginnings.

Carlos Domingo:

I’m going to try to be more positive. We’re at the very beginning but I talked to Steve for the first time a year ago and the amount of progress in a year of this industry has been amazing. And the amount of bright minds and people coming here, people that approach because they want to work with us. New cool projects that are coming up, this is amazing. And I think we’re going to be surprised about the amount of progress that we see in the next three to five years.

Stephen McKeon:

Final thoughts?

Ryan Alfred:

So, at DG we had a thesis from the very beginning that there are basically two primary use cases for a blockchain network, or [inaudible 00:30:53] technology. The first was hard money. And the second was transacting in private securities. And so there are lots of other things that will be tried, but for me those were always the two major categories. I think hard money is going to play out over decades. This will also play out over decades. But the amount of energy and interest and capital going into it will force it to happen faster than it would otherwise.

Stephen McKeon:

Great, well let’s thank our panel.