In this episode we have the pleasure of chatting with Dave Vertalo, founder and CEO of Vertalo.
Vertalo helps companies to Tokenize their Cap Table, and their equity.
Dave was able to give us some insight about the Tokenization of Private Companies, based on his expertise and experience. We talked about the state of the market for Tokenized assets, the difference in regulation and adoption between the US, Europe and other regions, and the chains and marketplaces available.
You can find Dave and Vertalo:
Twitter - @DaveHendricks
Twitter - @vertalo_
Website - www.vertalo.com
You can find us:
Dave Hendricks Podcast Audio
[00:00:58]Ron: [00:00:58] To the Interaxis podcast, continuing on our theme of real world digital assets on the blockchain. Ron Dixon here with Adam Blumberg and our special guest from Vertalo, Dave Hendricks. Dave, can you take a few minutes and tell us a little bit about Vertalo and yourself.
[00:01:19] Dave: [00:01:19] Yeah, thanks for that, Ron.
[00:01:20]great to see Adam. yeah, my name is Dave Hendricks. I am the CEO and cofounder of Vertalo, Vertalo connects and enables the digital asset ecosystem. what we re what we are is, a cap table and shareholder registry that uses blockchain as a database. We can take an analog asset, like a cap table spreadsheet, bring it onto our platform.
[00:01:43] And tokenize that asset in minutes. we can also take some data from an API bringing onto our platform and tokenize it in minutes. So what we do is we have reduced the cost and complexity of digitizing and tokenizing, real world assets and put it into the hands of our clients and partners so that they can go to business and they can create the revolution.
[00:02:09] So that's what we do.
[00:02:12] Adam: [00:02:12] Okay, so that real quickly. So how is that pertinent? What is important about the ability to do what you do and take real world assets and, take the cap tables, take whatever it might be and put them on chain. Why is that important to do.
[00:02:30] Dave: [00:02:30] So today what we're going through, if you, if we say today is, you know what, June 26, 2020, we're in the middle of a very interesting economic situation.
[00:02:42]you know, we've got public markets, which are very volatile. we've got, private assets, which haven't changed in price. We've got people who are having capital calls made against them. we've got a lack of trust in institutions, and we've got a populous business, especially a business community that wants more control.
[00:03:04] What we do is we help business owners, funds RIA is broker dealers, issuers of private assets, like, you know, PPMS. We help them manage their shareholder registry and we help them connect more closely with their investors. The reason why we use blockchain for this is because the so-called trustless. blockchain is frankly, a better ledger for recording ownership.
[00:03:31] And, it's also a fantastic tool for creating efficiencies and improving liquidity for private assets. So the process of digitizing an asset, the reason why you digitize it is one that record keeping more trust. more efficiency, lower cost. And then the ultimate, kind of Holy grail is ultimately secondary liquidity.
[00:03:56] And by, by tokenizing an asset, you put it into a format which subject to regulations and availability and interest, maybe more liquid that's, some paper shares that are in your, that are in a shoe box or that are, or they're on a proxy ledger, like a spreadsheet.
[00:04:14] Adam: [00:04:14] So that brings up an interesting question.
[00:04:17] What happens now? So for the most part in the, in the traditional finance world, What happens now? I mean, Ron and I talk about it sometimes, either in videos or podcasts, but from your experience, what does a company do when they're, when they're raising money for, Frances, our real estate fund or a particular piece of real estate investment, or any other sort of private investment, how is that handled from a cap table perspective versus what you're doing now?
[00:04:45] Dave: [00:04:45] Yeah, so right now, most cap tables, especially in private assets are stored on spreadsheets. while the fundraising process is going on the, the issuer, meaning the, the entity, which is raising the funds, issuing shares, they are gathering investment sometimes it's in one day because it's, magically successful and there's high demand.
[00:05:08] Sometimes it's over months. 40 years. And what they're doing is as they raise that investment, they then take , that check. They deposit it in a bank or in some other institution, and then they take the name or entity and information from the investor and they file it away somewhere. They might enter it into a spreadsheet.
[00:05:30] They might put it on an index card. They might write it in a, in a notebook. There's all kinds of different ways. So today, the way that, shares, like sharing or ownership, like the share register is managed in private companies is super fragmented. It's done differently everywhere. There's some, some people are using tools to do this.
[00:05:52] Mostly you're using spreadsheets. And the thing is that as a, as an investor today's systems or today's non systems, you actually have no confirmation whatsoever that your, your sheriffs have been entered into the ledger. you don't have access to the spreadsheet, which is on, which is on someone's desktop.
[00:06:15] And even if it's an, a Google sheet, they're probably not giving you rights to see it. So you're, you have to take it, you know, on trust that when you invest in a, in someone's company, that they're actually putting you on the cap table, this has led to a lot of problems. in Facebook, I think they spent about $50 million cleaning up their own cap table when they went public cap table, nasty cap tables are, a huge legal extent at M and a, or at IPO.
[00:06:46] It's a problem also for, for smaller companies, private companies. And so what happens is when, you know, with the asset gets sold or is acquired, etc. That's when everything needs to get reconciled. And a lot of times, no one finds out for years that in fact, their investment wasn't properly recorded by putting the investment record.
[00:07:08] On the blockchain using a system like for Talos, the investor has a con has a confirmation and we have a smart contract that runs between the two parties. Now this can be done at any time in the life cycle of a company or an investment or capital formation event. It can be done with a broker dealer. we're integrated with broker dealers.
[00:07:32] It can be done with a capital advisor. Who's helping raise capital and helping market and offering. and so, blockchain, I think as an innovation, was initially with the ERC 20 and RCS, that was a capital formation, innovation. And what happened was you got tokens dumped in your wallet eventually.
[00:07:54] We do the same thing after Tolo, but the, the digital assets are, registered securities. And so there's a compliance. Okay.
[00:08:03] Adam: [00:08:03] So the, the idea that we're putting the cap tape along chain is what facilitates things like a eventual liquidity, a secondary market, because we can, at some point prove that I own it.
[00:08:15] And, you, you couple that with the idea of a, of a transfer agent, now you can prove that not only do I own it, but now I've sold it to you and the provenance can change. because as we know with blockchain, one of the great things that started with Bitcoin was the idea that, I can't transfer until I actually have it.
[00:08:34] Right. The double spending problem. Well, you're, you're essentially tokenizing assets is you're, putting that in my account for it. You're making sure that I actually own it. It's in my wallet. And now, because of that, and based on whatever, you know, legalities or whatever regs say, I can sell it or I can transfer it.
[00:08:53] Now I can do that. Now I can move it to someone else. Yeah.
[00:08:59] Dave: [00:08:59] Yeah. So as it were an sec registered trade that's for agent wood. And what that means is that we manage the books and records for, the issuer. And when there's a transfer that transfer needs to be recorded, the system enables the issuer to see all that.
[00:09:13] It's all shareholders and all of, all of that's previous shareholders, current and former our system enables the investor to see their current holdings. That the fact that that holding is visible in the Virtela system is, is, is a proof that a smart contract has been wrong between you, the investor and the issuer, from whom you bought the shares.
[00:09:35]if you, decide to sell all those or transfer them to another empathy, one, you can't, you can't transfer or sell things which you don't possess. You can't transfer or sell things which are not subject to transferability. Or sale yet. And so by using smart contracts in this way, on a blockchain ledger, you can implement transfer controls, transfer restrictions.
[00:09:57]you can record on the ledger that this has happened. And then you can't, for example, issue shares, which are, which exceed the size of the pool. You can't issue options. If you're talking about a venture type company that exceeds the pool, et cetera. So you avoid being able to buy and sell things you can't buy and sell or issue things.
[00:10:15] You can't do that you don't have to issue or to issue things that you can't grant. so, it's, you know, blockchain is a fantastic ledger for this. The other thing which is really magical about this is if there's a mistake. this method allows to allows you to perform a sheet mint. So say someone dies, or there's a fraudulent or mistaken transaction.
[00:10:39] There's a transaction ledger and you can roll back the transaction. It doesn't mean you have to roll back the blockchain, you just roll back the transaction and that's a transfer agent function. and the other thing is that these are not bare assets. And so we're, we're associating ID. For the purposes of the travel rule and for purposes of FINRA and the sec to these assets.
[00:11:00] And, your title is very, very clear. So it saves time for the issuer. it brings a lot of competence and, you know, for the, for the investor,
[00:11:12]Ron: [00:11:12] So now that we kind of know how it works and what it does. Tell us in your opinion, and I guess in your expertise having been in the field, what is the market for tokenized assets
[00:11:27]Dave: [00:11:27] market for tokenized assets is probably substantially the entire market for, shares or instruments that would be owned by investors.
[00:11:36] It's a superior method for encoding ownership. It's a superior method for enforcing or implementing or programming transfer or trade restrictions. It's a fantastic tool for auditors and lawyers. there's really no reason why. three PPM, every derivative, every option. Every debt object or debt instrument, shouldn't be tokenized.
[00:12:02] Now you don't have to actually necessarily even on our system, even tokenize them. the first in, in Vitalis case, the first thing we do is digitize them. We just take something which is, which is on a spreadsheet and we put it in a form which could be shared by two parties. It's on our internal chain, not on a public chain and it's a, it's a nice clean ledger where everything hands off.
[00:12:25] When tokenization comes in, when you want to do, you know, add some of those other features, you want to add restrictions, you want to, you want to improve liquidity. You want to list it on an ATS or an exchange, or if you want to collateralize it. So, one of the most interesting things that you can do with these digitized or tokenized, private assets, is it, you can Dan, borrow or lend against them.
[00:12:52]and so you've got the smart contract and what you can do is you're going to portion off part ownership and use a smart contract to give ownership to another party. today, in the crypto world that we, we kind of intersect with a little bit, and I don't really think of us as a crypto company. I think of ourselves as on B2B SAS data management company, but in the crypto world, you have this thing called defy.
[00:13:15] And decentralized finance is basically a borrowing and lending function using cryptocurrencies. A lot of it's anchored by stable coins, like USBC and tether, and people stake their, their crypto and they borrow against it. They use these instruments, the real application of, blockchain enabled cap tables for equities debt and these other instruments, maybe ultimately to collateralize them.
[00:13:43] And, because you can assign ownership, programmatically, and, you know, using smart contracts. It's, pretty strong. Basically. They've got built in title and, then if you, sold off a piece of your asset, while you can't sell a hundred percent of the asset, you can't, you can only sell the part that you haven't collateralized and that slice or split or, strip it would be restricted from sale.
[00:14:11] So, I imagine, you know, you want to, you don't want to actually sell your interest in a building. What you want to do is you want to borrow against it. You may not want to sell it because you don't want the tax event, for a lot of reasons. So instead what you do is you, stake it and, and you borrow against it.
[00:14:31] And then when you're ready to you buy that contract back in the meantime you were paying that. That a lender might be getting your portion of your coupon and something else. And there might be a buyback premium, but there's so many interesting things you can do. And using real assets as digital collateral is, a pretty big opportunity essentially.
[00:14:58] Ron: [00:14:58] The market while it may be hundreds of millions or even a few billion. Now it has the potential to mean trillions, I would think because you can, if you start using the dead instruments and the PPMS and all that, then it's huge.
[00:15:14] Dave: [00:15:14] It will be, it takes a little while to get here, right. Building the technology to do this, is, making it easy.
[00:15:22] making it, accessible is the hard part. The ideas are simple. The idea of liquidity is very basic. implementing that in a regulatory environment like the United States, that's a little more complicated. However, debt is a lot easier. debt is just, a simpler thing to, to tokenize.
[00:15:40] And, you know, if you're not talking about securities, that are regulated by the sec. You probably have a little more leeway. And so getting to, you know, the reason why this, this so-called security token market or digital asset markets, regulated assets were real assets hasn't taken off. And there was a tremendous amounts of liquidity has a lot to do with regulations.
[00:16:01]but you, while that's been slow, you see the defined market it's really taken off and that'd be that's because that market's much more lightly regulated. And so, it's, this market is ideal for collateralization. Maybe, maybe even more so than for secondary liquidity
[00:16:16] Adam: [00:16:16] Dave, what types of assets, because we've obviously.
[00:16:21] Heard of real estate assets being tokenized more. There, have been some, I guess, relatively high profile, a relative in that in us, we all kind of run in the same, you know, Twitter, LinkedIn circles. So we see kind of the same things where there's been some real estate tokenized. It's a big one is relatively easy and you can talk to why real estate is kind of the big one there, but what other assets are you seeing and are people talking about.
[00:16:50]tokenizing and I'm talking about the next 12 to 18 months, obviously, longterm, it could be, it could and should be everything, but in the next 12 to 18 months, which direction are we going in terms of assets that can, and probably will be tokenized.
[00:17:09] Dave: [00:17:09] So, one of the interesting ones that we're seeing is, home equity loans.
[00:17:14]so, home equity is a very, very big financial category. So any kind of loan okay. is, a great thing to talk about the underlying collateral for that maybe real estate. But what you're really talking about is just a loan obligation. So debt OK. Debt like as a, category is a fantastic thing, to tokenize.
[00:17:38]you might see a venture funded company equity come, this way soon. I think that's a little more complicated because of the board approvals for that, but there are, there's quite a bit of a, of debt activity. in the venture space as well. And then they call that a venture debt, derivatives, that are built off of other assets.
[00:18:01]those things are pretty interesting to tokenize. You know, these things are, They're complicated. People want to spin them up really quickly and they don't want to spend months creating like a battle set of assets and then tokenize them and sell them. So this is, the, expense up until now, the expense, the time.
[00:18:23] The, inconvenience of tokenizing an asset, really limited the kinds of assets and the kinds of players who were involved in tokenization, but firms like and others are reducing the cost of tokenization down to near zero and B and are able to out, you know, in our case, able to do it in minutes.
[00:18:42] So that means you can spin a product. So it's really not, it's, it's more really limited to imagination. As to what kind of underlying asset you would like to use. And, you know, there's a lot of financialization out there. There's a lot of people who are really clever. They want to factor things. They might want to tokenize a, you know, custodians might want to tokenize it, like , you know, some fire trucks that are owned by a town.
[00:19:06] Okay. you might want to, you might want to tokenize a fleet of cars. there's I mean, it's, it's really limited to the imagination. And you're really just talking about, you know, under legal, underlying ownership being established so that you can then sell legally, sell off part ownership and whatever that is.
[00:19:25] Ron: [00:19:25] So, and with that, you touched on it a little bit earlier, but, can you tell us, meaning a, a registered sec transfer agent? Can you tell us some of the hurdles in the regulatory environment, both here and abroad. If you have any expertise on the abroad piece, but some of the hurdles that you have in tokenizing the assets.
[00:19:49] Dave: [00:19:49] So we have no hurdles in tokenizing. Tokenizing is, is a relatively mundane, and non-routine event. In our case, like I said, Vertol can tokenize an asset in minutes. It's elementary for us. It doesn't really matter. The underlying asset. The real complexity comes in, the regulators treatment of digital assets, digital assets today, meaning so-called security tokens.
[00:20:18] They can be the order matching for those can be performed by a broker dealer, but the broker dealer cannot custody those assets and they cannot settle the trade. So the role for a broker dealer in the digital asset space is one of introduction or order matching, but it is not a settlement. And so, what, this does is it actually brings a player that many people are not familiar with.
[00:20:46] You know, finance people know about this, a custodian or bank. The custodian or the bank ultimately is the entity, which settles a trade, which has been order matched by a broker dealer and in a system like ours. you use your smart contracts to adjudicate and navigate that plumbing. You you enabled, the investor to stake their shares and maybe make, like a, a bit ask.
[00:21:15] Okay. If someone asks shore or someone offers, on an ATS, like a T zero T zero can then, can then put those two buyers and the buyer and the seller together. That order matching can occur on that system. And then it needs to be handed off to, a proper, state charter trust bank, or custodian, similar to a kingdom trust, a, a prime trust Anchorage, North Capitol Bitco, et cetera, those, those parties, and then settle the trade.
[00:21:48] And that's where the that's where the money changes hands, et cetera. And then the round trip. Completes when a transfer agent or digital transfer agent, Hazel Portales, records, the change in ownership and then the, the assets are transferred. So, that, process is, has really been the crux of this kind of systemic programmatic trading of these digital assets that scale.
[00:22:15] So involve several parties. a minimum of five, an issuers, an issue or a, an investor, a broker dealer, a custodian, and then a transfer agent. you might be able to narrow that down to four in some cases, but typically it's about five players. and so now, and this is getting solved right now.
[00:22:36]this has been the main impediment, And this is very, very hard actually, in fact, also to do with self-sovereign wallets and men, a mask and other self solver, wallets, while, being, you know, tools of decentralization, actually do not help this process and I've caused, problems and, in adoption and an Austin regulatory components, as far as the rest of the world, there's a lot of countries and they're all different.
[00:23:02]and. A lot of them were similar to the United States, but not all of them. And so you need to be able to actually program, the, the issuer and their offering, and, change the smart contracts for each of the, the ATSs or exchanges.
[00:23:19]Adam: [00:23:19] Okay. So now we've, you know, we've, talked about some of the reasons that we might want to tokenize a, somebody that can and should, and will be, tokenized. Some of those hurdles that involves, regulatory issues, obviously. Which will lead to eventually the ability, once we get over some of those regulatory hurdles, the ability to then be able to transact or, or trade or move or use that as collateral, some of those assets.
[00:23:49] So. One of two things I want to ask you one and is you mentioned qualified custodians and the growth of qualified custodians has actually helped because it allows investors to feel more comfortable, plus it adheres to more regulations. So now with more States like Wyoming, who has their speedy regulation, that a bunch of banks are applying for a, I think Colorado is looking at doing something similar.
[00:24:16] Delaware's are going to doing something similar. is that a help? Is that going to help the fact that now you're going to have state blessed state chartered banks or bank like entities that are able to hold assets? Is that going to help? and I'll ask that question then I'll ask my next question.
[00:24:33] After that.
[00:24:35] Dave: [00:24:35] So I'm not as curious lawyer. my co founder Cowtown goo drawl is, and he's a former sec attorney. it's, our opinion that those things will be helpful, but they're, not definitive necessarily. the FCC and FINRA are in no mood to give up their oversight. On and they have very high standards and those standards are in gesture protection oriented.
[00:25:05] And, we think that this is slightly different. maybe FDA and DEA approval things like, you know, marijuana or other, or, you know, just like general cannabis laws. You know, that seems to be more of like a state's issue when it comes to securities, which, you know, the sec who was, has settled law for 80 years on this stuff, we think that changes in States will be informative and they'll, and there'll be influential, but, we're not sure that they'll at the end of the day.
[00:25:41]be the ultimate, arbiter of what is seen as legal by the sec and FINRA, Hey, look, that could change. And I applaud all the efforts, especially the Wyoming folks came along, so doing some great work in Wyoming and a lot of other folks have, and you know, a lot of States are trying to make, you know, crypto, kind of more mainstream we're just in the business of securities.
[00:26:05] This is not crypto. we don't see the FCC and FINRA dictating their role and oversight for those.
[00:26:13] Adam: [00:26:13] Now I wanted to pivot a little bit, probably let's see, 18 months ago or so, and even moving up there, we were really excited. I'm talking about Ron and I were really excited about the idea of security tokens.
[00:26:27] And there was a time when you were a few companies like Harbor and such that were looking to tokenize real estate, especially, and the idea was tokenize everything and. They were doing it mostly on a theory. And there were, you know, open finance was created and we were going to get to trade these within a year.
[00:26:44]and then it just kind of fell off like, It just kind of stopped. I feel like that momentum stopped. I might be wrong, but I didn't feel that moment so many more. So now new move ahead. Say 18 months, middle of 2020. What has happened in the last six, 12 months? That you feel has kind of propelled this forward a little bit, if at all.
[00:27:06]and then how has the growth in other aspects, like the, you mentioned earlier, how has that kind of propelled everything, forward in terms of tokenizing real-world assets?
[00:27:19] Dave: [00:27:19] So, the hype cycle was super strong in early 2018 and through 2018, there was an idea that security tokens are going to be the next big thing after RCOs and it was going to be as easy as ICS.
[00:27:35] But, it was actually quite different. you know, that, kind of, that blue didn't last itself much more than about 18 months. And then, the regulators got involved and things got a lot more difficult. A lot of people moved to security tokens, and there was an ethos that was security tokens, which is, Hey, look, these are, these are like, RCO is we're going to issue them.
[00:27:57] Like RCOs people are going to buy them. And then suddenly they're going to be able to trade interests in real world companies. Well, what happened was , the vision was there, the hype was there. but a couple of other things were not there. First of all, there was sure ecosystem. So there was not the pipes and the rails were not laid.
[00:28:20]just. You know, just producing a token. doesn't make something more interesting to invest in. It doesn't make it more liquid. It doesn't improve a poor underlying offering. Okay. So it didn't do that. I mean, much different than ICS ICO is I see always, you know, early stages, price late-stage liquidity.
[00:28:41] Okay. That was the magical thing about ICO is you could get in. And then there was a very, very quick ramp up. And then there was a little bit of a, you know, you could buy in early really quick and it matured really quickly. this, this, everyone, thought it was going to be similar to. It was the other thing was that.
[00:29:02] Did you know, regular investors, non speculative, kind of main street investors don't want to mess around , with my youth or wallet or met a mask. Okay. Metal mask is really, really hard to use. I mean, I applaud the Medimap team for creating mathematic, but it's not a trait. It's not an E-Trade quality or Robin hood event or Scottrade kind of quality experience.
[00:29:28] It's just a crappy thing. It's hard to use. It's foreign. That was hard. The other mistake that, that the earliest security token plays and, you know, companies and offerings made was that they tried to sell people tokens instead of selling them great companies. And so, you know, as soon as you take the money, can you say I'm going to invest in a company?
[00:29:54] Okay. That's the market for a great company. Is this wide okay. As soon as you say, Oh, by the way, you can invest it. But only if you want to buy a token, suddenly the number of buyers who are interested and understand how tokens work and want a custody them in their own wallet, drastically diminishes. So there was a natural kind of gating factor to requiring investors in early security token offerings to actually bring a wallet to the transaction.
[00:30:27] They have to know how to use the wallet, go through KYC and AML, and then they'd have to manage these tokens. Okay. That was, that was completely investor on friendly. We noticed that ourselves. And so what we did was we, we got rid of the requirement to use a metal mask or my ether wallet, et cetera. So, you know, we believe that the wallet is a big problem.
[00:30:51] No one cares about wallets. I mean, they're not the thing about this is that security tokens or these kinds of digital assets. Aren't going to just trade on centralized exchanges anywhere in the world. So, you know, self custody aiding them. Does not solve any problems.
[00:31:08] Adam: [00:31:08] Like I just do next to my, my men, a mask wallet and bam by 0.002% of some buildings, somewhere in another country.
[00:31:17] Right. It's completely different than defy as we know defy right now.
[00:31:23] Dave: [00:31:23] Yeah. I mean defy, you know, these wallets are holding, you know, ERC 20 formatted theory format and type tokens, which, have no transfer restrictions on 'em. And they're, you know, they're meant for that, kind of storage, these securities.
[00:31:38] So they have identity there, so-called security token, or like a regulated digital asset or digital security wherever you want to call them. They're not the same as cryptocurrencies. Cryptocurrencies are bare assets. These digital securities are not their assets. And so they've got one other thing, crypto, one thing, bear asset, DSO security token center.
[00:32:00] They've got identity and they've got, and they've got the so-called token and those things can only trade in certain places. So, it's a, it's a real, I mean, it's a binary black and white difference between these two content assets. And so the, the verse versions of these, of these platforms, you know, they, they didn't, this, this really wasn't contemplated and the rails were dealt for it.
[00:32:24] And, and the ATS has worked there to trade down. And so what happened was that there just, there was a fall off. And, and so, you know, people went back to the drawing board, You know, we were an issuer, by the way, that's how we got into this. We issued our own security token in March, 2018. That's how we learned that there was no cap tables for digital assets cause we had to build our own.
[00:32:45] So then we pivoted and decided to become a digital transformation, the cap table company for these digital assets, because we knew that it was, it was going to be totally different kind of experience necessary versus a Medimap wall.
[00:33:04] Ron: [00:33:04] What is the, I guess if we're talking block chain and smart contracts and all of that, are you chained agnostic or is there a specific change you use or does it matter?
[00:33:17] Dave: [00:33:17] Yeah. So we're a big fan of a taser. We think that taser is a fantastic watch and we love the community. So we work really closely with, TQ tazocin New York and, and the tasers development community. we are chain agnostic. We, we started on Ethereum. So we do it there area as well. and as other chains come on, we'll be able to integrate them.
[00:33:40] So we're again, we're chain agnostic. We're asset agnostic. We're jurisdictionally agnostic. so, you know, it doesn't matter that much to us, although we do, we do like, taser quite a bit. It's a, it's already a proof of state chain it's kinda got built in defy, which is pretty cool. it's got, it's really fully decentralized chain it's.
[00:34:00] It's cool. so, you know, we, we think that there's a, there's a lot of development going on in the space, and it's only accelerated.
[00:34:08]Adam: [00:34:08] Okay. So see if we can do that. And you might tell us, you know, this, answer is not possible, but if you could in like five to 10 minutes, tell us, okay, Ron and I say, interacts is we want to be able to raise money.
[00:34:21] We want to be able to issue a security token for our company and have the owners of the company participate in the growth, participate in the, income we make by it, distributions and dividends. What do we have to do? In the, in the digital asset world, what do we have to do to go from where we are now to, launching a security token that represents some level of ownership in interactions?
[00:34:46] Dave: [00:34:46] Well, so the first thing is that you probably have to have a really good asset. That was the other side of the question. I didn't answer. Before the initial offerings in digital assets, specifically security tokens worked out good. A lot of them were uninvestible. you know, people thought, okay, if I issue a token, people aren't going to invest, right.
[00:35:07] Adam: [00:35:07] It was much like ICO and most people were just trying to capitalize on the idea that people will invest in anything because it's blockchain related. So I'm going to have some crappy investment. I'm going to throw a security token on top of it. And there were people in the world that are just looking for something called a security token, and I can.
[00:35:27] Put whatever I put ever, whatever I want on it, and people will invest in, I give them money.
[00:35:33]Dave: [00:35:33] Yeah. And so the first thing is interacts. Us needs to have a great product that people want to invest in. That's the most important thing. Okay. Then there's a lot of ways for you to raise money. It's no different than raising money.
[00:35:46] Any other way, you can go to VCs, you can go your friends and family. You can go, you can use a crowdfunding platform. You can go to a broker dealer. You can go out with a sandwich board out in the, on the street corner, you can raise money, lots of different ways. we work with a company called deal box.
[00:36:02] They're a licensee of Bertolli. They're a capital advisor there. They are helping 22 of their portfolio companies raise money. And then those are all managed on our platform. We work with, a broker dealer called in Toro and Touro does, does, you know, capital formation. They raise money.
[00:36:20] For their clients. This is the same thing North capital does this, you know, T zero does this a lot of there's so many broker dealers, every investment bank of the broker dealer, they go raise money. And then, you know, and, you know, as an entrepreneur, I raised money for , you know, myself, that's what I do.
[00:36:39]so there's lots of ways to raise money. What you can then do is if you're plugged in, if, depending on who you use, they might be plugged in into a platform like for tall, and they might have a industrial onboarding kind of workflow might run you through KYC, AML, like, you know, net key or something like that.
[00:36:59] Check the investor that investor passes, they commit funds. They then wire money to you. And then they're on the cap table. So you can do that, you know, with, with someone who's integrated with a platform like ours, or you can just, you know, call up people and they'll say, they'll give you money. And then you can type their name into a system like ours, or upload a spreadsheet into a system like ours.
[00:37:25] And then when your round is closed or at any time thereafter, you can then. Tokenize that asset. I mean, in our system, you can tokenize the asset at any time during the assets life, it could be a hundred year old app. You could tokenize it. Now it doesn't have to happen then. And then when you do that, the tokens are then, automatically placed into what we call kilos, custodial wallets in our system.
[00:37:51] And those are super easy to use. blockchain wallets, where you don't need to know private keys, you know, none of this, you can use a combination of fundraising methods. You could just do it the old fashioned way, and then you can, get the data into a system like ours, and then you can tokenize when you want.
[00:38:07] That's how you do this. it's not, actually very complicated. The hardest part is coming up with a great company. That people want to invest in that is the number one hardest part. That's the 99% of the job. The other 1% is usually going a digital transfer agent like us and broker dealers, et cetera, to then let people know about that great company and raise money against it.
[00:38:31] But, you know, building a great company, obtaining an asset that people want to invest is by far the hardest part. Our part, we've tried to make our, our parts super easy and actually make it so you don't have to have a PhD in blockchain to do it because that has been the biggest impediment to the adoption of all of these things is the technical complexity, the user interfaces.
[00:38:55] Adam: [00:38:55] Well that, and that's why we're here, right? Is we're, we're trying to educate people and jump over that hurdle, to where they realize that, what they're doing, whether they're investing in some sort of company asset, whatever it is that has a. They ignore the security token, or they're a company that might want to issue something like that.
[00:39:15] We're trying to help them understand here's why you're doing it. Here's why it might be important. Here are the steps you need to go through. and, and kind of make that simple to jump over that hurdle. As you said, the biggest thing is if I'm, if I'm creating company, if I'm issuing the token, I just need to have a good company that makes money.
[00:39:34] And if I'm the investor, I want to invest in a good company that makes money and makes sense for me. I need to know. And we had a conversation with pedo Miura talking about the need for data to kind of back up, the idea of the good company, right? Here's what. Is driving that whether it's in real estate terms, it's, here's the value of the property.
[00:39:56] Here's the rents that are going in. Here's the occupancy levels. Here's, what's up with the staff, everything like that. Once you have the data to show that it's a good company and all that data of course, is on chain and immutable and transparent, everything else. Now you start to add benefit on top of benefit on top of benefit, right?
[00:40:16] So you, you, not only do you have a good company, but I can prove it. Right. And I'm not proving it by saying, trust me, I had my hand up, you know, I promise you, it's a good company. I'm saying, trust me, here's the data you can't, there's nothing you can do to dispute it. So now you have my token that represents ownership in my company.
[00:40:37] I have data to prove it's really good. And by the way, you can use this as collateral. You can. Sell it to someone else. If there's a, if there's a market for it and all the provenance and everything about that particular ownership is now going to change. And that person knows that it's a good company they're buying.
[00:40:56] So you start to me when, when you start adding blockchain, like you say, it's really simple, but you start compounding the benefits that you get. Once you start putting. Ownership of real assets on chain, right? Because again, you can add the data piece. You can add the lending, the defined piece to it, right?
[00:41:16] The collateralization piece, the transfer piece, that liquidity. Now you take away that illiquidity premium, that illiquidity issue, and you start really increasing the number of benefits by doing something that as you say is relatively simple. Just the tough part is building a good company. Everything else is relatively simple, but you've comp you've compounded all the benefits.
[00:41:39] Dave: [00:41:39] Yes. No, you're, you're one you're 100%, right? I mean, this is, a great, exciting technology for boring assets. Okay. And that's, you know, we're, excited to evolutionize. private share of ownership. It's not even revolutionizing it. It's just making it much work. it's not trustless. It's more trust.
[00:42:06] It's more trustworthy and you know, Pat's right. You know, you, you want to have great underlying data. You know, there's companies like, Oh, naira out there, which is, you know, building a platform to for Keya, know your assets, et cetera. You've gotten done. Who's who's doing the same thing for real estate.
[00:42:24] There's a lot of takes on this. And the principals are all pretty much aligned. You know, a great asset it's performing is something that people want to invest in and then you want to actually know that you own it. And that's what blockchain, that's what blockchain in coded ownership does for you. Yeah.
[00:42:43] Adam: [00:42:43] When you, we get excited about it from a, an investment standpoint, because again, being financial advisors, which is our background, trying to get people to invest in boring. Assets, like sometimes real estate can be, you know, if you're not the one who goes out and picks the shopping center or picks the multifamily or something, if you're just investing in it, it can be kind of boring.
[00:43:03] And the fact that you add illiquidity to that makes it even harder. but we know sometimes those are vital parts of a portfolio. You add in the ability to look at the data, to eventually be able to get some sort of liquidity for it, to use it as collateral. Now, you you've made that a little bit more exciting and we don't want to play into the hype of it, but.
[00:43:24] It makes it a more vital. It makes a vital part of your, the potential portfolio, more interesting to investors, which means they might put it in their portfolio and it makes our portfolio better yet potentially non-correlated assets that you can rebalance right early coming in. that in a time like this, when the market is going a little crazy and you can get income.
[00:43:45] That's fantastic. Right. So one thing I wanted to ask you real quickly, Dave, is I just got an email and I saw some, notice some, post yesterday, I think on LinkedIn, about something you all have created called for teller real estate. Can you tell me a little bit about that?
[00:44:00] Dave: [00:44:00] Yeah, so we think that real estate is a, fragmented, disconnected asset class.
[00:44:05]it's, there are, it's the biggest, asset class in the world next to debt. the ownership structures are, very widely. it's a, it's a favored boring asset. it's also historically, illiquid and also has been, hard, like hard to own. you know, sometimes it's in limited partner structures.
[00:44:27] It's there aren't marketplaces outside of reeds and REITs are very, very small percentage of real estate. We've got great tax advantages, et cetera. But, you know, it's, it's been, it's illiquid private, real estate and, and the cost of managing some of these funds and like doing, share redemptions, et cetera, has been, costly.
[00:44:49] And so, there's a, there's a lot to do just even before tokenization in terms of data management and stakeholder and shareholder management that you can do using this blockchain technology, even before you get. To, to secondary liquidity. One of the, the things that you can do with real estate is you can collateralize it.
[00:45:08] And so the Vertol real estate platform is a team that we did this acquisition in the middle of this pandemic, fully remote. We brought on a team. It's four people in flood by this guy, Gary Brandeis, who's a 30 year veteran and fund manager. So it's led by a practitioner. A guy who's, who's a CPA, worked at Lincoln properties, et cetera.
[00:45:32] We brought real real estate expertise and to make the Vertol platform a better platform for digitized and tokenize real estate of fund management and investment. And, as a result, we've gotten a lot of attention. We got a lot of inbounds for signing or signing deals to digitize and tokenize real estate, not just for secondary liquidity, but also for collateralization.
[00:45:57]and so there's a, there there's a good, you know, this story is just getting started, but you know, it's an industry which is right for disruption.
[00:46:08]Adam: [00:46:08] And of course, you know, being the fellow Texans, of course, we know a lot about real estate start getting into things like oil and gas and all that, which, you know, we understand as a huge investment, especially here in this part of the world and in this part of, in Texas.
[00:46:24] So we get that. It's a huge industry. We know a lot of people that have a lot of money and made a lot of wealth in real estate, but. because of that, it does need some updating right in, and that's one of the, we're glad that that you're hitting. So, we're going, we really appreciate the time we're going to wrap it up a little bit.
[00:46:46]can you tell us a little bit about, I guess, how to get ahold of you and your team and where to find you and, and all of that. I know you do some regular webinars and such that I've, I've gotten to be in on. So tell us a little bit about that.
[00:46:58] Dave: [00:46:58] Yeah, so you can always reach out to info at dot com. That's a great way just to get some basic information about Virtela.
[00:47:07] If you want to follow, follow us we're at, Vertalo underscore on Twitter or there's a Vertalo YouTube there's Vertalo medium. I am at Dave Hendricks on Twitter. And you can find us on LinkedIn. and you know, of course, you know, it's just going to have WMS www.vertalo.com and learn. And then if you come to talk to us, we're going to tell you about tell us sandbox where you can, you can try before you buy or the Vertalo distribution network, where you can actually get a Vertol license and go out and find your own deals and, and pay later.
[00:47:44] To go and, and tokenize assets. So you can get onto the Vertol platform for free and you can tokenize assets. You can use it, learn it. You can even create a business on top of it, and you can go into business and create your own tokenization, digital asset business by using Vertol. So you come and learn about that.
[00:48:05]Yup, exactly. So we designed it for, to do that from scratch, from the ground up from scratch.
[00:48:12] Adam: [00:48:12] We definitely might have to look into that soon. Well, a day we really appreciate all the time and especially all the expertise and being able to look at this market because it's something that we research and we want to get the information out there.
[00:48:25] But of course we don't know it as well as you do, because. You're in it every day and you have been for a while. So we really appreciate it and look forward to seeing what for Talos going, going to bring what you and retard and just the whole world of tokenized assets of assets that are being moved on chain, because it's just more efficient and offers more benefits.
[00:48:46] And just as you said, the evolution, the next evolution of assets.
[00:48:53] Dave: [00:48:53] Exactly. Thank you, Adam. I really appreciate it. And thank Ron foreman. Okay. Right. Thank you so much.