Dave Hendricks is the CEO and cofounder of Vertalo which is a stakeholder Registry and Cap Table platform for SEC Compliant Security Token offerings. They connect broker-dealers, issuers, exchanges and ATS’s.
AT: Could you share with us what Vertalo does?
DH: Vertalo seeks to help more issuers, tokenize more assets, at lower cost and lower risk. And at less expense. Vertalo’s core offering is a crypto cap table, in other words a ledger of token holders. ICOs didn’t care about cap tables, but equity investors do.
Investors can be added to a Vertalo-built cap table before, during, or after a fundraise or ICO. Vertalo’s wallet registration process is the connective process between issuers – who want to know who owns how much of their company – and investors, who want to know how much they own of the company. Vertalo is glue for the overly confusing STO ecosystem. Vertalo helps issuers manage their investor community and Vertalo helps investor manage their holdings – all via a simple graphical interface that is way better than etherscan.
AT: Is this on a public or private blockchain? If both, could you elaborate what information is on the public versus the private?
DH: Most Security Token issuance development is Ethereum-based, and most smart contracts are written in Solidity, so Vertalo started its work in alignment with the community, but Vertalo was designed to be chain-agnostic. If an issuer wants to write their token using Hyperledger, or Hashgraph, or NEO, or Stellar they can do that and Vertalo’s cap table and investor registration functions will operate the same way. We see benefits of permission-less and permissioned Blockchains for Security Tokens.
AT: Do you perform the KYC/AML accreditation yourselves?
DH: Vertalo partners with major Accredited/Qualified and KYC/AML Services, since there are more than 200 different jurisdictions and we want to focus on what we do best. We are developing a subscription service with several of these vendors to simplify secondary trading (where KYC-AML is so important). More on that later in Q1.
AT: Could you describe how the platform enables issuers to manage the investor community?
DH: Vertalo’s Cap Table combines the features of a traditional ledger with network connectivity. The Vertalo cap table represents a relationship between two parties, determined by consensus. Issuers use the vertalo registration smart contract process to invite and add an investor to the cap table. That registration process creates a ledger which is more than a list of holders, it facilitates communications between the issuer and investor so that tokens, dividends, and documents can be transferred between the parties.
AT: There are many non-blockchain options to manage a cap table. What are the benefits of using a blockchain, and more specifically Vertalo?
DH: Token trading is real-time. If someone trades a security token, the investor ledger by law must be updated with the new address/holder of the token. So a blockchain-based cap table ledger operates at the speed of blockchain, faster than paper and with better record-keeping. Without a blockchain-based ledger for a blockchain based security, who would manage the legal requirements for maintaining a list of shareholders? This was not a concern for ICO issuers, so they didnt create this tech. ICOs just cared about exchanges. STO issuers need to maintain compliance with securities law.
Developing blockchain-based cap tables is also the first and fundamental step towards greater liquidity for private assets, because cap tables are where the investor ownership rights are best enforced. The reason that issuers and investors are tokenizing their offerings is to ultimately achieve greater liquidity by enabling their shareholders to sell on exchanges and ATSs subject to the issuers rules.
No traditional private equity cap table platforms connect to exchanges, and even obtaining a stock certificate from a traditional cap table platform is a days-long effort. And when you receive a paper share from a traditional cap table platform there is no where to sell it, since you have to get permission from the board, and then there are few marketplaces for anything other than Uber or Lyft, etc..
Tokenized offerings are issued on the predication that the tokens/shares will be ‘tradeable/’ after a restriction is lifted. By connecting the Vertalo blockchain-based cap table to exchanges and ATSs, we enable token holders to achieve the liquidity that is main differentiating feature of a security token offering, while complying with basic securities law.
AT: How does the Vertalo registry reduce costs for Broker dealers?
DH: Broker-Dealers have fiduciary requirements to check KYC and AML. Vertalo’s investor registry function, which connects KYC verified email addresses to blockchain wallets, was designed in conjunction with major broker dealers to help them comply with basic AML requirements. Vertalo built its platform to be whitelabeled by broker-dealers so they don’t have to build or manage this process themselves.
AT: You offer investors who register with Vertalo the opportunity to instantaneously share their investor profile with broker-dealers and issuers. How do investors sign up for this?
DH: This feature will be built out later this year. Our focus is on the Picks and Shovels for our business clients.
AT: One of the tools that you offer is the verification of wallet ownership? How is this performed?
DH: The Vertalo Wallet Registration process uses a smart contract to run a process that is similar to the method by which a bank verifies your ownership of an account, by depositing random amounts into an account. We send an email to the registered account holder, with a link to kick off a process. If you can log into that account and verify the amounts, that is the beginning of proven ownership. It’s actually a little more complicated than that, but to the proper owner of a wallet, it is a very smooth process. We use a special utility token (no, you can’t trade or transfer it) and smart contracts for this process.
AT: Are there any notable projects that are currently using the Vertalo platform?
DH: We were our first client. I think that Vertalo issued the third or fourth real, US compliant Security token in March 2018. That is why we built this. We are working with PrimeTrust, Issuance, Entoro, and we will be announcing some Major real estate, fund, and debt issuances that are launching in February and March. By the end of Q1 there should be more than 10 projects or Broker-Dealers using the tech to simplify their token issuances, investor relations and cap table management.
AT: Is there anything else that you would like to share about Vertalo?
DH: Issuers should create a great product, find a great law firm, find a great broker-dealer and call Vertalo. We can stitch all the parts together for you and also help you save a tremendous amount on your overall tokenization costs.
Srdjan Mahmutovich, Founder of Kriptomat – Interview Series
Srdjan Mahmutovich is a tech enthusiast and the founder of Kriptomat an exchange that is fundraising by offering a security token. Previously, he has built a successful B2B digital marketing agency with 40 employees and coworkers. He also worked as the head of web development at Telemach.
Antoine: When did Kriptomat first launch and why did you decide to launch a cryptocurrency exchange?
Srdjan: Kriptomat opened to the public on 15 July 2018. We identified the need for a service anyone could use (like our friends and family members). We are on a mission to bring crypto into every household and to do that we needed to create a simple yet powerful service anyone can use. This will enable complete beginners to enter the world of cryptocurrencies in an extremely simple, safe and quick manner.
Antoine: Which countries do you currently accept customers from?
Srdjan: We currently accept customers from 82 countries around the world. They are listed here: https://kriptomat.io/global/
Antoine: How many active customers do you currently have? Where do most of these users originate from?
Srdjan: We currently have more than 10k registered users and steady growth of 20%-25% month on month. The majority of the users come from Europe, but with the recent addition of more payment methods, we are seeing a gradual increase in customers from all over the world. Our next goal is the 100k registered user mark and we are hoping to achieve this by the end of 2019.
Antoine: Are there plans on accepting Non-European customers any time soon?
Srdjan: We already accept Non-European customers, but we are working on adding more payment options in order to provide true worldwide support. Currently, we support Skrill which is really global, but we will be adding new locally popular payment methods.
Antoine: What currencies can be purchased on the Kriptomat exchange?
Srdjan: You can buy 29 cryptocurrencies; they are listed here: https://kriptomat.io/price-of-cryptocurrencies/
Antoine: Can you tell us about your upcoming security token sale? What’s the soft-cap, the hard-cap, and what will be the benefits offered to investors?
Srdjan: We have come to a stage where we need capital to speed up our growth and take us to the next level. We have decided to do an STO because it’s an innovative way to raise capital that allows our existing users and community members who already believe in us to invest in our project. We’re not only looking to get an investment but also loyal users that will evangelize and use our service as well. It’s a win-win situation. If we’re successful, our investors will be successful and we feel we’re in a much better position to build something big if our investors are our users who actually use the service.
We are looking for an investment of 1.8 million euros. We offer our investors an 8% share of our revenue and 4% of our audited profit.
The soft cap is 1 million euros and we reserve the right to cancel the issuing of the token if we don’t reach that. Detailed information can be found in our Security Offering document which you can get in the crowdfunding platform Desico which is going to issue our security. To get there go to https://kriptomat.io/sto
Antoine: What will these funds be used for?
Srdjan: So far, we have been focused on building a product, relationships and proving the business model. With the new funds, we will focus on creating user acquisition mechanisms and improving the platform.
The orientation of spending of the funds raised during the STO:
– 60% Growth – Marketing, customer base growth
– 18% Product development
– 12% Security, compliance
– 10% Operations, support
One important thing to note here is that crypto market is in its early stage and things are moving fast. We have been maneuvering quite successfully so far and adapting to the sudden market changes and that’s what we plan to do in the future as well. If the market situation changes significantly, we will pivot and change direction if necessary.
Antoine: The market is beginning to become saturated with exchanges, how will you differentiate yourselves?
Srdjan: Because we are creating some awesome new products. We are integrating the next-generation Ethereum-based ERC-1155 tokens into our Kriptomat exchange. This adoption of blockchain-based virtual items is the first of its kind and it is being made with the purpose of gamifying user experience. In other words, it is a blockchain-based reward program that will boost loyalty, increase the customer lifetime value and speed up user acquisition.
We have recently launched a revolutionary ERC1155 Token Mint Portal, giving everyone in the world an opportunity to create their own customized tokens. The use cases are countless and we haven’t even scratched the surface of what can be done with such a powerful tool.
So it seems we are going more in the direction of supporting gamers and game developers. This means we as an exchange will appeal more to the gaming community and they might just be the first customer segment to completely adopt crypto.
Antoine: What are long-term plans for Kriptomat?
Srdjan: Our mission is to bring cryptocurrencies into every household. This can be in terms of giving people the best way to exchange digital currencies, or in terms of giving them a valuable product or use-case that utilizes blockchain and crypto. Whatever the case, we truly believe that this technology will be integrated into every pore of our lives, and just like the internet protocols, people won’t have to know exactly how it works in order to use it.
Antoine: Is there anything else that you would like to share about Kriptomat?
Srdjan: We are very transparent with our community and we welcome an open discussion on our social media channels. I invite everyone reading this to join our Telegram channel where you can talk directly with our team members. We know that it is often hard to maintain a personal relationship with the community when the number of users starts to grow exponentially, but we make a concerted effort to reply to every single message.
To learn more visit the Kriptomat website.
Arnoldas Nauseda, CEO of Smartlands – Interview Series
Arnoldas Nauseda is the CEO of Smartlands a crowdfunding platform that tokenizes real-world assets. Prior to joining Smartlands, he spent four years as a full-time entrepreneur, developing businesses in the fields of technology, fintech, and robotics.
Antoine: How did you personally get involved in blockchain and cryptocurrency?
Arnoldas: Well, we need to acknowledge that getting involved in blockchain does not necessarily mean that you’re involved in cryptocurrencies and myself is a stark testimony to that, although, understanding ICOs as a mode of crowdfunding was step one for me.
I’m trained in finances and business development and for a while, have been an entrepreneur. I hold a bachelor degree in economics, MBA in Finance and International Executive, and I’ve made some strides co-founding companies in fintech, venture capital and robotics industries. In the past years, I’ve done a lot of projects, held top executive positions with fintech companies, did my share of consulting and, of course, was heavily involved with real estate.
The point is, even though I was a little late in the game, but by 2017 an executive of my stature and experience would have to have heard of blockchain, it was inevitable. At that time I felt that building a business on DLT was not only a clear sign of “progressiveness” as a business person, but it was also a real unadulterated adventure when I felt reborn every day waking up for work. It was great, still is!
Antoine: What made you decide to get on-board as the CEO of Smartlands?
Arnoldas: I dedicated a year to studying DLT, what it could do for my field, read countless pages and visited hosts of blockchain conferences, gatherings, meetups. At one such event, I was introduced to one of Smartlands co-founders, and we immediately hit it off. We both realized that cryptocurrencies as one of many DLT derivatives are a fascinating use case and an excellent tool for transforming financial markets, but the real value of blockchain lays in providing trustless access. The immutable ownership rights embedded in smart contracts… You don’t have to be a specialist to imagine what it could do in a world where the right to claim ownership was the reason for war for thousands of years. Smartlands and I were on the same page: attributing digital ownership to an asset and giving the owner the ability to use that piece of code as they saw fit was the wave of the future, and we wanted to unveil that future to people.
Antoine: Smartlands is a crowdfunding platform that focuses on tokenizing real-world assets, what will some of these asset types be?
Arnoldas: Literally, anything. As long as an asset has a documented rightful owner, it can be turned into a security token using Smrtlands proprietary tech. With that comes liquidity – the Holy Grail of asset tokenization. Naturally, the sort of flexibility in holding, trading or exiting investment that we can provide is something any asset owner or investor is after.
Antoine: The first project on your platform is purpose-built student accommodation in Nottingham, UK. Could you tell us a bit about it?
Arnoldas: We’ve selected this type of asset after careful consideration and with the help of our community. Purpose-built student accommodation complex in Nottingham, UK is a perfect starter use case for a tokenization platform like Smartlands: it’s a hands-free investment with the projected 15.72% annualized return, revenue comes from rent as well as property appreciation. The equity share is 30%, and we are aiming at £1 million funding target.
Overall, student housing in the UK is an up-and-coming asset class. The United Kingdom remains one of the top global destinations for those seeking quality marketable education, which means that the revenue stream from students paying rent is not about to dry up. Also, if you’re looking to benefit from current weakness of the pound sterling, inexpensive real estate in the British heartland is where you’d be looking to park your capital right now.
Antoine: How many more projects should we be expecting in 2019? Are you at liberty to discuss any of these?
Arnoldas: I can’t give you the details right now but I will say that we’re looking at a pipeline of six more asset tokenization projects to go live before the year’s end and the portfolio we’re preparing is highly diversified. We are looking at agricultural assets, various types of real estate, private equity. Like I said before, the essential benefit of our proprietary technology is unlimited access: asset owners and managers looking to crowdfund capital get access to investors, in turn, investors are given the opportunity for what we call “fractional ownership.” With the lowest in the industry threshold for investment, we are granting regular people the opportunity to get verified as accredited investors on the Smartlands platform and through the use of security tokens issued on Smartlands own a share of a property in the UK.
Antoine: How do you choose which projects to list on your platform?
Arnoldas: We put a lot of thought and careful analysis in the process of selecting the right assets for our investors. In fact, that’s one other major benefit of Smartlands: we have a team of researchers formulating investment documents for our clients so that the scope and scale of a project are revealed to an investor at the earliest stages of participation. As a result, the process is as straightforward as it can be on a regulated investment crowdfunding platform registered with the British Financial Conduct Authority, FCA.
Antoine: Smartlands recently launched a Stellar Powered Wallet, what is the benefit of this for investors?
Arnoldas: Essentially, it’s a multisig wallet primarily designed on the Stellar’s SEP8 protocol but with the addition of some cool proprietary features such as AI-driven compliance engine, account recovery/mapping, and others. Smartlands wallet operates within the compliant segment of the Stellar network, which to an investor means that all transactions with security tokens as well as XLM and our native token SLT are carefully sourced to prevent any risks connected with illicit activities.
Antoine: Where do you see Smartlands being positioned in 5 years?
Arnoldas: At the Consensus 2019 event in New York, we’ve introduced our “Unicorn Vision” – the strategy of consumer-centric approach that envisages our transformation from a security token issuance platform to a global investment ecosystem focusing on the most lucrative equity types and asset classes. The Vision is all about unlocking liquidity for various kinds of currently illiquid assets and, of course, going fully mobile. Basically, Smartlands is about to become a one-click operation with a built-in exchange where investors will be able to track offers and manage portfolios right from their mobile devices using multiple fiat currencies and cryptocurrencies.
We will be issuing Smartlands Card with the genuinely unique functionality of a multi-wallet payment system. All the wealth you create using the Platform will be stored in your account – digital assets, fiat currencies, and crypto. The Card will be used just like Visa or Mastercard enabling our customers to engage in IBAN and SEPA transfers as well as for value storage.
Remy Jacobson, CEO of RealT – Interview Series
Remy Jacobson recently launched a crowdfunding platform called RealT that allows cryptocurrency investors to invest in real estate assets, starting with rental homes in Detroit, Michigan. The company is expanding next to Cleveland, New Orleans and South Florida.
In South Florida, Jacobson heads the Aventura-based development firm J Cube Development. In November, he sold a development site in Wynwood to Quadrum Global for $8.55 million.
Antoine: RealT plans on tokenizing real estate in the city of Detroit, Michigan. Why did you choose Detroit versus competing cities with stronger real estate markets?
Remy: Detroit is the optimal place for RealT to get started. Properties in Detroit are already in high demand among international investors, due to their low price tags and high rental rates. As RealToken owners, the rental income is the tangible source of gratification they receive. Having low-cost properties with high rental rates is a great way to provide value for our early adopters.
Antoine: Will you be focusing on capital gains or rental yields?
Remy: We will be looking at both areas. Rental yields will be paid to the investor via their Ethereum wallet on an ongoing basis and, as the value of the property and rent price increase, so will their rental income. Investors also have the option of selling on their tokens, after due diligence has been carried out, to yield capital gains too.
Antoine: What will be the average holding period?
Remy: RealTokens sold overseas will be freely transferable overseas to non-U.S. persons who have qualified following AML/KYC reviews, but, in order to comply with U.S. applicable securities laws, these ReatTokens may not flow back into the United States for a period of 12 months. RealTokens that are sold to accredited investors in the U.S. may be transferred to other whitelisted accredited investors after 90 days and will become freely transferable to anyone after 12 months.
As a practical matter, it is too early to tell how long purchasers will want to hold their RealTokens.
Antoine: What made you decide on the tokenization model?
Remy: We wanted to make investing in US property more accessible, notably to foreign investors. By tokenizing property, we can offer investments at accessible prices to a greater number of people. It’s also important that blockchain is the technology that backs tokenization because this ensures the efficiency and traceability of real estate investment that the traditional real estate sector is clearly lacking. Our tokenization model offers the advantage of a regular real estate transaction on top of blockchain transparency. RealT is a bridge between the physical and the digital world: all deeds, operations agreements, and other legal documents are viewable on the blockchain, while at the same time held in trust with a law firm.
Antoine: How are you planning on attracting retail investors who may not be familiar with security tokens or cryptocurrency in general?
Remy: RealT has lowered the barrier of entry to real estate, to an accessible and affordable amount. RealT can provide an integral part of a modern investor’s portfolio, and now it can be held inside on Ethereum’s wallet. We aim to be the Coinbase of real estate assets. One of our main aims is to make the concept and process of investing in property as straightforward as possible. It’s important to us that people who would have otherwise never considered investing in property through blockchain understand that they don’t have to be bogged down in bureaucracy and jargon to participate. Our marketplace and buying process is intuitive and runs buyers through digestible steps before purchasing tokens.
Antoine: Can you share with us the benefits that investors will be offered?
Remy: Investors can enjoy passive rental income that will be paid continually into their Ethereum wallet once they have invested in a property. This income will be paid in stable coins which are pegged to the US dollar so that investors don’t have to concern themselves with the volatility of a particular cryptocurrency at any given point. As token owners, investors can also contribute to the significant decisions required concerning the upkeep and maintenance of the property in which they’ve invested. This is done through a simple voting process.
Antoine: Will investors be able to select the investment they wish to be involved in? Or will the security token act as a fund which holds multiple properties?
Remy: With RealT, you can select specific properties and become an owner in the property. As an investor, you get to own the actual real estate. RealTokens are important building blocks in the Ethereum ecosystem. By going all the way down to the foundation of real estate, to the individual properties themselves, RealT enables anyone to create a real estate portfolio using RealTokens. It’s an important distinction; the real estate funds of the future may very well have RealTokens as the asset. This is why RealT investors have full visibility on our marketplace and can choose the exact property they wish to invest in and how many tokens they want to purchase for that property. The rent they then yield will come directly from the property that they’ve invested in.
Antoine: Is this offering exclusive to US accredited investors? Will you be accepting international investors?
Remy: The offering is primarily targeted at international investors. Traditionally, the US real estate market has been relatively inaccessible to those residing outside of the US. We want to change this and open up the possibility for anyone in the world to invest in US real estate and benefit from passive rental income. We, of course, accept accredited investors.
The offering is being made in the U.S. only to accredited investors pursuant to Regulation D under the Securities Act of 1933, and overseas to non-U.S. persons pursuant to Regulation S under the Securities Act.
Antoine: How are you planning on differentiating yourself from competitors such as BlockEstate, Realecoin, Slice RE, etc.
Remy: The main differentiator is that RealT is up and live. To the best of our knowledge, we are the first platform to officially launch and offer the prospect of buying into tokenized property. Additionally, RealT is tokenizing properties themselves, rather than offering an investment fund that specializes in real estate. This returns autonomy to the individual, and allows them to choose the properties they want, at the investment size they chose. We have a very strong team behind RealT, with both blockchain and cryptocurrency expertise as well as extensive real estate knowledge. Many projects in the area of tokenized real estate are either run by crypto enthusiasts or real estate professionals, but at RealT we combine these areas of expertise to offer a comprehensive, fully-compliant service.
Antoine: Is there anything else that you would like to share with us about RealT?
Remy: RealT will continue to add new property types, from various cities, to continue to sample what our customers want to see available for purchase. RealT has plans to tokenize properties in all major U.S. cities, and we look forward to seeing which cities generate the most demand. And creating liquidity.
To learn more visit the RealT website.
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