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Howard Marks, CEO, of StartEngine – Interview Series

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Howard Marks, CEO, of StartEngine - Interview Series

Howard Marks is a co-founder and CEO of StartEngine. Since inception, nearly 150 successful financings have been completed for startups and other businesses via the StartEngine platform.

Long before ICOs became standard parlance, Howard saw the future of Security Token Offerings. On his blog and also through guest articles as contributor to Forbes, Hacker Noon, The Mission and Next Web, Howard has shared his vision for the space and has worked to chart the path forward to liquidity.

StartEngine was involved in the highly successful tZERO STO, they hold annual conferences, and many STOs are raising via the StartEngine platform.

 

AT: You have quite the impressive background, with an extensive history in software and gaming. Yet, you decided to launch an accelerator program called StartEngine. What inspired this?

HM: I felt the Los Angeles technology community needed an accelerator to invest in young companies.  We were the first accelerator to launch in Los Angeles, many more followed.  The mission was to help Los Angeles become a technology city.

 

AT: How long was it until StartEngine pivoted towards equity crowdfunding?

HM: We invested in 60 startups and most of them were not able to raise any capital.  This was a huge problem.  Investors were only interested in very narrow set of ideas and a certain type of founder.  This resulted in most of our investments failing.  This is viewed as normal given the early stage nature of the companies, however, access to capital was difficult for most of them, especially for the female led founders.   In 2014, two years after launching the accelerator, we created the crowdfunding platform and launched in June 2015.

 

AT: Your first client on StartEngine Elio Motors went on to raise an impressive $16.9 million. How did you source this client?

HM: We were introduced to Paul Elio through a marketing company who felt they would be a perfect first customer for our company.  Paul was adamant his community would invest and we were excited to have such an early success.

 

AT: When did StartEngine decide to also offer ICOs?

HM: In June 2017, I was reading about the DAO report published by SEC.  This report explained how the DAO was an investment in securities although it was positioned as utility tokens.  This intrigued me to learn more about ICOs and I found huge fast growing marketplace of investors who were using cryptocurrencies to crowdfund companies.  There were two main differences from our marketplace: They were not following the securities laws and they offered many liquidation marketplaces for the investors.  We decided to help ICOs get out of the shadows and use the JOBS ACT to sell securities within the securities rules.  The first significant ICO we launched was tZero in February 2018.

 

AT: You were one of the first companies that pivoted from ICOs to STOs. What made you pivot toward STOs?

HM: ICOs were viewed by the general public as an investment in utility tokens.  Although most of those tokens were securities, they were not sold as such.  Changing the name to STO made sense because it was clear these offerings were for securities.

 

AT: We are huge fans of tZERO, how did you get tZERO on-board to raise on the StartEngine platform?

HM: When we launched our first summit on November 10 in 2017,  we invited Ralph Diauto from tZero to come and speak.  He saw our entire organization and how we were focused on compliance and following the rules.  This was refreshing for him given the large number of platforms who were launching utility tokens by disregarding the laws.

 

AT: The StartEngine Summit has been quite successful. My only complaint is that it’s not long enough, any plans on making this a 2-day conference?

HM: We have completed three Summit so far and our next one is April 12th.  I think a 2 day conference makes sense, however, it involves twice as many speakers and a lot more logistics.  For now, we are expanding the 1 day conference and in collaboration with many other Los Angeles companies to offer an incredible LA Blockchain Week.

 

AT: You’ve spoken strongly in the past about supporting women entrepreneurs as traditional venture capitalists often do not provide them with the support and funding that they need. Do you feel that equity crowdfunding and STOs offer them more of a fair playing field?

HM: We have learned that under 4% of Venture Capital is invested in women led companies.  This results in discouraging women to pursue their dreams and business aspirations.  This bias contributes to the lack of diversification in the types of companies that are funded and also in the types of ideas available for investors.  So far, StartEngine has women leading 22% of the companies on our crowdfunding platform.  This is still low but a large step forward.  We believe crowdfunding and STOs will help fund more women led companies than VC and Angels combined.

 

AT: I know you believe in mission statements, what’s the mission statement of Start Engine?

HM: Our mission is to help entrepreneurs achieve their dreams.

 

AT: StartEngine is currently running their own STO. Could you tell us about this STO, the raise amount, and the terms that are offered?

HM: We have a fundraising campaign for accredited investors called OWN Limited.  This is limited to a short period of time before we have received qualification from the SEC for our next Regulation A+ public offering.  The OWN Limited terms are $7.50 per token.  Each token represents a share of Preferred stock in the company.

 

AT: Anything else that you would like to share about StartEngine?

HM: We are focused on building a modern financial firm which can help entrepreneurs capitalize their companies directly from the crowd.  We also want to provide investors with liquidity options.  We are in the process of registration with the SEC for our broker-dealer and Alternative Trading System.  We recently launched a proposed standard called ERC-1450 to tokenize securities.  The purpose is to offer investors the ability to receive digital stock certificates in the form of tokens and to then facilitate the trading on our upcoming platform.

 

AT: Thank you for the interview. We are huge fans of StartEngine and we were excited you were able to join us.

For anyone who wishes to learn more about StartEngine or Howard please see the links below:

StartEngine – Invest in companies via equity crowdfunding or STOs.

StartEngine Summit – Scheduled for April 12, 2019. This summit is held in Los Angeles twice a year. Future dates will also be posted on our conference page.

Howard’s Blog – Howard discusses his views on the industry.

Howard’s Twitter –  One of the best Twitter accounts in the industry to follow.

 

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Antoine Tardif is the CEO of BlockVentures.com, and has invested in over 50 blockchain projects. He is also the founder of bitcoinlightning.com a news website focusing on the lightning network, and a founding partner of Securities.io

Interviews

Brian Collins, CEO at Horizon Globex – Interview Series

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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.

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Oliver Bolton, CEO of Almond Impact Ltd – Interview Series

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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

You can find Oliver Bolton on LinkedIn or follow him on Twitter

 

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Graham Rodford, CEO of Archax Exchange – Interview Series

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Graham Rodford, CEO of Archax Exchange - Interview Series

Graham Rodford is the CEO and Co-Founder of Archax exchange based in London, England.  Graham has almost 20 years of experience in the traditional funds/investment world and is applying that knowledge and experience to digital securities.  A testament to Graham and his team’s experience is that Archax is one of the very few regulated digital securities exchanges, in arguably the world’s largest financial centre.

Archax is a London-based regulated exchange for trading asset-backed tokens; the exchange is geared primarily towards the professional investor community.  Archax aims to bridge the crypto world and the traditional investment space with an institution-quality approach. 

RS: In one sentence, how would you describe Archax?

GR: Archax is a forthcoming regulated, institutional, digital securities exchange based in London.

RS: What is the long-term vision for Archax?

GR: Our vision for Archax is to be the leading venues for the primary issuance and secondary trading of digital securities globally, operating a 24×7 market.

RS: Who will be able to use the Archax platform? 

GR: Our focus is in professional investors and institutional clients from all over the world as direct users – both the buy-side and sell-side. Any retail participation will be through brokers.

RS: What differentiators does Archax have from similar exchanges?  How will those appeal to the professional investor community?  

GR: A focus only on institutions/professional investors – most other venues cover retail flow.

A focus on security tokens – most other venues cover cryptocurrencies/utility tokens, which are unappealing to institutions currently.

The first digital securities exchange regulated in London, the world’s leading financial centre – most other venues are regulated in peripheral jurisdictions.

Archax team all come from the traditional financial markets world and are used to operating in regulated markets globally.

All our technology partners are proven suppliers to the traditional institutional space.

Archax will be integrated into the existing traditional trading workflow through vendor partnerships

Archax supports industry standard trading APIs like FIX

All the above appeals to the professional investor community.

RS: Archax is a regulated digital securities exchange; can you tell us some more about where you’re regulated and what the regulation means for the investors and companies listed on the exchange.

GR: Most other crypto exchanges are unregulated, and those that are regulated tend to be from peripheral jurisdictions. The traditional institutional investment world does not like trading in venues regulated in those types of jurisdictions, they want to trade on venues regulated in leading financial centres like London.

Companies looking to list a digital security want exposure to the blue-chip institutional investment world – an exchange like Archax gives them that exposure.

RS: You’ve formed a few new exciting partnerships recently; can you tell us some of the benefits these partnerships will provide?

GR: Our partnerships with proven technology firms from the traditional space like Aquis and Quod give us proven capabilities and direct links straight into our target marketplace.

Our partnership with tokeniser firms like Tokeny and Securitize gives us a flow of quality digital security listings for our exchange.

Our partnership with ClearBank gives us institutional-grade banking capabilities – all backed up by the Bank of England.

RS: When do you expect Archax to go live?

GR: We expect Archax to go live in late Q3 early Q4 this year.

RS: As someone with extensive experience in financial markets, where do you envision the digital securities market going in the next 2 years, and 5 years?

GR: It is still early days for security tokens and over the next two years we expect to see the required supporting ecosystem continue to emerge with the key players in primary issuance, custody and secondary market trading establish themselves. The regulatory landscape will evolve too with the regulators in major financial centres clarifying their position regarding security tokens other crypto assets too. The number of firms looking to issue security tokens will grow as well, with larger and more prominent issuances appearing as the whole landscape starts to take shape.

Looking out to five years, all this activity will create liquidity on these new markets and nurture mainstream adoption which we expect to build momentum quite fast. We will also start to see existing financial instruments use blockchain/digital security tokenisation too – as this is a far more efficient and frictionless way of handling financial assets than is used currently – particular in the post-trade clearing and settlement space.

RS: Is there anything else you would like to tell us?   

GR: The tokenisation of real-world assets using blockchain technology will not only unlock liquidity and create secondary markets for assets that are currently hard to trade, but also has the potential to disrupt all traditional financial markets too. Already there are more than 150 firms who have used or are looking to use security tokens as a way to raise capital or unlock asset value – a total value of over $2billion, with $400m raised so far.  This momentum is building with new initiatives appearing every day. The types of token range from tokenising equity/revenue/debt as a way of raising business capital, tokenising property or funds to create secondary market liquidity, and even tokenising more niche or exotic assets – like art, race horses, diamonds, container ships, aircraft – to unlock value in new, innovative ways.

 

You can find more news coverage about Archax here

And reach the Archax home page here.

 

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