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Why Andreessen Horowitz Decided to become a Registered Investment Advisor

Expert Interview


 
Dave Hendricks of Vertalo
 

Dave Hendricks

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.

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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.

Transcript


 

Adam Chapnick:

Hey everybody, it’s me again, Adam Chapnick, with the Security Token Academy. And we’re here in LA at CIS 2019. I am pleased to be joined by a gold corporate member of the Security Token Academy, the founder of Vertalo Mr. Dave Hendricks.

Dave Hendricks:

Hey Adam, how are you?

Adam Chapnick:

It’s great having you back.

Dave Hendricks:

It’s great to be back.

Adam Chapnick:

Yes. Maybe the returning champion.

Dave Hendricks:

Wow.

Adam Chapnick:

It’s possible.

Dave Hendricks:

Top of the leader board.

Adam Chapnick:

Top of the leader board I think. It’s possible.

Dave Hendricks:

Thank you.

Adam Chapnick:

So, 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 it. What did you want to start with?

Dave Hendricks:

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 span of a couple of weeks. Specifically, Andreessen Horowitz decided to change their entire business model. Do you know who Andreessen Horowitz is?

Adam Chapnick:

Yes, I do.

Dave Hendricks:

Yeah. Andreessen Horowitz is kind of of a big deal, right? I mean, besides being one of the largest and most successful VC firms in the Valley, they’ve also really gone all in on crypto. They made some big investments. They invested in issuance platforms like Harbor, they’ve got a partner Chris Dixon, who is 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 150 of their employees. It’s a really, really interesting development. Now, even 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.

Adam Chapnick:

Yes, they are.

Dave Hendricks:

Well, a couple weeks before that, news had leaked that they were leading a $300 million round in Carta. Do you know who Carta is?

Adam Chapnick:

Yes, sure.

Dave Hendricks:

So, Carta is a cap table company. They’ve been building cap tables for venture funded firms for better part of a decade. Now, Vertalo’s also a cap table company. We happened to put our cap tables on blockchain, okay, which we think is a great technology for creating connection between issuers and investors. Carta does theirs behind the Firewall, it’s a little different than ours, they’ve got a head start.

Adam Chapnick:

But blockchain does solve a very particular pain point around cap tables. I can say from experience in startups that’s a huge headache that just having it on ledger would really help.

Dave Hendricks:

Right. What about provable ownership, right?

Adam Chapnick:

Yes.

Dave Hendricks:

And it if you’ve ever not owned something you thought you owned that’s kind of painful. Well, so, when these two items, okay, 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 buying and selling secondary offerings. By being a registered investment advisor, those companies that are on the cap tables managed by Carta can now be bought and sold more easily through the Carta exchange enabled by the team and Andreessen Horowitz. So, basically, Andreessen Horowitz has the ability now to make this private VC investments more liquid.

Adam Chapnick:

Wow.

Dave Hendricks:

Now, liquidity is obviously a really, really big topic.

Adam Chapnick:

Yes, it’s the Holy Grail.

Dave Hendricks:

It’s the Holy Grail. Liquidity is the whole reason for security tokens.

Adam Chapnick:

Right, well, a major, yes, right, yeah.

Dave Hendricks:

It’s the whole reason to me. Okay?

Adam Chapnick:

Okay.

Dave Hendricks:

The reason for security tokens is taking private assets, okay, and making them more sellable. Okay? 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 are IT assets. So, now you’ve got Andreessen Horowitz that has made their team into, basically, a broker-dealer, registered investment advisor. They have now all connection to Carta, which has all these private companies, these private assets. Now, maybe they’re think of that they going to try to take some of those private assets and make them more liquid.

Adam Chapnick:

Liquified, yes. Exactly.

Dave Hendricks:

Yes. 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 150 people is not something that you do casually.

Adam Chapnick:

No. What an indicator? I mean that’s a really strong indicator for the space, and it’s funny, because we’re here as I mentioned at CIS, and yesterday there was this security token focused event just on the issues surrounding security tokens. The question that came up on almost every panel is, “How’re we going to get to liquidity?” And this is really interesting as an indicator.

Dave Hendricks:

This is really interesting.

Adam Chapnick:

How’re we going to get to liquidity?

Dave Hendricks:

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 the secondary liquidity. You need to make it so that someone who owns something doesn’t have to go to a really, really painful process that could take months to sell what they own. And they also need to know what they own. Right?

Adam Chapnick:

Right. Yeah that’s important.

Dave Hendricks:

And so, people say when liquidity, right? Yesterday I gave a talk at the conference, and I wanted to focus on the concept of whales. Okay?

Adam Chapnick:

Okay. Great, yes. Let’s hear it.

Dave Hendricks:

So, right? So, I mean Andreessen Horowitz is a whale. Let’s talk about the sperm whale. Okay? The sperm whale has a 15 month gestation process. Okay? It takes a long time to make a whale, and the whale lives for a really, really long time. Basically, what we’re doing here is, it takes 15 months, maybe 18 months from the beginning, when you think about doing a security token offering, to when it trades. You’ve got to do all the work with the bankers and the lawyers. Did they get to raise the money? Okay? And then it sits there for a while until you can sell it. Okay?

Adam Chapnick:

Yes. It’s all true.

Dave Hendricks:

So, it takes a long time to make a sperm whale. Okay? And so that’s the same thing with the security token liquidity.

Adam Chapnick:

My mother always said that to me.

Dave Hendricks:

When the whales born, it becomes the king of the sea, and it lives forever.

Adam Chapnick:

Wow.

Dave Hendricks:

Okay. 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 eminent adoption.

Adam Chapnick:

Wow. The drop of the wisdom.

Dave Hendricks:

Look, I’m just Encyclopedia Brown. I’m just trying to put couple things together.

Adam Chapnick:

You are very securely atop the leader board here, at Security Token Academy. But before we let you go, tell us a little bit what’s happening for Vertalo next six months?

Dave Hendricks:

Yeah, so, I can’t really talk about the next round of funding that-

Adam Chapnick:

Good night. Okay, so.

Dave Hendricks:

... we’re starting in May, so that we can take the blockchain, enable cap table to any company that wants to have the option of tokenizing.

Adam Chapnick:

Amazing.

Dave Hendricks:

See, the thing about blockchain and cap table is if you put your cap table on blockchain, you don’t have to issue a token. But it gives you the option, the ability-

Adam Chapnick:

Easily, yes, right.

Dave Hendricks:

... to issue the token later. And if you’re in [00:08:00] this business, like we are, you’re here because you believe that this is a mega trend. Right? So, Vertalo is working to capture the early part of that mega trend by helping companies raising money to put their cap tables right on blockchain for self-sovereign ownership of the things that people are investing in, connections between issuers-investors. We’re taking this to market now, we’ve got too many clients, too much work, so, it’s getting busy and exciting.

Adam Chapnick:

That’s the best kind of too much. We like it. Well, thank you again for joining us at Security Token Academy-

Dave Hendricks:

Thanks Adam.

Adam Chapnick:

... It is always a pleasure. Can’t wait for the next one.

Dave Hendricks:

See you soon.

Adam Chapnick:

Dave Hendricks.

Dave Hendricks:

Cheers.