Erich Spangenberg is the CEO and founder of IPwe, a company using blockchain and artificial intelligence to create the patent asset class. He also was a founder of nXn Partners, a company that is focused on predictive analytics. He was the founder and CEO of IPNav, a company that was one of the pioneers in patent monetization.
AT: Can you give a brief overview of how IPwe plans on revolutionizing the patent market?
EP: IPwe is leveraging technology—in particular, AI and blockchain, experience and changes in market attitudes to create the patent asset class. Billions are spent on regulating, obtaining and maintaining patents and the returns to owners and society are low. We are going to help fix that. AI and blockchain make things much easier to understand and far more transparent. Intangible assets—and patents are one of the key intangible assets for many companies – are just too important to be ignored and left to underperform under the management of people who are not asset managers.
AT: Are you using a public or private blockchain?
EP: IPwe’s Global Patent Registry – the first registry of the world’s patents—and our transaction platform are built on Hyperledger Fabric. After evaluating other solutions, we concluded that our market is best served through a private blockchain—we are not dealing with a fungible commodity where issues of who you are transacting with are not of any importance. We will be building public components as part of our product roadmap—but it will take time for the market to accept these solutions.
AT: How will you educate companies to register patents on the blockchain?
EP: We are fortunate that our management team is well known in the space and has extensive connections with key players in industry and the nonprofit and government sectors. Leveraging these connections, we reach a large swath of the world’s patent owners. In 2019 you will see IPwe more aggressively advertising and raising its profile.
AT: One of your goals is to enable the easy access to any patent from any office in the world. What incentive will those offices have to use the blockchain?
EP: Many of the world’s 200 patent offices already understand the importance of blockchain and its ability to increase transparency and improve things like how title is recorded. The most forward-thinking offices are already in conversations with us and we will be publicly announcing initiatives with them in 2019. We are not selling anything to these patent offices—we do not seek revenue from patent offices. What we offer is a way for these offices to better fulfil their public mission. Will all of them participate? No, as there are some offices that harbor curious beliefs that their mission is to do something other than serve innovators and society—we wish them well and believe they will soon enough recognize they can play an important role in improving the patent system.
AT: The IPwe blockchain is linked to your patent analytics platform, Zuse. Can you explain how Zuse is able to both estimate the worth of a patent and its validity?
EP: Zuse has been under development for 10 years and is the only analytics system that we are aware of that can lay claim to being central to and directly involved in over $3 billion of identified licensing and financing transactions and raising over $1.4 billion of capital as part of a strategy to invalidate patents. Zuse has been used by experts in recent US patent cases. The “how” is fairly complex and white papers are available on our website for those who want to dig deeper, but the system closely mimics the methodology experts use to assess validity. Our valuation efforts are progressing and we will be announcing an initiative in December as part of a joint effort with key industry, accounting and academic participants that will advance patent valuation to a new level.
AT: One of the intended goals of IPwe is cheaper patent transactions. How will the blockchain help with these cost savings?
EP: We have already announced our pricing for traditional transactions – 10% of the purchase price or license price– which compares to current market rates of 25%–and pricing for other services that owners pay for things like annual maintenance fee that are over 50% lower than what patent owners currently pay. We use a variety of technology–including smart contracts built on Hyperledger–to lower transaction costs. Since we are making the pie bigger, there is still a critical role for legal, broker and other patent service providers that we want to work with the improve the system and increase the transaction volume. A key goal of IPwe is to dramatically lower the cost of patent ownership.
AT: IPwe did not pursue an ICO – happy with that decision?
EP: An ICO was not a viable option for IPwe. At the end of the day we are a B2B market solution. Today most large companies simply cannot get past the regulatory issues raised by traditional ICOs. This will change—but it will take time. We also believe that forcing customers to transact with you only through a single purpose token is not a viable way to transact or build a platform.
AT: How about security token offerings—do they play a role in IPwe’s future or the future of the patent market?
EP: STOs are something completely different from ICOs in our view. We are huge fans of regulatory compliant STOs and will use STO structures for both IPwe and for our patent finance solutions. This is a huge development in the patent space that will become apparent soon when we announce our first two STO financings next month.
AT: It doesn’t sound like IPwe is seeking to eliminate intermediaries that exist in the current patent market—why?
EP: Patents are in fact complex assets and certain intermediaries will play a critical role going forward and some, we expect, will either change their business models or disappear. Many enjoy singling out lawyers as non-value creating intermediaries, and while this may be true in some contexts, it is not true in the patent space. We think their role might change as they will become focused on higher value services, but we believe they play an important role in the new market IPwe is helping to create. The patent intermediaries that charge exorbitant rates to, for example, do nothing more than make annual payments to patent offices – we think their days of exploiting these types of inefficiencies are limited.
We think some of the abuses and negatives in the system—patent trolls, efficient infringers and lower quality patents, for example, will be addressed and remedied by these same changes. The intermediaries that embrace AI and the transactional efficiencies that can be realized through blockchain and focus on high value services are going to do even better as the market expands. The sloths and luddites will disappear.
AT: If we visit with IPwe again in a few years, what will we be talking about with respect to patents and the patent market?
EP: The biggest changes that AI and blockchain are going to facility is that new managers will likely take over the patent asset class and, as capital becomes more comfortable with patents, patent based financings will dramatically increase and large and small patent owners will regularly use patents to access capital. Intangible assets – which includes patents – are a majority of most companies balance sheets. Today, these assets are largely managed by departments other than finance and not well understood by finance types. This will change and it will be a change for the better.
Syed Hussain, CEO of Liquidity – Interview Series
Syed Hussain is the co-founder and CEO of Liquidity Digital, a blockchain based fintech firm that is building an end-to-end investment banking ecosystem for the digital economy.
Prior to this, Syed had served as the CEO of the Americas for BANKEX, a global blockchain firm focusing on the tokenization of assets; as the Director of the Eastern US for Blueprint Technologies, a digital transformation consultancy
Antoine: You have quite the background in tokenized securities having previously being CEO of BANKEX. Could you tell us a bit about your experience with BANKEX, and how it has prepared you to be the co-founder and CEO of Liquidity Digital?
Syed: In times of struggle, I become stronger. My character is defined not by my successes, but by my reactions to disappointment. BankEx under delivered on its promises to the market. The excess of funding created a lack of focus rather than a platform of support. I have learned. I will apply the knowledge, strength of character and a team that shares my vision, we will succeed.
Antoine: What inspired you get involved in digital securities initially?
Syed: My love for solving problems. I was inspired by the intellectual design of Satoshi’s whitepaper on Bitcoin and was searching for a practical, business use case for this new technology. Digital securities provide me with this stimulation and opportunity to learn an impressive team to grow a solid, revenue generating organization in this new industry.
Antoine: Liquidity Digital is developing a regulatory compliant ecosystem for the creation of digital assets. This is a three-step process which includes Security Structuring, Regulatory Compliance Issuance, and Post Issuance Modules. Could you tell us about the security structuring and how Liquidity Digital handles this?
Syed: We initially consult directly with clients to understand their business needs. Internally we structure a deal that is suitable for their use and will hire outside consultants on a per need basis. We will also refer to third party legal and accounting teams to provide a due diligence analysis of the issuer and then of the security and the structure.
Antoine: The second step is the regulatory compliance which is what many are most concerned about. Can you let us know how Liquidity Digital handles this?
Syed: We will be relying on third party legal on a per issuance basis. Most likely we will be using a combination of Reg D and Reg S offerings.
Antoine: Do you also handle international regulatory compliance?
Syed: Yes, we will be relying on legal counsel as well as broker-dealers who are registered in their operating regions per that local jurisdiction.
Antoine: The third step is the Post Issuance models. Is this managing cap tables? What else does it involve?
Syed: Yes, cap table is part of post-issuance. As is tax reporting, investor relations, voting rights management, dividend distributions and buybacks. What we do not do is secondary trading. For this service, we will be relying on a network of partners who are registered to handle digital securities in their jurisdiction.
Antoine: For a company who is interested in signing up with Liquidity Digital. What do they need to have ready before they approach you?
Syed: The ability to pass audit by a big four accounting firm. $150,000 in fees to Liquidity Digital due before raising capital to cover our advisory and technology costs. Another $200k – $300k set aside to create offering documents and for marketing and roadshow expenses.
Antoine: Are you currently only accepting United States clients? Are there restrictions on where corporations should be incorporated?
Syed: No, however we prefer US based clients due to the higher reporting and compliance standards. For clients incorporated outside of the US they would have to be able to also pass third party auditing from a large US-based accounting firm.
Antoine: Is there anything else that you would like to tell us about Liquidity Digital?
Syed: We eat securities for breakfast and shit them out as digital blocks.
To learn more visit Liquidity Digital.
Brian Collins, CEO at Horizon Globex – Interview Series
An experienced public and private company CEO, Brian founded Horizon Globex in 2010, which was listed on Nasdaq in 2012. From 1999-2010 Brian was CEO of Abbey Technology in Switzerland, specializing in the design of trading software for Swiss banks. Prior to this, Brian worked for Credit Suisse in Zürich designing and building proprietary equity trading solutions. Brian graduated in 1990 with a B.Sc.(Hons) in Computer Systems from the University of Limerick, Ireland.
AT: Horizon Globex features multiple products which target companies that are looking at launching a Digital Securities Offering. To begin, could you tell us about Tokenetics, and describe the issuance process?
BC: Tokenetics is our underlying digital security issuance, custody and disbursement software for issuers to launch a secure and compliant DSO. An issuer comes to us, and we collaborate with their team (including management, securities lawyers and investment bankers) to create an Ethereum ERC-20 smart contact for the digital securities that will be able to be issued pursuant to an exemption from the registration provisions of the federal securities laws such as Regulation D, Regulation S, Regulation A or pursuant to a registered offering on Form S-1.
We take a unique approach that we believe is most suited for today’s ever changing regulatory framework. Instead of integrating numerous layers of features onto a single digital securities’ smart contract, we prefer to apply additional regulatory compliance via “peered” smart contracts that are built alongside the primary-issuance smart contract, like our Transfer-Agent- Gatekeeper smart contract (via CustodyWare).
For example, if a holder becomes the CEO of the issuer (e.g. an affiliate who is now restricted from “insider” trading in the security), the issuer would be forced to burn the holder’s digital securities, reprogram with the new restrictions and issue a new token. With CustodyWare, the issuer can simply notify the Transfer Agent and the Transfer Agent c an input the CEO’s KYC’d wallet ID to the CustodyWare portal and apply relevant affiliate status restrictions on the securities in that wallet. Our approach puts control in the hands of properly SEC regulated Transfer Agents instead of developers or CEO’s.
AT: Tokenetics also offers secondary trading opportunities, could you describe these?
BC: The answer to this question lies in the ability for our software solutions to integrate with one another. Tokenetics integrates with KYCware, our white label investor onboarding and KYC identity verification smartphone app. AMLcop, our watchlist management sanctions and PEP screening solution, also integrates and acts as the gatekeeper for our entire ecosystem as an investor must be whitelisted to participate. Then, on completion of an offering and its potential holding period (e.g. SEC Rule 506(c)), a Transfer Agent utilizes CustodyWare, our Transfer Agent custody portal, to transfer the digital securities to a regulated ATS for compliant secondary trading. Our use of a Transfer Agent allows issuers to exercise good control, ensuring the identities of investors remain intact throughout the lifecycle of the digital securities. Ensuring that investor identities are known in the same way as traditional securities means that proxy notices can be sent, voting can be done, dividends can be paid, escheatment can be managed, and state and federal laws complied with for estate management and regulatory reporting.
We’ve also developed a dollarized secondary trading solution to provide liquidity assurance to investors and offer new investors the ability to take part in the secondary market, with trading-pairs priced in fiat. Investors both deposit and withdraw funds in fiat, minimizing risk of cryptocurrency regulatory and AML exposure.
AT: CustodyWare is another one of your products which describes itself as a compliant agent custody solution. Could you elaborate on what this product does?
BC: We believe that CustodyWare is the first regulatory compliant product for U.S. Transfer Agents to custody and manage digital securities on behalf of their clients pursuant to an SEC registered or a registration-exempt DSO. The CustodyWare portal integrates with ERC-20 issuances and supports all major Transfer Agent functions including issuance, custody, transfer query, reporting, affiliates and release, providing Transfer Agents with the ability to fulfill the same role for digital securities as they do for traditional securities. All transactions are signed by the Transfer Agent and are transparently and immutably stored on the Ethereum blockchain.
AT: In January 2019, you signed a deal to license CustodyWare to VStock Transfer, LLC “VStock” an SEC registered transfer agent and registrar. Could you tell us a little bit about this agreement?
BC: The agreement with VStock is a licensing agreement which enables VStock to expand upon their traditional business as a leading stock Transfer Agent and registrar firm and begin taking custody of digital securities issued pursuant to Regulation D, Regulation A, Regulation S, or registered offerings filed on Form S-1. We have licensed VStock Transfer our “portal” for them to manage holders and affiliates of digital securities, cancel and re-issue tokens if a holder’s private key is lost/stolen, and act as a paying agent to distribute dividends, etc.
AT: The third product that you have for STO solutions is KYCWare. There’s been a lot of KYC products that have hit the market, what differentiates yours?
BC: I think one of our biggest differentiators is our methodology and level of security when it comes to the protection of users’ sensitive information. We don’t perform KYC/AML “verifications” ourselves. Instead, KYCWare provides clients with a white-label mobile app solution and back- end portal to streamline the collection of CIP, KYC and AML information without ever sharing sensitive data with a third-party.
How it works is investors or customers are onboarded through a client-branded KYCWare app which incorporates advanced identity verification technology such as anti-gaming video interview solutions, machine readable ‘MRZ’ scans of passports, security hologram checks for IDs, and more unique layers and updates from traditional identity checks.
On the back-end issuers or customers are run through our AMLCop, anti-money laundering software solution. Then all this sensitive customer information is stored in memory until a representative of the company (whether it be a designated KYC/AML representative or broker- dealer engaged by a DSO issuer) downloads and reviews the submissions on an SEC Regulation S-P compliant medium (for example we recommend clients use a FIPS compliant external hard disk). We take this approach because in the eyes of the regulators, the issuer is ultimately responsible for making sure that all investors are properly K YC’d and AML’d, not the third-party who could further outsource the data to be verified.
AT: You’ve entered into a software license agreement with Tripoint Global Equities in order to provide them with software support to the BANQ branded security token platform. What is the BANQ platform?
BC: BANQ is the online division of TriPoint that is focused on private placements, Regulation A IPOs and digital security offerings. In addition to supporting the BANQ platform, Globex announced that we entered into a software licensing agreement with First Growth Funds Limited (FGF) to power fully regulated and compliant security token offerings in Australia and New Zealand. FGF is a publicly traded fund listed on the Australian stock exchange and is a diversified Investment company which focuses on increasing shareholder value by making investments across a broad range of asset classes including listed equities, private equity and token offerings.
AT: What’s the Globex API?
BC: The Globex API is simply a way for our four software applications to interact directly with Ethereum. Typically, if a company wants to integrate with Ethereum, they could use an open source API or a third-party resource but our ethos for software has always been to create the solutions ourselves. By doing this, if there’s an issue, we have total control over fixing the problem.
AT: One of the more interesting offerings on your website is that you offer a ‘Turnkey Financial Portal’ that can be branded to a company’s brand. What capabilities will these financial portals offer?
BC: The branded financing portals offer many benefits. On the front-end, issuers present investors or customers with an on-brand investment process from start to finish, maintaining a sense of trust and a seamless user experience. On the back-end, issuers, and their bankers, experience a hosted web portal where they can securely and compliantly manage their customers and necessary reports with no IT experience needed.
AT: You recently had some exciting news with Timeless Luxury Group AG, licensing the Globex full suite of blockchain software solutions to power its DSO, is there anything that you would like to share with our readers about this partnership?
BC: This is a key announcement because it showcases our blockchain software stack’s ability to address all aspects of a digital securities offering. The relationship began with an understanding of Timeless Luxury Groups’ desire to access US capital along with foreign investors in a fully compliant DSO and grant investors the right to a percentage of any future profits.
This offering marks the first offering in the United States to use an SEC registered Transfer Agent for the issuance and custody of digital securities. CustodyWare is being licensed by Timeless Luxury Groups’ designated transfer agent, VStock Transfer, granting VStock the ability to custody Ethereum ERC-20 securities while compliantly maintaining the identity of holders to facilitate the future payment of any dividends in US dollars and any other transfers that the Transfer Agent is responsible for administering (e.g. holds, releases, transfers, etc.).
AT: Is there anything else that you would like to share about Horizon Globex?
BC: There is a lot of hype in the industry with companies making claims about what they ‘will’ create, or even more detrimental, making false claims about the capabilities of their existing companies. We like our approach of coming to the market with live and proven software. In two years, our team of developers built out a comprehensive suite of blockchain software solutions that address the full lifecycle of a compliant digital securities offering. With the continued input from our experienced tech, Wall Street and public company executives, we aim to continue developing and bringing to market technologically advanced products that power the next generation of exchanges and securities offerings in the US and worldwide.
To learn more visit the Horizon Globex.
Oliver Bolton, CEO of Almond Impact Ltd – Interview Series
Oliver Bolton is the CEO of Almond, a free app that rewards consumers for buying responsible brands and helps them understand and reduce their carbon emissions. They are currently accepting investors for their STO.
AT: What inspired you to launch Almond?
OB: 2 years ago my son arrived (and last month my daughter!), and with the climate crisis I can’t stop thinking about their future and what type of world they’ll live in. I really want to use my time to make a positive impact and have decided to focus on consumption which in the UK represents 50%+ of our personal CO2 emissions
AT: Almond has a huge environment mission which includes rewarding consumers for buying sustainable products. Can you tell us what some of these sustainability goals are? Does it involve reducing excessive packaging, sustainable harvesting of products, etc.
OB: Our overarching goal is to help people lower their CO2 footprints by at least 50% over the next decade (with a focus on consumption). Specific assessment metrics are still being developed and will be based on the UN’s SDG. Packaging, ingredients, processing and the LCA of products will all be contributing factories to certification. The foundation will ultimately develop its own impact assessment program for accreditation.
AT: Almond will enable consumers to learn about the carbon footprint of each product. Can you elaborate on how this is done and what information will be available to the consumer?
OB: Using the supply chain data (ingredients origin and production processes) and other product information that is uploaded, we can calculate an LCA CO2 footprint at point of manufacture. We then plan to use a dynamic per mile average CO2 score (to represent storage/distribution/display emissions) to calculate the footprint from point of production to point of consumption to create an estimated total footprint score.
AT: What type of process will brands have to go through in order to be selected for the platform?
OB: To start with we are aligning with best in class certification labels in their respective categories. For example ‘B Corp’ in Food & Drink and ‘Cradle to Cradle’ in clothing. Over time we will build out our own impact assessment which will integrate the supply chain data above, accreditation and a detailed business questionnaire to reach an Almond score (run by the foundation).
AT: You’re launching with food products initially, what are the other types of products that you plan to add to the platform?
OB: In 2019 we are piloting several cross-sector consumer products including food, drinks, clothing, health, beauty and fresh produce products. We want to include any consumer product (and some services) that contribute to our user’s carbon footprints
AT: Almond s launching in the United Kingdom first, what markets will you be targeting afterwards?
OB: The richest 10% around the world are responsible for 50% of CO2 emissions. The wealthiest consumers in developed economies will be our priority. A US pilot is planned for early 2020.
AT: The Almond token model has both a security token (ALMA) and a utility token to offer rewards (ALMD). Can you tell us about the use cases of the ALMD utility token?
OB: Due to the structure of the project, the tech and IP is owned by the foundation and can never acquired by a third party. The ALMA security token allows investors to exit their investment post their lock-up periods. We also hope to democratise investment into the project and will make ALMA security tokens available for purchase to the wider community through ALMD reward coins conversion. To clarify, the ALMD reward token is a fiat backed stable-coin rather than utility token. The reason for taking this route is that often products are sold in multiple countries so we need a cross-fiat global rewards currency. This ALMD stable-coin for good also opens up other potential opportunities for the project.
Can you tell us about the ALMA security token, and the benefits it offers investors?
OB: ALMA security tokens will offer similar rights to traditional equity such as ownership, dividend rights and are EIS eligible (subject to conditions). We plan to list them on an exchange in late 2019 to provide early liquidity to our investors.
AT: Investors are obviously interested in the business aspect of Almond. Currently, you plan on generating revenue via a ‘Tokenisation Service Fee’ which is a fee incurred by merchants. Can you tell us about this fee?
OB: There are multi income streams, the core being the Tokenisation Service Fee which is charged when physical codes are created to be placed on partner products. The fee structure scales down from 0.5% of the tokenised product’s retail sales value to 0.2% of retail sales value. Other income is projected from marketing and ecommerce solutions.
AT: In a perfect world, where do you see Almond being positioned in five years?
In five years we hope to have a presence in those key countries that are contributing to climate change and an active user-base around the world. We hope to show hard data and evidence that we are helping our users reduce their carbon footprints (in line with our 10-year plan to reduce by 50%) and evidence to show how we have helped responsible brands rapidly gain market share.
To learn more about Almond visit the Almond Website
Investor information is available here
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