I recently had the pleasure of interviewing Darren Marble, CEO of Issuance. Through his role as CEO of CrowdFundX , Darren has extensive experience marketing Reg A+ IPOs and Digital Security Offerings to institutional and retail investors. This experience perfectly aligns with Issuance (a platform that connects digital security issuers with investors) as Darren knows what investors are looking for, and what is needed for a successful and compliant offering. Check out the interview below to learn more about Issuance.
RS: Can you tell us a little bit about what Issuance does and the long-term vision?
DM: Issuance is developing a technology-enabled investment bank for digital securities issuers–a modern Goldman Sachs. Our vision is to be the leading investment bank for digital securities, which we believe is the next mega-trend in capital markets.
We believe in regulated markets, investor protection, and are confident that the U.S. will be the leading market globally for digital securities.
RS: Issuance recently announced the acquisition of CrowdFundX, how will this acquisition be integrated with Issuance?
DM: Issuance has executed a Letter of Intent (LOI) to acquire the assets of CrowdfundX (CfX), a FinTech marketing firm known for marketing some of the industry’s most notable digital securities offerings (DSOs) and Regulation (Reg) A+ IPOs. Some of CfX’s clients include Drake’s Virginia Black Whiskey, KODAKOne, and tZERO, among others.
The dominant investment banks of the future will effectively blend digital securities technology with traditional financial services. Issuance at its core is a technology company, while CfX is a services company with notable industry clients and established revenue streams. As such, CfX is a natural acquisition for Issuance.
The transaction, which is expected to close in February, 2019, will be subject to due diligence and definitive legal documents acceptable to all parties. Once completed, the CfX brand will be sunsetted, and Issuance will be the enduring brand.
RS: How is your platform different from similar issuance platforms like Securitize, for example?
DM: Issuance is in the business of deal marketing and capital raising, which is the biggest pain point in the market. We act as a bridge between tokenization platforms and secondary trading platforms, since neither of these players are true capital raisers.
In September, we announced a strategic partnership with Securitize to give their clients exposure to the right network of investors and increase their likelihood of funding. Conversely, Securitize offers a proven tokenization solution for our clients, who require a proven compliance solution for the trading of their digital securities.
RS: How does Issuance market to potential investors?
DM: Issuance is developing an app that will allow issuers to market their deals directly to authenticated, interested investors. Issuers will pay a fee to Issuance each time they send a message to an investor on our platform, with the fee varying based on the type of investor messaged. For instance, a message to an institutional investor will carry a higher fee than a message to an accredited investor.
Issuance is in the process of partnering with a broker-dealer, which will allow us to capture success fees when investors sourced through Issuance invest into a deal.
The Issuance app is expected to be available in mid 2019. In the interim, we are selling traditional advisory and marketing contracts where Issuance serves as an introducer between our issuer clients and our network of investors. We have trusted relationships with some of the most active digital asset investors around the world, and have successfully sourced capital through this model for multiple clients. Our advisory and marketing engagements are sold in a fee-for-service model where Issuance is paid a flat fee month-to-month.
RS: Your website notes that Issuance “provides unique incentives for investors”, can you tell us what incentives Issuance offers that sets it apart?
DM: Investors generally want access to the best deals in the highest discounted rounds. Issuance has access to some of the industry’s most proprietary, desirable deals, which is an incentive for investors–particularly institutional investors and digital asset funds–to work with us.
As an example, we just signed a NASDAQ-listed biotechnology company running what it believes to be a historic digital securities offering (DSO). The company has a $250 million market cap and has been publicly traded on NASDAQ for more than a decade. This is one of most unique DSOs in the industry, and Issuance has exclusive access to the deal. The initial reception from our investors has been incredibly positive, and will further credentialize Issuance as a firm with true proprietary deal flow.
RS: Issuance “allows investors to only receive certain deals”, can you tell us how this works and how it is beneficial to investors and issuers?
DM: The problem with current platforms is that they are issuer-focused, and they market every deal they take to every investor in their database. Moreover, the majority of investors on these platforms are self-directed retail investors. This approach has resulted in a lose-lose-lose scenario for issuers, investors, and platforms alike. It’s one of the big reasons no equity crowdfunding platforms have had any real success to date.
Our strategy to solve this problem is counterintuitive, yet simple: Issuance will solve for investors first. Our app will cater to investors–the most sought-after segment of the market–and ensure that we protect both their privacy, and, more importantly, their time.
The Issuance app will gather investor profile and deal preference information up front during the sign-up process, which can be completed through the app itself, or through our institutional sales reps who will input profile information on behalf of investors.
By gathering profile and preference information up front, Issuance knows what deals investors are interested in seeing, and what deals they have no interest in. When an issuer pays a fee to market their deal to an institutional investor, for instance, that deal will only be sent to an investor who has explicitly expressed interest in that type of deal.
Think of it as a matching technology. By better matching the right deals, to the right investors, at the right time, we increase conversion, and everyone wins.
RS: Can you tell us some more about the ranking system that exists within the platform?
DM: We are developing an algorithm that we can share more about when we launch.
RS: What is the most important criteria you can recommend to issuers to achieve a high ranking within the platform?
DM: Issuance is focused on working with established businesses and publicly traded companies. Ultimately, issuers whose deals are the most highly de-risked, and offer the most fair and compelling terms to investors, will have a higher ranking on our app.
RS: Issuance offers aftermarket services, can you tell us a bit about those services and the benefits?
DM: Issuance offers aftermarket support services for issuers who successfully raise capital and list their digital securities to a secondary trading platform. Raising capital is only half the battle: issuers must continue to aggressively market to investors post-raise in order to increase the visibility, liquidity, and market cap of their digital securities.
Aftermarket support is one of the most overlooked yet critical services that digital securities issuers will need to succeed long-term. Issuance currently offers aftermarket support contracts with 6-month or 12-month terms, with our 12-month terms offered at a slight monthly discount.
RS: Is there anything else you want to share about your project?
DM: Issuance is currently raising our own round of capital, and some of our current and committed investors include Alpha Omega Capital Partners, Slim Ventures, Proactive Capital, and Business Instincts Group, to name a few.
If you’re looking to invest in the digital securities ecosystem, and want a company with a proven team, traction, and revenues, I’d say we’re a great bet–and our investors would agree. To access our complete investment package, please visit www.issuance.com.
Myles Milston, CEO of Globacap – Interview Series
Myles Milston, is the CEO & Founder of Globacap, an end-to-end solution for Capital Raising, Asset Administration, and Custody of Digital Securities.
You were previously CTO of Colossus Bets, which is a successful sports betting business operating out of the UK. Were you initially introduced to bitcoin and crypto in this role?
Colossus doesn’t use bitcoin or crypto in its business, however I did see bitcoin gaining traction in the wider gaming industry, and I started to explore blockchain more after seeing this. Prior to Colossus though – I did almost buy a load bitcoin when it was at $300, unfortunately I didn’t understand enough about blockchain at the time and decided against it at the last minute. I’m sure everyone has their ‘almost bought bitcoin’ story!
What made you shift from CTO of a successful sports betting business, to founding Globacap?
Prior to Colossus, my background was capital markets: starting off as a programmer in a bank, then quantitative equity research analyst, derivative structuring and sales, and later algorithmic commodities trading. So when everyone doing an ICO in 2017 was trying to avoid their token being called a financial security, it made me think about structuring a real financial security as a token.
The advantages were apparent: (i) instant transferability of private assets, and (ii) simple administration (e.g. corporate actions, stock splits, buybacks, etc). It was so compelling that I had to start Globacap. The founder of Colossus was one of our first investors.
Could you share with us what exactly Globacap does?
We’re an automated capital markets platform. Regulated by the FCA with passporting across Europe.
Our automated platform does:
(1) Securities Issuance – all of the administration throughout a capital raise, including the structuring, approving, and distribution of offering documents while ensuring regulatory compliance across 41 countries (and counting), and issuing the tokenized debt or equity securities to investors.
(2) Securities Administration – simple, one-click cap-table management, including all corporate actions (stock splits, buybacks, etc), restructuring, proxy voting, and paying out distributions (dividends or coupons). The difference between us and other cap table management platforms is blockchain. When a transfer of ownership takes place, it is reflected in the cap table in real-time, slicing off a layer of administration overhead that the non-blockchain platforms can’t escape from.
(3) Digital Custody – we are an authorised custodian for blockchain securities and cash.
We are also the only company to date that has created tokenized equity as a direct shareholding, without using a nominee structure. In other equity tokenizations globally, a nominee was required to act as the legal owner of the underlying shares. However, we created a structure that works around this within the existing bounds of regulation, allowing the token holder to also be the legal holder of the underlying shares.
In June 2019, Globacap successfully exited from the FCA’s regulatory Sandbox Cohort 4, becoming the UK’s first fully regulated digital security offering and administration platform. Can you share with us the experience of being in Cohort4?
Great experience. The FCA successfully pioneered the sandbox concept amongst regulators globally, we know of several other regulators that are now trying to copy the FCA’s success. We had a case officer assigned to us on day one, he was available throughout the process at any time and was always extremely helpful, even replying to emails on the weekend (what government organisation does that?). The Sandbox gave us the opportunity to trial our new technology and processes in a controlled regulatory environment, which ultimately led to receiving full authorisation in a quicker time frame than might have been possible without the Sandbox.
Two months ago Globacap announced a strategic partnership with Archax which offers secondary market trading. Could you elaborate on the benefits of this partnership?
Globacap is focused on private investments. However, some of those securities issuers may seek full public secondary trading, and if they do then Archax will be ready to list and facilitate trading in those securities. They have great institutional support, and core technology supplied by Aquis, which is a leading European equities exchange and provider of matching engine technology. We are a partner in order to use Archax as a listing and trading venue.
Globacap was recently recognized as of the UK’s most disruptive companies in the Disruption50 index, which highlights the UK’s most disruptive tech companies. Did this achievement surprise you? Has it helped to bring in additional clients?
It did surprise me as we hadn’t heard of the Disruption50 index prior to being nominated! We’re thrilled and humbled to be included in this index, amongst other highly disruptive tech companies. We believe that we are disrupting the traditional securities market, and we will increasingly do so in force as we continue to scale our business. The recognition did indeed send additional clients in our direction.
Investors can currently invest in tokenized private assets from around the world on your platform. Do you accept USA investors? Are there any restrictions on international investments?
We do accept US accredited investors, depending on the specific offering. Around the world, each country has its own unique set of financial promotion rules. Even within the EU there are small differences between some of the member states. Our platform streamlines this for an issuer – automatically showing or hiding certain investment opportunities to specific investors depending on their location and type, ensuring local regulatory compliance at all times.
Globap is raising £3 million. Could you tell us more about this raise and what the funds will be used for?
We’re in the late stage of completing a funding round at present. A large portion of funds from this round will be used for marketing and scaling the platform. To date we haven’t done extensive marketing, instead we have been focused on building out the product and gaining regulatory authorisation. Having done that, and having completed several transactions on the live platform, we are now starting to market the platform and scale.
Where do you see Globacap being positioned in 5 years?
We are focused on private assets in the small and mid-cap segment. In other words: too-big-for-crowdfunding through to listed on a small/mid-cap exchange such as the LSE AIM market. We believe the market is over-priced and under-served for that demographic. Our tech gives companies a better experience, an easier process, full regulatory compliance, lower costs, and empowers the larger end of that range to stay private for longer – giving investors access to secondary market liquidity while avoiding the overheads associated with becoming a public entity.
Is there anything else that you would like to share with our audience?
This is an exciting phase in the evolution of the securities industry. It’s now possible for private assets to trade more freely, for paper to truly disappear in securities administration, and for billions of dollars worth of private assets to be securitized cost effectively – potentially unlocking a new wave of economic growth.
Claus Skaaning, CEO of Digishares – Interview Series
Claus Skaaning is the CEO of Digishares, a software solution that is used through the issuance process and the ongoing management of the tokenized shares.
You were previously the COO of Venturefusion – a crypto-security ecosystem for startup creation and growth. How did you transition to becoming CEO of DigiShares?
The vision of VentureFusion is to create a decentralized incubator platform for startups. It will work as a collaboration and bootstrapping platform where founders can tokenize the equity in their startups (even if no legal unit exists) and use the equity tokens as a means of payment for anyone that contributes to the startup. Founders can then make a plan for how much equity they want to spend to get various parts of their startup developed, making individual equity token allocation plans for short-term contributors such as freelancers and long-term contributors, such as co-founders and permanent team members, under vesting conditions. VentureFusion is still an ongoing active project but it primarily managed by my co-founder Yuriy Zubarovskiy these days.
VentureFusion prompted us to look at how to tokenize equity and in early 2018 this was a relatively new concept. We went to some of the first conferences in Europe on the concept and decided to create a new project, GoSecurity, which would focus on tokenization of securities. This project later re-branded to DigiShares and I became the CEO. It is now my primary focus to manage and develop DigiShares.
Could you elaborate on the services that DigiShares offers?
DigiShares is one of the leading providers of white-label infrastructure for securities tokenization issuance and management in Europe. Our first product was a single-project platform for issuance and longer-term management of tokenized securities, and we are just releasing a major upgrade that can handle multiple projects with a lot more functionality. We are one of few companies in Europe – and the only one in the Nordics that can provide an operational platform of this type.
Our platform can handle the complete workflow of an STO (security token offering), from investor registration, verification (KYC/AML), approval, to the actual purchase of tokens with fiat or crypto, signing of contracts (e-signatures), token holder cap table overview, communication with token holders, voting (shareholders’ meetings), payment of dividends, etc.
For tokenized equity, we offer a unique function where we allow a proportion of shareholders to be non-tokenized, i.e., as digitized as possible but not tokenized, so with no tokens issued. This is by customer request as some of our clients have voiced concerns that they would like to approach both crypto and non-crypto investors – and non-crypto investors may prefer a non-tokenized registration. Another unique function that we are working on is a mini-exchange, an internal OTC-like trading platform for the token holders within a single project.
Overall, we provide solutions to enable anyone to conduct their own STO or offer a number of simultaneous STOs. We primarily work in white label partnerships where clients offer the solution under their own brand name.
In addition to providing the software, we also provide access to the security token ecosystem. We have a big network of partners for legal, investments, custody, KYC/AML, etc. Some of these are integrated into the platform.
Digishares is one of the few companies in the industry that is headquartered in Denmark. Do Danish securities regulations support the digitization of shares?
While we are based in Denmark and concerned about local securities regulations, it is important to state upfront that we are jurisdiction agnostic and can operate from any jurisdiction. Indeed we have ongoing projects in both Europe and the US.
Locally, we are working with a Danish lawyer and the Danish regulators to establish whether shares can be represented as tokens. So far, our lawyer has established that tokenized shares are supported by Danish legislation but some details need confirmation from the regulator and the Ministry of Industry, Business and Financial Affairs. DigiShares has applied to participate in the sandbox of the Danish regulator to further analyze how tokenized securities can co-exist with Danish law.
Some countries do not support the tokenization of shares since they require either paper-based stock certificates or notarized trading. Fortunately the Danish securities legislation supports digitization of shares and has neither of those requirements.
The ability to tokenize shares (and other types of securities) is of course important for DigiShares and for Danish companies, but it will have importance outside of Denmark as well, since securities that are issued in Denmark can be passported to any EU member state. We believe Denmark could be a good STO destination for the above reasons – but also because we believe other typical STO costs can be significantly reduced here (incorporation, legal costs, etc.). As an added benefit, Denmark is a highly trusted financial jurisdiction with one of the lowest levels of corruption in the world.
How is the security token ecosystem and community in Denmark?
It is as of yet quite small but we are doing our best to develop it with regular conferences in Copenhagen. We’re organizing an annual conference focused on tokenized securities (Fintech Disruption Summit – http://www.fintechdisrupt.dk/en/home/) and regular events on different types of tokenization, next time on September 12 with a focus on real estate tokenization (http://www.digishares.io/events).
We are presently the only Nordic company with an STO issuance platform and we are also the first to conduct an STO. However, we expect others to join us soon.
You’re currently in the process of raising funds for your own STO. How much are you raising, and what benefits will investors receive?
We are raising just below EUR 1 M. This relatively low limit was set to enable us to approach retail investors and market the STO publicly across Europe. In addition, we’ve filed a form D in the US so we can approach US accredited investors. European regulations is more flexible than the US and enables us to make a more “democratic” STO since we are allowed to target retail investors in almost all European countries.
We have designed our STO so investors receive common stock in the company with exactly the same governance rights as founders, similar to a standard IPO. Many STOs design “handicapped” tokens with quite limited governance rights for investors but we didn’t want to do that. In general, we believe it will be a problem for the STO industry if issuers keep creating tokens with very limited investor governance rights.
What are the plans for the raised funds?
The raised funds will be used to speed up our development & marketing efforts. In addition, there are certain licenses we would like to obtain in order to extend the scope of our business. In general, we are seeing more leads & opportunities right now than we have the resources to exploit.
You are arranging an event on tokenized real estate in Copenhagen on September 12. Do you see real estate as being the most promising asset class to be tokenized?
Yes, if you look at statistics and speak to industry experts, there is consensus that real estate is the biggest homogeneous chunk of the STO market right now. So currently, we are directing our marketing and development efforts in this direction. Our real estate tokenization event will be attended by around 100 real estate professionals from the Nordics. 90% of them are non-blockchain people that we hope to motivate and inspire to adopt blockchain. In general, we don’t go to many blockchain industry events but rather spend our efforts on the traditional financial & real estate industries.
We hope to announce a real estate STO quite soon, and we are also involved in a really exciting project about creating Eurasian security token exchanges.
What other asset classes will you be focusing on?
Through partners we are also looking at debt and bonds, but we are primarily focused on equity at this stage. The platform can handle any type of security.
Where do you see the industry being in 5 years and the role of DigiShares in this industry?
We currently see two major trends; one with startups attempting to create a new parallel financial infrastructure and another with incumbents adopting blockchain and approaching the new opportunities in their own speed. These two trends will eventually merge and a new financial infrastructure will emerge where some old financial institutions will still exist and some of the new players will be established as leaders. We will see just one or two main security token protocol standards. The consumer (investors) are the real winners with much decreased fees for trading, decreased interest rates for debt, increased interest rates for deposits, faster and more efficient financial operations, etc., etc.
Bastiaan Don, Managing Director of Token Factory – Interview Series
How did you first get involved in the blockchain space?
Early 2011 I read about Bitcoin online at a bulletin board with lots of active and interesting members. Pretty soon I was more interested in the underlying technology and started to read on a daily basis about it at various sources (reddit, bitcointalk, etc.). After Ethereum was introduced in 2013, followed by the pre-sale in 2014 and the launch in 2015, I followed the progress and possibilities closely. After the ICO madness, I decided to become active and combine 2 worlds I understand quite well being Real Estate and Blockchain, with a serious approach towards product development and regulation.
You’re currently managing 3 projects, Blockimmo which specializes in tokenizing real estate, STX Swiss which is a decentralized security token exchange, and TokenFactory which is a technology provider for asset digitization. Can you let us know which came first?
Coming from the Real Estate industry I’m rather familiar with the challenges around this illiquid investment class and the high entry barriers. Initially, the company I founded was called “blockimmo”, with the vision to enable anyone to invest in real estate (access) and, in addition, turning this asset into something more liquid. With our 2 fantastic developers (Michael Dietz / Jesse Ngatai) we developed our (primary issuance) platform on the public Ethereum Blockchain, without the introduction of any proprietary standards or useless in-between (utility) tokens. In addition, we conducted several (successful) rulings with the financial regulators of Switzerland and Liechtenstein related to the tokenization of assets. In order to live up to our second promise (liquidity for the secondary market) we initiated STX.SWISS to demonstrate the possibilities of a trustless, peer-to-peer (decentralized) exchange without an operator, for tokenized assets like real estate. Summarized, we built a tokenization solution for both the primary and secondary market. In order to broaden our potential clients and partners we decided to rename the company to Token Factory Switzerland Ltd. The platform (brand) “blockimmo” will naturally still be used for real estate tokenization.
Blockimmo tokenizes real estate, currently all the properties are in Switzerland. Will we be seeing more international real estate options?
Yes, definitely. In fact, the Swiss Real Estate market is, thanks to its attractiveness amongst established players (investors) quite tricky to get started. Currently, we have several projects (both existing properties as well as property development projects) in the pipeline which are located outside of Switzerland and will be announced in due course.
How do you source and select the real estate portfolio that is offered?
This is a good question, which applies to any real estate investment platform (irrespective if you use blockchain technology). Due to my experience in the real estate market (12+ years) and of course due to the fact that we are one of the few platforms that actually already have tokenized real estate with public available smart-contracts for the security tokens issued and traceable transactions of the investments on the public Ethereum blockchain – we gained a lot of attention and receive a lot of requests for future tokenization cases.
Is STX Swiss currently licensed, if not are you in the process of acquiring a license? What jurisdiction will this be licensed in?
STX.SWISS is a decentralized exchange proofing the concept how security tokens can be exchanged on a public Blockchain (Ethereum) without the involvement of any controlling party (operator). This means that no centralized party controls any important element that require a license, for example the wallet (only decentralized access is possible) but also more important elements like the order-book (there is none) or the liquidity providers (only possible through a decentralized process). More information can be found in our blog posts (high-level / more tech focused). We are however in progress of establishing a regulated exchange, with centralized elements (in order to control certain elements which are required by the regulator to be controlled). We do this together with a licensed institute based in Switzerland and hope to announce further details in the near future.
What are the requirements to list a security token on STX Swiss?
We require that the security token is under control of the asset owner (issuer) at any point in time. Simple put, this is what makes our tokenization solution unique, as with blockimmo (TokenFactory) we introduce a smart-contract “whitelist” which is attached to the default ERC20 token smart-contract. Inside the “whitelist” there are the address of identified investors (meaning they went through a compliant KYC/AML on-boarding process). Although we call it a “whitelist” it’s actually a mapping mechanism, so with our solution you don’t lose (transaction) speed no matter if there are one thousand or one million address whitelisted.
Token Factory offers asset digitization services. Could you elaborate on what the different types of services are?
Yes, currently we offer an important puzzle piece for tokenization; being the technical solution that has been multiple times audited and executed before and is available for any other asset. Another important aspect is that this solution is based on the public Ethereum blockchain, open standards and thus is “future proof” for the upcoming Decentralized Finance ecosystem. In addition, we do not make the asset owner (issuer) depended on us, they are in full control and ownership of the smartcontracts representing the tokenized asset. Of course, based on our experiences, we offer consultancy services mainly around the topic of tokenization and financial market requirements and challenges.
What are the white label services that are offered by Token Factory?
There are plenty of niche markets with strong players where tokenization as such brings benefits to the existing solutions. We are open to provide our technical solution as a complete white label service (Software as a Service / SaaS) for those players and are currently actively working on launching such in the near future.
You offer investor management; can you elaborate on what these management services are?
A key puzzle piece related to security tokens is, besides our on-chain whitelist, the way how you onboard the investors and how you manage them actively to stay regulatory compliant. We have built a complete paperless on-boarding solution, integrated with strong KYC and AML providers and offer this to our clients who seek a working technical solution.
Is there anything else that you would like to share with our audience?
Yes, we’re currently very close to partner with a strong, regulatory compliant partner and will then be able to offer a full “one-stop shop” for tokenization. So not only a strong technical solution, but also provide a solution for the legal, regulatory, compliance, distribution and marketing/PR elements. All from one provider with know-how, quality and speed, really understanding true value proposition (liquidity provider) for both the issuer and investor. We’re still at the beginning of the era of tokenization and there are exciting times ahead of us!