- Did Elon Musk Miss The Boat On AI?
Topics: AI, Hollywood, ChatGPT, strike, Elon Musk, Mark Zuckerberg
Host: Anthony Noto , Benzinga Editor
David Bloom Sr. Associate at Kyber Knight Capital.
Ary Vaidya Associate at Kyber Knight Capital.
David Bloom David is a Sr. Associate at Kyber Knight Capital. He helps lead the built world and labor automation focuses at the fund. Over the past several years, he has led investments in novel homebuilding technologies, robotics, and AI-enabled software. Outside of KKC, David is a Board Member at NextGen Partners and a Senior Fellow at the New Building Institute. As an undergraduate, David was an active part of the entrepreneurial community at UC Berkeley. He was a part of Dorm Room Fund which allowed him to invest in the best and brightest students in the nation. He further developed his investing ability by joining The House Fund, writing pre-seed and seed checks directly into the Cal Network. David graduated from UC Berkeley with a BA in Interdisciplinary Studies with a focus on behavioral economics.
Ary Vaidya Ary is an Associate at Kyber Knight Capital. He helps lead the AI and commerce focuses at the fund. Over the past years, Ary has actively advised and invested in multiple start-ups across AI, consumer, and fintech. Prior to joining KKC, Ary worked on the Special Projects team for the CEO of Cantor Fitzgerald, an Investment Bank in New York. At Cantor, he worked on the company's digital asset strategy focusing on integrating emerging technologies across the firm. Ary grew up in London and graduated with Honors from Stanford University, obtaining a BS in Symbolic Systems with a concentration in Artificial Intelligence. During college, Ary also spent time studying Philosophy at Oxford University.35m | Jul 31, 2023
- From The Creator Of Five Nights at Freddy's - What's Next?
Topics: video games, AI, augmented reality, Five Nights at Freddy's, illumix, 2D,3D, Mark Cuban
Host: Anthony Noto , Benzinga Editor
Kirin Sinha is the Founder and CEO of Illumix, a leading technology company bridging the digital and physical worlds.
Founded in 2017, Illumix is driving the global shift from passive 2D digital experiences to immersive 3D interactions through its seamless cross-platform infrastructure. Illumix has already powered over 300 million digital-physical interactions across web and mobile in the past two years alone.
To date, Illumix has secured $13 million in venture capital funding, including funding from acclaimed director Michael Bay.
Under Kirin’s leadership, Illumix was listed as one of Fast Company’s Most Innovative Companies in 2020, named an honoree in Fast Company’s Innovation by Design Awards, and spotlighted by Google as one of their limited partners for the Depth API to further enhance AR realism. Additionally, Kirin was named to Forbes 30 Under 30 List in 2022.
Kirin received a degree in electrical engineering, computer science and mathematics from MIT and holds advanced degrees in mathematics, statistics, and business from the University of Cambridge, London School of Economics, and Stanford.17m | Jul 25, 2023
- Why Betting On Yourself Pays Off With Founder of CEO School Suneera Madhani
Topics: Private Equity, Female entrepreneurship, women of color, CEO School, fintech,unicorn,payment systems,Stax
Host: Anthony Noto , Benzinga Editor
Featured Guest: Suneera Madhani CEO/Founder of CEO School and Founder of Billion Dollar Fintech Stax Payments
Suneera Madhani is a true trailblazer in the business world. As the founder of Stax Payments, she built one of America's top 10 fastest-growing fintech companies from an idea to over $100 million in recurring revenue, making it a billion-dollar technology platform. She is the first female CEO to lead a unicorn out of Florida and has received numerous accolades for her success, including being recognized by Fortune's 40 Under 40, EY's Entrepreneur of the Year, Entrepreneur Magazine's 100 Most Influential Women, and Inc.'s 100 Female Founders to name a few.
After facing personal challenges as a woman in business, Suneera became a passionate advocate for gender equality and female entrepreneurship. She founded CEO School, a company that empowers women to scale their businesses and change the statistics. With less than 2% of female founders ever breaking $1 million in revenue, Suneera is on a mission to make sure her success isn't a unicorn but becomes the norm.
Beyond her professional achievements, Suneera is a top 100 podcast host, a mom of two, and an avid traveler. She is a role model for balancing work and life and is determined to destroy the gender wage gap and change the narrative for women in business. Suneera's commitment to empowering women is unwavering, and her new adventure as the founder and CEO of CEO School is just the beginning of her impact on the business world.35m | Jul 11, 2023
- Owning Parts Of Race Horses, Sports Cars and Andy Warhol Portraits
Transforming Analog Ledgers to Tradeable Digital Assets
Topics: Private Equity, tokenization, Tradeable Digital Assets
Host: Anthony Noto , Benzinga Editor
Founded in February 2017, Vertalo solves the most critical challenges facing the digital asset economy today.
Dave Hendricks: We started in 2016. I was living in London. And so initially we started working on a problem using Ethereum Smart contracts to do human capital due diligence. It was a graph where organizations could connect with their associates, people that worked with and for them, and that would be validated on a blockchain.
So in October of 2017, we created this entity in the Cayman Islands. It was called initially called Certifiable Technology. Then we settled on the name Vertalo
We work in the securities context and we tokenize securities.
Vertalo’s platform allows companies to streamline digital asset management and create liquidity.
Tony Noto: Do you think that the folks in charge over at Binance and Coinbase are gonna have a branding issue? This scrutiny from the SEC it's a negative for the industry. What is your take?
Dave Hendricks: I believe that people should be able to invest in things that they want to invest in.Take a look at Wall Street Bets. You know, wall Street bets is out there, saying whatever it wants. People are posting there, they're providing advice, people who don't understand the underlying, you know, KPIs and metrics and, the industry that they're investing in public equities and they don't know anything about, you know, how a theater is run or what the foot traffic is at a GameStop. They don't know anything about it. But they're part of these, you know, piping schemes in public shares, and no one goes after them. And there's substantial risk in buying and selling, puts and calls. But, you know, people are out there doing it .
Crypto is generally a private market, right? Cuz they're not public equities. They have not gone through an IPO process. They're all private. They're kind of two sides of a coin pun intended, right? Vertalo is on the regulated side.
I've got a former SEC attorney as a co-founder. But you know, that doesn't mean that I think that the issuers of digital currencies should get slapped or shut down. The buyers understand that there's risk here. This is actually quite a knowledgeable buyer base. I think that people should be free to make and lose money as long as no one else is physically harmed.
Tony Noto: Do you think that the FTX kind of ruined the show?
Dave Hendricks: FTX is an example of malfeasance. I don't think, I don't need to say anything about FTX. I think there's plenty out there that proves that it was a scam. And, and, and, you know, then I don't even consider that blockchain, by the way. That is just like bucket shop scamming, boiler room stuff.
Coinbase, on the other hand I am very, very confident. And by the way, full disclosure, Coinbase is an investor in Vertalo
Bad actors need to be punished, but I don't think Coinbase is a bad actor. And I don't think Kraken is a bad actor. I don't know. I don't spend a lot of time on Binance, so I don't know much about that.
Tony Noto: You're a big proponent of institutional defi. Why is that the future of regulated distributed ledger applications?
Dave Hendricks: I'm generally a proponent of defi I think that there's some really great efficiencies.
The borrowing and lending process going through a bank is very expensive and time-consuming. Institutional defi is a logical next step for large financial institutions.
Institutional defi gives large financial institutions the opportunity to use the blockchain skills that they developed over the last years and productize that knowledge into offerings, which are step function improvement on current debt, credit and collateral markets.
And they can cut their internal costs, they can increase speed and they can, they can continue to do things with distributed ledger which should turn in ultimately to consumer products. JPM
Onyx, and Broadridge is doing this. There's so much collateral out there. And these big institutions, it's kind of like they're just gonna end up maybe buying the tech at some point later on, or they're not really gonna develop anything in house.
This is called the Monster versus the Baby Problem. Okay. The, the, the monster is the existing revenue stream from the, the revenue producing product that the, that the company creates. Then, you know, the baby is this small startup in inside a large corporation, which is creating something which drives less revenue.
Apple went through this. The iPhone was the baby and the monster was the iPod.
Since we brought Aldo's Digital Asset Securities platform to production, I've been able to test with more than a hundred clients. If we failed, it was all right. It wasn't existential, right? Big institutions are less able to do this successfully because they're less willing to test.
If a large financial institution tried to build something like Vertalo, which is a digital transfer agent literally manages data. For issuers and broker dealers, et cetera, their competitor, financial institution companies won't use it. Citadel tried to do something with broker dealer technology and it failed miserably because no one trusted them.
So no one wants to put their data on another. No financial institution wants to trust a competitor, financial institution with their data. So you need an independent. Third party, like Vertalo that can logically and physically separate data, and so that multiple financial institutions can use the same system to get some stability and some standardization.
Yet they have control. Over their data. Right. And that they're not worried about their, about data leaks.
Tony Noto: You're quite active on Twitter, and you talked a little bit about the Andy Warhol pieces of art that have now been tokenized. Yep. I thought that was interesting. 'm an art guy myself but I don't know how I feel about classic pieces of art being tokenized.
How do you win folks like me over?
Dave Hendricks: People like to be part of something. People like to join things, they like to be part of a community. It is very, very hard to buy a whole Warhol for 99% of people because the cheapest, Andy Warhol portrait is $600,000. Sure you can go buy the poster at the museum and you can put it up on your wall. But what if you could own a piece of that portrait? t's not dissimilar from NFTs. The difference is that the fractionalized and tokenized versions of Warhol's art issued by freeport.app. That is an actual legal representation of ownership of an actual Warhol and if it goes up in price or value.
Sure, you can sell, but maybe you just want to create a virtual gallery that you can send your friends to and say, here's my art collection. And that's what Freeport is doing.
We already do it with racehorses and sports cars.
People who have bought fractional interest in racehorses have literally had horses in the Kentucky Derby. And the horse valuations have gone up like this. And so art is historically illiquid fees for buying and selling art at auction are very high. It's not a market that's easy to enter. And by working with freeport.app you are purchasing a fractional ownership of one of these Marilyn Monroe or James Dean or Mickey Mouse. You can be part of something and, and, you know, you're not there to flip it next week.it's not crypto like that. It's more like, Hey, I'm gonna put some money And if this thing goes up I'll benefit but I can sell it at any time. I think the Marilyn Monroe one went for $195 million.
Tony Noto: What other industries do you think will gravitate towards tokenization?
Dave Hendricks: The VC equities, specifically LP interest in VC funds. I think it's a really ripe market because the VCs are not getting exits to distribute gains to their limited partners.
And so imagine 12 years ago as an LP you invested in a VCs fund that hasn't had enough exits. But you know, you wanna move on. And there's some internal rate of return (
irr) that has been, you know, from the markups and the investments in the portfolio.
You might see VCs getting pressure from their LPs to make them liquid. Well, you can create a liquid market out of LP interest. We talked about collateralization earlier. Debt is still one of the most antiquated markets, debt and credit. I think that real world asset tokenization works really well for making debt easier to buy and sell.
Real estate has been reluctant to adopt cuz it's one of the most, most antiquated anti-avian, as they say before the flood kind of markets. And it's a really, really fragmented market. But as their loans come due over the next couple years, you see this in San Francisco and New York and their buildings are not recovering Post covid.
They're going to have to sell off some or all of their interests in their buildings. And so if you're the owner of one of these large real commercial real estates or office buildings and you've gotta meet your loan requirements, we’ll sell off some of your equity to investors in order to stave off the collections so you don't have to turn your keys back while you wait for the return of people to the office.34m | Jun 27, 2023
- Private Equity For All But Not For The Faint Hearted
‘I had to hear my share of inappropriate comments along the way’ Sunaina Sinha Haldea
Topics: Private Equity, glass ceiling, thoma bravo, nasdaq, women in finance, Stanford, Raymond James, Sunaina Sinha Haldea
Anthony Noto , Benzinga Editor
Sunaina Sinha Haldea Global Head of Private Capital Advisory, Raymond James
Tony: There was a big private equity deal this week, and those are few and far between. Nasdaq agreed to buy Thoma Bravo-owned software firm Adenza for $10.5 billion. That's not small change.
Sunaina: That's not small change. It's a huge exit for this environment, and a huge congrats to the deal team there.
I think that we have to look at it in the context of where we've been for the last nine months, which has been in a bit of winter for M&A activity, both exits ie sales, coming out of private equity portfolios, but also private equity buying assets. I think I'm hoping that this Thoma Bravo deal is a sign of things to come.
Now here's why. My hope is an educated hope. Most of M&A deal volume is driven by private equity, right? Private equity holds companies that need to sell and private equity runs on a clock. Right now, if you look at total private equity, Undrawn commitments.
So these are funds that are waiting to be called to be put into companies. That stands at over 3.5 trillion dollars. You just look at the capital that sits with buyout funds that can do large transactions in profitable companies. That's over $1.1 trillion. So that's a lot of overhang.
And one thing that people forget is that private equity runs on a clock and the clock doesn't stop ticking. Doesn't stop ticking for you, me, or anything. And that clock basically states the following four years or five years of deployment followed by four or five years of exiting. And the more you run down the clock without doing any of the above, ie doing new good deals, buying companies or selling companies, the clock then works against you.
Your net returns to investors suffer. If you don't put money in the ground and buy companies fast enough your net Internal Rate of Return (IRR) will suffer if you don't sell companies according to the right time to sell it which is generally 3, 4, 5, or 6 years after buying them. Your Distributed to Paid-In Capital (DPI) numbers suffer, and you need both those things to be very standoutish to be able to raise capital these days. Raising capital is hard for everybody. So private equity can go on pause for three months, six months, nine months, 12 months, but it cannot go on hold forever because investors then say, well, I'm paying you 2% management fee to put money in the ground. Why aren't you doing so?
And I think that we're now starting to see the wheels turning. if you ask my M&A colleagues, they will say that May was one of the highest months for signed sell-side engagements that they've seen in recent years.
So I think it's a sign of things to come that the M&A markets will open up and deal activity will pick up. Of course, the big unknown is the debt markets, but we can talk about that, a little bit later in the conversation. But for right now, we're seeing a lot of green shoots in private equity firms wanting to buy and sell companies.
Tony: Definitely. And it's reminding me of a lot of the conversations I had with PE Pros, 10 years ago. When there was a lull in deal-making as well, and they were talking about holding onto these portfolio companies a little too long and what to do with them and, and how their investors would react to that.
And they did sort of express optimism last year and they thought that maybe the tide would turn in Q1 of this year. But that wasn't the case. And then it kind of lines up that it was the lowest M&A volume for a quarter, since 2013.
what could we expect in the second half of this year?
Sunaina: I think we can expect to see a lot more dynamism in the m and markets in the lower mid-market and mid-market of PRI private equity. What does that mean? That means companies sub $50 million of EBITDA, they don't require the syndicated loan market to get the deal done.
Those companies will have a receptive audience. Why? Because leverage is available through direct lenders, the private credit markets are open for business. Those folks also have a clock. If you have a private credit fund, you are also running on a clock. You also need to put money to work. Structured credit funds are all seeing attractive deals come their way and they're doing those deals. They're underwriting those deals. So if you are operating in that sub $50 million EBITDA range, you're going to see a lot more transactions, both M&A processes where you can cherry-pick your spots. or you may be saying, okay, I'm gonna take my own companies out for sale because I need to return capital to my investors, otherwise I'm gonna fall behind in the Distributed to Paid-In Capital (DPI), which is the most important metric, some would argue to investors, you'll find fall behind that curve. And you don't wanna do that. You don't wanna be fundraising with that fact pattern. So in that end of the market, we're gonna see transactions coming to market.
Over $50 million ie the bigger deals you do need the, you know, bank debt, right? You do, you need the syndicate loan market function, or you need banks to provide you with leverage. And that is still, that is, that is a tale of idiosyncrasy. Right now, the, the markets are not functioning, let's say one once used to, but the green shoot there is, we're starting to see, uh, a pricing in of terminal rates. Right. So we, we all expect now, given the inflation print this morning, that the Fed will take a, what is they're calling it, the Fed skip. The Fed will take a pause rate. I. And folks expect Okay. Maybe there might be one more hike after that. But that's it. We're near the end of the hiking cycle such that banks can then underwrite risk. So with that, we'll start to see more functioning of the debt markets for larger deals. But certainly in the $50 million and south EBITDA range, we'll start to see deals come to market.
Tony: Just before we wrap up this topic, I want talk about the type of deal we saw. what does it say about PE, Thoma Bravo specifically did a deal with Nasdaq. And they sold a large portion of their portfolio company, Adenza, but they kept about a 15% stake. And this is not the first billion-dollar plus deal that they did with a stock exchange.
They did one with the New York Stock Exchange, back in 2020, what does it say about that part, this particular type of deal? what's the strategy here?
Sunaina: I think the strategy here is two-fold. It is, and again, the ultimate viewpoint on this has to come from Thoma Bravo, but when you're reading what was announced and had the playbook that's being deployed here is that strategic buyers will always pay up for strategic assets and that's what you have here. You have NASDAQ, a strategic buyer. They will always pay more for companies and especially strategically oriented companies than private equity buyers. So good for Thoma Bravo for finding a strategic buyer for the asset. So that's fantastic. and I think that you are seeing a leaning into businesses with predictable revenue, right? So you think about why did NASDAQ do this from their perspective? Why does this make sense? It really is about building up a software business with a recurring revenue business model in this market environment and this macro that we are live in.People will pay up for annualized recurring revenues and which this deal very much brought to the table for NASDAQ. Now, NASDAQ stock didn't react very well, was down quite a bit yesterday. But that's a one-day event. I think over time when you hear NASDAQ talk about its rationale for the sale, it really is the predictability of the revenue stream that was attractive to them.
Tony: I did, I did see that about the stock, but, and, and with all the stripe powder, you still not seeing PE sponsor come in and be like, well, we can pay north of $10.5B?
Sunaina: Well, the, the PE buyer needs to enter at a price where it can make two and a half times. So, yes, of course they can put any number out there, but they got, they gotta make, they have to make money. They have to make a return on that. And so generally when you put pit a private equity buyer, head to head with the strategic, the strategic can pay more because the private equity investor, has to. price in its own fees. Remember, there's fees on the capital that goes in.The capital considerations are different for a private equity sponsored buyer than for strategic buyer, number one.
And number two, the strategic buyer has synergies, that they can price in which the sponsor usually cannot.
Tony: So I wanted to bring up a little bit about the image of private equity. it's an industry that you are a top player in. And I know from experience there arent too many women in it inking deals. It's predominantly men. II read something that you had written. You wrote it for https://www.penews.com/
and I wanted to get your thoughts on private equity as an industry. I think, it still struggles with this image problem of settling companies with debt and perhaps, too much so because a lot of them are going into bankruptcy. And I wanted to get your thoughts on one, what it's like being, oa young, mover and shaker in this industry. two being, a woman in this space and if representation is improving, and three, what folks like you are doing to make sure that maybe PE gets the makeover that it, it.It needs to appeal to the, the average consumer?
Sunaina: So let me start in reverse chronological order and talk about the industry and its reputation and its contributions to society, if you will. What is the value of private equity in the world today? And then we'll move backwards into the you know, probably more disappointing territory, which is representation of women and women of color and, and, you know, lots of -isms that come with it.
Often also, some of it's stereotyped, but some of it very legitimate. So when it comes to private equity and image problem, it is so easy to say, Hey, they saddle companies with debt, and then they go bankrupt. But remember, the, the incentives are not aligned for that to happen. Because with private equity is a long only model.
Private equity buys. It doesn't short. It goes long, number one, right? And it buys low and sells high. That's the model. Buy a company of this size. And sell a bigger company three to five years later. It's very simple. And now the question is how do you make that company bigger? How do you finance the acquisition and how do you finance the growth of the business?
So you adding value on the way out. Because it has to create a more valuable business. That was, it can't sell it for more than it bought it. It has to make the business stronger, more efficient, more operationally resilient, and a better economic contributor. To society and to the economy around it. In order for that to happen often means way more jobs growth because the business is growing, the business goes to international expansion, business goes to acquiring new companies.
It often means that the, the companies are left much larger, more scale players. And so whenever you have private equity inflows into countries, if you look at emerging marketing and economies, if you look at parts of the United States, for example, where. Capital has not flown to more,naturally ie the Midwest, etc. You see that every time you have private equity in flow. It creates a thriving entrepreneurial community because that private equity is designed the way it's engineered to build better companies, build bigger, healthier companies, because that's the only way you get someone new to come in and buy that business for you.
If you create value, if you create something more valuable, hundred percent that if you cannot do that, if you are one of those. Uh, in those unfortunate moments in your portfolio as a private equity fund, and almost every private equity fund has one or two of these stories of, Hey, I tried. I couldn't get there.
I have 10 or 15 portfolio companies in this fund, and one of them didn't make it. I couldn't turn it into what I thought I would turn it into. So either I sell it at the loss or in the Armageddon scenario, I lost the business in its entirety. If you look at the loss ratio in private equity, which means a total wipeout, it's incredibly low.
It's, it's one of the lowest in any market. So private equity does not wanna lose, have a complete wipe, because that's terrible to their own fundraising, prospects out there because it's so rare to have a complete loss. Yeah, you can lose money, but to have a complete wipe out a bankruptcy pretty low.
And what you are seeing right now in the last nine months is that debt hasn't been so available. So the companies are buying, certainly in this cycle, are not over-levered. They can't be because there isn't that much debt available. In fact, it's the opposite. It's a slight over equitization of deals.
So that's the private equity perception issue. I think it comes from all the, all the stories of the heyday that took the industry, by storm and its reputation for being like barbarians of the gate and whatnot. But I think if anyone actually studies the business model who looks under the hood and especially the private sponsors that play in the mid-market, Mid-market, all they're doing is buying, creating value, making bigger, healthier businesses and selling 'em on. That's the model. That's how they're incentivized.
Tony: But do you think that over the past 10 years they've gotten better at bringing that message out there and changing the narrative in a way for better?
Sunaina: I think that it, it's a question of who you ask, right. So they've done a great job of doing that in their ecosystem ie doing that amongst. Advisors, the investors, the players that they deal with all understand how it works, but they haven't been asked.
So the industry at large has not been so good at getting the message out to people outside of the PE ecosystem. There is still wood to chop, but they've made some good steps in organizing themselves better. There are associations such as the Institution Limited Partner Association (ILPA) and so we are doing a better job of telling the story.
But we're still not there yet. We still have a lot of evangelism to do.I think it's important that they do so. Private equity touches everything. The mic you are on was probably made by a company that is backed by private equity. The water you drink, The roads you're traveling on. The airport you're taking off from or landing into. It's all owned by a private sponsor in one way, shape, or form. It is unbelievable that the things on your desk, what percentage of it will be owned by a private equity back company? Quite a lot.
To your point on representations, I think that's where the industry has done a very disappointing job. It is still far too low. We're still in the single digits for female representation and private equity in general, but when it comes to senior women, It's sub 5%. And when it comes to women leading businesses, folks who are in my chair, Sub 1%.
It's very low when it comes to both on the buy side of private equity on the sell side. Dismal, numbers. Is there a lot of talk behind it? Yes. Now just keep in mind, we've gone through a macrocycle where they were able to fundraise very quickly. That tide has just turned and, but by just turned, I mean only just in the last six, seven months, it's become difficult to do so, which puts the investor in the driving driver's seat. And my, certainly, my hope and expectation is that these investors will now start asking tough questions.
If I have, if I only have limited capital, I need to commit to it. One of two funds, maybe I will commit to the one that has better diversity policies. Maybe I will commit to the one with better Environmental Social & Governance (ESG) policies. This is where you drive change in this environment, right? This is the silver lining of a more stressed mark Macroeconomic backdrop for fundraising is that you can drive change with responses saying, Hey, unless you fix this female representation issue, it's gonna be difficult for us to invest with you.
That's when you'll get the behavior change. Otherwise, it's been unfortunately not very acceptable or not very helpful in terms of what's happened with the numbers. Then your final question is, what's it like been like for me, I'd say peaks and troughs. There've been many, many moments where I've had to raise eyebrows at my colleagues in the industry because of things that are said or the way things are put across.
That's because they're just not used to dealing with a lot of senior women. By and large, the industry has warmly accepted me. It was hard in the beginning, no question about it. When I started, when I started my own business, which was now 13 years ago it was not easy at all. They didn't understand who I was, what I was building.
My firm is a 100% female led when I had it myself. And then also in Raymond James. I run the business globally for them. We're hundred percent female led and we're over 60% female and minorities when you combine the two together now. So we look very different.
Tony: And just so our listeners know you were essentially an acqui-hire. Is that a fair way to put it? you had a firm and Raymond James was like, I want you and your whole team
Sunaina: So they bought the whole business and they've been great to us. You know, I'd say Raymond James's culture has been a pleasant surprise. We did the deal because we believed in the culture at Raymond James, and I'm pleased to say it's almost two years in. So the honeymoon's definitely over. This is not honeymoon speak.
Yeah, it's real speak, which is, they've been really good to us, I think culture is set at the top by leadership and James Bunn who runs the investment banking division of Raymond James has been a terrific, supporter of the type of business we've built. We've built differently. We've built diversely.
He's backed that all the way and it understands that that may mean certain compromises. We may not rush to make a hire just because we need to get on with it. We'll wait to get the right diversity in the candidate pool before making that decision. So he gets that we will build a little differently to many other businesses he has under his wings, but we will do so for the right reasons.
Tony: Now you have a pretty cool backstory on how you inked that deal with your firm. It wasnt done on a golf course.
Sunaina: Life does these things to you to show people who they are. I love the Maya Angelou quote, “when people tell you who they are, believe them.” Right? And for me it was, the pandemic that made it happen this way. Firstly, I'm useless on a golf course.
most full-time working moms of three kids would, would probably say they're useless on a golf course. I certainly am. It's definitely on a wishlist of something I'll pick up when my kids are off to college, but, but not today. So that would've been lost on me. And in the pandemic, this was in the throes of the pandemic.
Remember this is early to mid-2021. The Raymond James folks in headquarters could not visit me and I was in London. At the time, they couldn't visit me because of quarantine requirements without spending 14 days in quarantine. And I couldn't get into the United States because Trump had a travel ban on.
so we're like, well, where do we meet? There's no way we're inking this deal. They're not going to buy the business and I'm not gonna sell it to them without meeting in person. And so we looked at a number of Caribbean islands and settled on Antigua as a place where we could both fly in and out of and just the way the flights worked.
We couldn't, there were no daily flights because it was the middle of the pandemic. There were lockdowns and so we kind of all had to fly in and spend three days together. And that was such a blessing because as you rightfully said, Tony, you can pretend in a conference room setting, you can even pretend over one dinner and then fly back out.
That's right. So it's really hard to make up pretenses for three, four days when you're swimming together and going snorkeling and figuring out how to spend time. Yes. Because your flight's not until two days later. So that was a great blessing for us, and I'm very glad I did it because it made me very comfortable selling the business.
Tony: I, I know you wear a lot of hats, professionally, but you also, as you mentioned, uh, mom of three kids, uh, what's the balance like, and do you have any advice?
Sunaina: I think most days the advice is tape and staples pick your tool and make it all work together. But I joke, I think, for me, the pivot to my life came from finding my own mental balance every day.
Once I was able to achieve that centricity on a daily basis, everything else. Stop feeling like work. otherwise, the rate of burnout for working moms, in particular in finance is very high in private equity It's sky high. I got into meditation about a dozen years ago and held onto it, and now it's part of my daily practice and has been for over half a dozen years.
Come what may rain or shine, sick kids or deals that are on fire, I will meditate. I'll do it for full hour now. Most people find that daunting, and so I tell them start with five or 10 minutes and then build the muscle. It's, it's a muscle, like anything else in your body takes time to build. And for me, that's been a game changer.
It means that whatever life throws me that day, I'll take it, I'll deal with it. I'll be able to reset from it and move on. It doesn't, things don't sway me the good or the bad as, as much as, as they once used to. It's like your sine curve of life. Stops being so deep and high, both on the peaks and the troughs. It's a much narrower band, and therefore you live a more balanced and happier life. And that's been a game changer for me.
Tony: what's like the first step to someone who has never done it or maybe sees an ad on Instagram or something like that about meditation, but they want you to pay a certain amount of money to get started and maybe someone just needs, uh, you know, that, just that first step to just.
Try it out for maybe, like you said, five or 10 minutes, and then maybe invest more time. What's your advice? How do what? What do you do? Is it just a matter of sitting and and letting a candle and doing nothing, or just clearing your mind? What is it?
Sunaina: I would say if you're brand new to meditation, Pick your favorite app.It doesn't matter. Hit play and start. You have to start somewhere. There's many different types of meditation out there. Get on, get going, right? Don't be so picky on which app and which type and, and this and that. Just get started because any moments of stillness you can get, give your brain is a moment of healing, is a moment where you are letting go and not adding that's, that's a moment extra of peace in that day that you would not have had.
So my first recommendation is get started once you've been. In your journey and you're now finding yourself doing guided meditations. You know, once a day for a few minutes each day, then say, okay, now I wanna take a deeper step. And that deeper step to really train that muscle is to attend a meditation course.
The course I go to every year, in fact I'm going in a couple of weeks, and I've done it every year for over a dozen years now, is the Vipassana Meditation. It's free. There are many centers across the US I think about 20 centers across the United States, many centers across Europe as well. you sign up and you go and you sit and you, they teach it to you and you leave everything behind. And that's a form of immersion. If you think about, you're trying to reset your body. You take yourself to a health retreat or a, or a yoga course, or you take yourself into bootcamp, right? and you put yourself through a full cleanse. This is a mental cleanse, right? It's a full mental reset. Where they really teach you how to meditate and you just practice it continuously for a number of days and you come out of a course going, now I know how to meditate.
And that's the full immersion that you can then take with you throughout the course of the next year until you feel like you need a new reset and you need a new sort of jolt to the system to get your mind into, the mode of meditating. So that's how I would say, I'd say just get started guys.
Just get, get going. Your favorite app, whatever you like. Do it for a few months and you'll find, okay, now I'm seeing some benefits from this. What's next? How can I take the next step? And then think about going to a course.
Tony: And what was the name of that course?
Tony: Who has been an inspiration for you, either personally or in the business world?
Sunaina: I would say there's, there's a number of folks that are higher on my list. but if I had to pick one person whom I have always admired personally and professionally, it would be Oprah Winfrey. It's a little cliche to hear a woman say that but she's been a tremendous service to women around the world through her message, and also what she's done and with respect to spreading the word of spirituality towards women. Think about what is your spiritual path and follow it. But she's done it in the domain of a terrific media empire that she's built. so nothing but tremendous respect. If I had to pick one woman, it would be her.
Tony: She was also a journalist.
Sunaina: She was also a journalist.
Tony: She also comes up every now and then from folks that we interview at Benzinga. When she plugs a brand or a company, That is like a golden ticket for some entrepreneurs.
Sunaina: She's the original influencer. now we've got so many, but she's the original.28m | Jun 20, 2023
- Beating The Odds - The Real Story of Bosco - Now A Major Motion Picture
The Quawntay Redemption: The Incredible Story Of A Marijuana Convict Who Studied Law To Get Himself Out Of Prison
In 2006, over 2.3 million Americans were incarcerated, but only one managed to escape a federal maximum-security wing while under 24-hour surveillance: Quawntay "Bosco" Adams. Sentenced to 35 years behind bars for the distribution of marijuana, Adams made a miraculous escape.
Now, Quawntay Adams is producing an original motion picture soundtrack for the feature film "Bosco," based on his incredible story.
Topics: Marijuana,Cannabis, War against drugs, cannabis legalization, movies, Morgan Freeman, Film Festival,Motion Picture, Blockbuster
Anthony Noto , Benzinga Editor
Quawntay Bosco Adams is a former prisoner turned film producer, author, and motivational speaker.
Tony: Your story is very unique, and if they haven't read your book Chasin Freedum, they should pick it up. It's amazing. you have three names, Quawntay Bosco Adams (https://quawntayboscoadams.com), but you also have another name that you were known as Houdini. Why do they call you Houdini?
Bosco: Because I kept escaping from federal prison and Marshals decided there was actually no place to hold me, even though there was, but they would jokingly say that there was no place to hold me, because every chance I got, I was trying to escape. And no matter what circumstances they put me on, I found a way to escape.
Tony: Now, it's not once, not twice, but three times.
Bosco: Actually a little bit more than that as used. Considered some of the other attempts that really didn't get too much too far.
Tony: But I have to ask, I mean, do you think that they just didn't learn after the first time or were you getting creative?
Bosco: I was getting more creative with each one. I learned, and picked up different, different ideas and I became more determined. And you know, with determination, you, for some reason when you're determined about something, you'll figure out a way to make it happen. And I think the fact that they kept locking me in solitary confinement also helped because it gave me the time to just think and ponder and strategize and figure out a way to actually penetrate their security system.
Tony: What was the security system?
Bosco: All of 'em were high-security prisons. All the times I was locked in solitary confinement. The first time I was confined to a cell I cut the bar out the window.
After that first attempt, they locked me in solitary confinement and it became more strict. So even after the second one, when I was in solitary confinement, they transferred me to this other maximum security, and they locked me up 24 hours a day. And in that cell, they had a camera in it monitoring me, and I escaped and got away from there.
So it was like, it seemed like the more strict the security the easier it became for me.
Tony: Which prisons were they?
Bosco: Alton Jail in Illinois, St. Clair County in Illinois. Jackson County in Illinois.
Tony: So when you started escaping, Did they have some prison experts come in and be like, look, what are we doing wrong here? Because this guy's outsmarting us.
Bosco: I'm not sure if they did, but I know that they started training, correctional officers by showing them my escape and videos of the escapes that I was doing. So I, I definitely became a part of their, their training course.
Tony: And what is solitary confinement like? I'd imagine that is next to impossible to escape. And you're saying you, you saw it off, you found a way to cut the, the bars.
Bosco: So solitary confinement is when you're locked in the cell by yourself and you can't come out of that cell. A lot of times you're, they bring you out for one hour a day. And they might lock you inside of a cage, a rec cage, or inside of a TV room or whatever, a day room to where you can watch tv, shower, and make a phone call or whatever, right within that one hour timeframe.
But the other 23 hours a day, you're locked inside your cell. And, solitary confinement is where they put high-risk individuals or people who are constantly, disrupting the prison.
Tony: Now you were in there for cannabis possession.
Bosco: Yes. And that was it for attempting, attempting to possess cannabis. I never even had it.
Tony: Yeah. So just just for attempting to possess, you were in jail for how long? I was sentenced to 35 years.
Tony: 35 years. Just for attempting.
Bosco: Yep. 35 years just for attempting.
Tony: So when you were there, you said at one point, I think you started studying law because obviously, anybody listening to this thinks that just can't be right. 35 years for just attempting cannabis possession just sounds so screwy.
Bosco: I mean that's our system. That's the war on drugs, right? You know, with this federal war on drugs, it was give out the most harsh sentence you can to try to deter others from getting involved or specifically it really not to deter, but to more so they encourage.
Those individuals to start cooperating and providing information on others so that the cycle could continue.
Tony: Were there any lawyers who tried to help you, like reduce that time
Bosco: There were, there were plenty of lawyers who would come and none of 'em were ever able to accomplish it. I started teaching myself the law. At the very end filed a motion represented myself, and I was able to get it reduced
Tony: While you were in prison?
Bosco: Yes, while I was in prison. So you sort of, that's stuff that you sort of see in, in movies like the criminal, you know, in confinement, you know, trying to, who's not supposed to be in jail and he is trying to study law. But then, for you, that was a reality.
Bosco: It's the entire story. It's the entire story. That's why it is a movie. I tried escaping. And then I got to the point to, you know what, let me try the legal way. Let me see. Let me talk. Let me stop trying to escape. Let me start teaching myself the law and let me try to learn a legal, find a legal loophole rather than creating a hole within the ceiling or the ground and tunnel on my way out.
Once I started doing that, I applied the same determination. And it started coming to me and I was successful at that.
Tony: Why were you so determined to escape?
Bosco: I had a daughter. When I got arrested, I found out that I had a child on the way, so my daughter was born eight months after I was arrested, and so I was constantly trying to get out so that I can be a present father didn't want to repeat the same cycle that my father had repeated and his father had repeated, so I was determined to break that cycle. And so at one point you're just like, I gotta stop trying to escape and get caught. Cuz if I'm not gonna be successful, if the, if the, the guards are going to get wise to my attempts, I guess gotta study law.
Tony: How did you start studying law?
Bosco: Really it wasn't so much that of that, it was once after the third escape when I escaped from the prison. In the cell that they had, the camera monitoring me, the National Geographic Channel produced a documentary about that. And I started getting mail from people all around the world. So now I was famous, so to speak, you know, and, I started when I just, the letters and support that I was getting.
It made me re-evaluate whether I wanted to escape because people started saying that I was smart. You know? I'm like, okay, if I'm smart, then I can figure out a, a smart way to do this. I can figure out a way within their legal system and, and get myself out. And so I gave it a try.
Tony: And were you able to just get a hold of books?
Bosco: Case law. A lot of times you have law libraries where, you know, they'll bring you books to read, law books you can check out. And then there was a time when I was in solitary confinement where it would, things were so strict for me that the only thing that I can get was mail from my attorneys. I couldn't get reading books. I couldn't get personal letters, and so I would just have my attorneys send me a bunch of case law to read. And I would read that case law for recreational purposes as I repeatedly read the same case law over and over, just to take my mind away from the prison and, and, you know, escape, so to speak.
I began to interpret law pretty good and you know, and that's how I really became good at law, just from reading case law over and over again.
Tony: Any cases in particular?
Bosco: I mean, not none in particular. I would just read all type of case law, whatever I can read. Most of the time it was circumstances similar to mines, you know, drug, drug trafficking, marijuana cases, speedy trial cases, cuz I had been waiting to go to trial for nearly five years.
Tony: Why do you think it took so long?
Bosco: Probably because I was constantly escaping and, You know, and they were constantly, the feds were still investigating and, and I wasn't, I wasn't really complaining because the, the way I figured that is the longer that I could sit around before I was actually convicted and sentenced, the easier my chances of escaping were.
So I didn't really complain too much about it.
Tony: Did it ever get physical with, with the guards?
Tony: For the folks listening, Bosco is a, is a big guy. You're, you're very tall. I think you're about what, 6’ 5’’?
Bosco: Six four and three quarter six fiveish with shoes on.
Tony: So like, and you know, I can imagine it's, you know, it's intimidating to see like, oh man, he's out now, we gotta go, you know, apprehend him again and bring him back. how did they treat you when that happened?
Bosco: I mean, of course they're coming hostile, you know, they have guns and they have plenty of them. They got more people with guns behind them, and they got military behind that, you know, so at at that point you're just like, all right, you got me.
I still had to make sure that I was around for another date to try it again. And so I had to be smart about that.
Okay. If they got me, they got me, you know,. I've been caught before and escaped again, and so let's, let's repeat the cycle.
Tony: When did you start documenting your story?
Bosco: After National Geographic did that documentary and I started getting mail from people is when I decided that I was going to share my story on paper to give people more details about my story because people were writing and they wanted to know more. And ironically, they all opinioned that I didn't deserve to be in prison. But we had a criminal justice system was said differently and so I wanted to kind of like share everything about me so that people can decide whether I deserve to be in there or not. And also for those who thought that I didn't deserve to be in there, to give them ways that they can help prevent other people from finding themselves in that circumstance. And also to just share my story to shed light. To people who didn't understand individuals like me who come from communities like mine to where there's this misperception that, you know, young black men who come from Compton and grow up in that culture that we're just inherently dangerous and violent, and that's not the case.
It's really that we're just a product of our environment and we tend to take the roads that are available to us. And when I was growing up, there weren't any roads available other than the ones that I decided to take had I had someone. Had they shown me something differently, I probably would've been a lawyer.
You know, I probably would've done, something, well, I most likely would've done something differently, but I took advantage of the opportunities that were present to me. And unfortunately, in communities like that, there aren't too many opportunities.
Tony: Where did you grow up?
Bosco: In Compton, California, South Los Angeles.
Tony: Give me an idea as to how you started out. Like would you, were you, disinterested in school? Were you a good student or did you just get involved with folks who just were, I dunno, you, you talk about the roads that you chose.
Bosco: I think, I think that's the, where people don't understand and that's why I wanted to share all that in my book because the school is no different than the neighborhood. The schools that we have access to are identical to the street corners that we hang out on as kids, the same people are there in the school.
Sometimes the same people teaching in the schools are the same people from communities like that, or either. There are people from communities who don't understand, so there's a disconnect. And they believe that a person has the option that the person has. What's really, we do have an option, but well, we have a choice.
Every individual has the ability to make a choice, but when your options are narrow, you don't have too many different things to choose from. And so a lot of times sometimes you have where there's a disconnect between the students and the teachers. And they don't understand. And so they think, well, you know, just do better, do the right thing.
That's not how it works, right? Cause sometimes children don't see and don't understand and don't believe the right thing. And that's the case, how it was for me growing up in the eighties and nineties. I didn't see any other choices, so I did the right thing, I didn't know what the right thing was.
Tony: Who do you credit for helping you see that your story could potentially help others? Was it the letters that you were receiving?
Bosco: Yes. It was the letters. It was the letters and the determination that make something of my life in my story. Even though I was locked in prison without any end in sight, I figured that if I would die in there, I wanted people to understand me.
And I wanted, particularly the criminal justice system to understand me and the people who didn't understand people from our community and who sided with the criminal justice system to let them see how unfair it really was. And the only way they could see that is understand that I was a human and that I was no different than them and their children, and that if given better opportunity how likely would it have find myself in a criminal justice system?
Tony: So 16 years in prison, And when you got out, what was that day like?
Bosco: I went straight out, got my daughter, and went through a custody battle. Got full custody of my daughter, but I went to work, started working on production of the movie immediately.
Because I had to, you know, I'm getting old, you know, I needed to start securing some type of wealth and particularly start setting up to where I can take care of my daughter. So I didn't have the opportunity to just go sit still and spend time with her constantly. She was with me on set every day, so we were spending time together all the time.
She was with me every single minute. But I was working at the same time. B
Tony: Before the movie even gets set up for production, there's the writing process. Did you have a writing partner?
Bosco: Well, all, all of that took place while I was in prison, actually started writing, you know, I started this, we started this maybe like a year and a half before I got out.
So the, the goal was to produce this movie while I was in prison, just to share my story and hopefully, you know, get people to support my release. But I ended up getting myself out in the right after we finished writing a screenplay. So screenplay and novel or biography really are
Tony: Both being written in prison at the same time?
Bosco: Yeah. All, all of that was done in prison. The book was actually self-published while I was in prison.
Tony: Okay. And when you, and when you came out, you're just hitting the road and trying to get financing, what was that like? You're like I got the book, I got my documentary, here's my story.
And what was the response like?
Bosco: Exactly. That's it. And once people heard the story, they were like, you know what? I want to be a part of it and just hitting the ground, hitting up. Just, you know, the regular, average individuals, no VCs, no wealthy people, just individuals, you know, who might have $20,000 saved in the bank. Oh sure. I'll contribute that in just a bunch of individuals start getting behind the story because they loved it.
Tony: So there was no Hollywood folks involved at first. It was just really almost like a, a crowdsourcing thing.
Bosco: Yes. No Hollywood folks involved at, at first, no.
Tony: But then how do you, you eventually did make inroads to, some Hollywood heavy hitters, though.
Bosco: Oh, yeah. As far as the cast, there's definitely, and a lot of that was just through, you know, people who know people.
Tony: So who's in it? who could we expect to see in Bosco, the motion picture.
Bosco: You got, Aubrey Joseph from Cloak and Dagger. He's playing me. Tyrese Gibson from Fast and Furious and Thomas Jane from The Punisher and Vivica A Fox from Kill Bill.
Tony: That's an amazing cast. How so did they, when did they start to come on? Did Vivica A Fox come on, and then the rest came on?
Bosco: It was a trip because it was, we were, we were putting it together as we were going along. We started filming just with, you know, a handful of money. Didn't have a full budget, didn't have a full cash. And just started going out there, knocking stuff out and, and people were coming on board as we were going along.
Tony: Who, who directed it?
Bosco: Nicholas Pino.
Tony: How did you meet Nicholas Pino?
Bosco: I met Nicholas through one of my, co-producers. when I was in prison and we decided that we were gonna start putting the film together, they reached out and found Nicholas. Nicholas had won some awards for screenplay writing. So me and Nicholas, we would talk a lot on, on the phone and, and go over the script when I was in prison.
Tony: I know from experience that there are three big accomplishments when it comes to making an independent film
Getting a film made is a huge accomplishment in and of itself. , getting into the festival is - a hurdle and Toronto Film Festival is one of the big ones. There's, also South by Southwest, there's Sundance. Are you, dedicating a certain amount of financing to just getting the word out and sending it to those festivals as well?
Bosco: Yeah. And then just putting in the work, just, you know, putting together the best quality, product and presenting it, right? And, using the same energy that I use. So far, everything I've been doing, such as escaping from prison, representing myself in the federal court, getting out and raising the funds to produce this movie, getting full custody of my daughter and just getting off probation, just all of the things that I've been accomplishing, applying that same energy. And sometimes I think it is not even so much me, I'm doing the work that I'm supposed to be doing, but I think sometimes it's just meant to be, you know, I sometimes it's this train ride, it's going where it's going and you just gotta enjoy the ride.
I think that's what's happening here. I think a lot of it is, is meant to be and there's good energy and there's the universe is conspiring with me here.
Tony: where is the source of that energy? What gives you, that drive? Because a lot of people, they just, they would break, you know? you didn't, you, you just, what you just said, enjoy the ride.
Bosco: I think once you start fighting for stuff, And you fail and you repeatedly fail and you lose and you fail.
And then if you get back up, that's the thing when you continuously get back up. You start training yourself to continuously get back up. And when you get to that phase, that mindset, then everything just becomes a ride. You just start enjoying, you're like, okay, you know, I'm going to fail sometimes, but I'm not going to even focus on that failure because I'm going to get back up afterward.
And if you keep getting back up, if you continue to get up after the fall, you're going to eventually accomplish what you're trying to accomplish. And so, Now it's to the point where I don't even focus on the failures. And then when you don't, even once you get to that point, it's just like everything is positive now.
And when you are constantly in that positive mode, then you're going to continue to attract positive things. And when you get to that phase, you're going to get more wins than losses.
Tony: I imagine spending time with your daughter is one of them, Talk to me a little bit about that.
Bosco: Yeah, and looking at where I'm coming from in my life over the past couple of decades, right now I'm already winning. Right now, I'm in a great place even though I don't have financial wealth, I have my daughter and I have freedom.
And those are the two most, those are the most valuable things that a person can ask for freedom and physical health. That's the, you know, once you have those things, you have the people you love and you care about around you. Then nothing else really matters. You can, you can make do with whatever, you know, even if we had 10 people living in a one-bedroom house and we're frying noodles, it's the mindset you have about it.
And coming from prison, solitary confinement, eating the worst food, and not having that freedom and having to deal with men that you don't know and don't care for, who don't care for you. You learn to appreciate little things, and I think that right there is what contributes to the mindset that I have.
I don't cry over spoiled milk. I take it and I add sugar to it and make, you know, make cottage cheese or something. You gotta, you gotta make something of it or else it's just the waste. And when you're talking, when you're talking about your life, I can't just consider, you know, those years to be a waste.
I want to make something of it, make it count even though they were not good experiences.
Tony: Do you take your story on the road? Do you talk to kids in schools and, and after-school programs? I think that they would get a lot out of hearing your story, especially if they're feeling like you are or if they're worried about where their road might take them.
Bosco: that is definitely one of my passions and where I see myself here in the next year or two. Traveling and speaking. I haven't made it to high schools yet, but I hope to make it to a bunch of high schools and share my story. I think that a lot of people can benefit from my story, not only kids, adults, also because it's one of resiliency.
It shows that when a person is ambitious and driven that you can accomplish anything, no matter Whatever card you are dealt. It's, it is about learning how to play those cards to the best of your ability and making the most of it.
Tony: You're looking to sell equity in the film, right? If there are folks listening to this interview and they would like to perhaps come on board as a co-producer or a financier, or if you are selling equity and a piece of the film, why don't you tell us a little bit about that?
Bosco: Yeah. I, I have a lot of equity in the film and. If some people like to be a part of it, there's an opportunity where they can get a piece of my equity and I can use a lot of that fund to capital to use to invest in, the soundtrack and other projects that I have. Like movie merchandise and other things that I plan to put together. So yeah, there's an opportunity there. If anybody's interested, they can definitely reach out to me and contact me, whether it's through email email@example.com, or even gimme a call. I'm old school. +1 661 917 5418.
And we also forgot to mention the documentary with Morgan Friedman, the Great Escape, which has already been produced and going to be aired on a history channel this fall.
Tony: History Channel, Morgan Freeman documentary. He narrates your story, correct?
Bosco: Yeah. He narrates my story. Correct.
Tony: That, must be really surreal to have Morgan Freeman narrate your story. That's like having God narrate your story. He played God and he was the guy who narrated one of the greatest prisoner escape movies of all time - Shawshank Redemption. Did you see that movie before you were locked up and did it inspire you in any way?
Bosco: Ironically I saw that movie while I was in prison.
Tony: What do you mean they showed you that movie?
Bosco: Yeah, just one day I was out in the rec cage watching TV and it came on AMC or something, and I sat there and watched it and I'm like oh, that’s a sign.
Tony: So when you were caught, did you just say, look, “I was inspired by watching the TV that you guys do.”
Bosco: There you go. That's funny, right?
Tony: Well, I think that we're gonna have a modern-day Shawshank Redemption film coming up and, I'm very excited to see it. I wish you all the luck and, in getting your movie seen and your story heard, and, I would love to do a follow-up interview.
Tony: So thank you so much for coming on Benzinga Interviews.30m | Jun 13, 2023
- DIY Tax Loss Harvesting Feature With Alex Harmsen Founder and CEO of Global Predictions
Topics: Portfolio diversification, AI investing, investment predictions, tax loss harvesting, create and managing your own portfolio, Global Predictions
Anthony Noto , Benzinga Editor
Prepare your portfolio for today's economy
With Global Predictions Import your 401k, crypto, real estate, and investment accounts and get automated recommendations from an expert system.
BZ: Hello, Alexander Harmsen. Welcome to Benzinga Interviews. How are you today?
Alex Harmsen: Great to be here. It's going really well for those listening wherever they upload their podcasts or watch their internet videos.
BZ: Alexander is an experienced . Tech entrepreneur. He's a CEO and board member and advisor having founded multiple successful companies and organizations. So he is a good get for us here at Benzinga. And I'm happy that you're joining us today. We have a lot to talk about. But first and foremost how are you doing?
How has, how have you fare during this turbulent time in the economy? Inflation is an all, is that an all time? 40 year high. I believe that's the number that they're telling me what's your take of everything?
Alex Harmsen: It's definitely a time when macro plays a more important role than, almost anything else.
Where one of the things, one of the trends that we've seen, happen. A huge change over the last 13, 14 months is, we've seen a lot of people go from focusing on individual stock picking everyone feeling like they're a winner. They're really good at this game to, people focusing on travel, shutdowns, inflation, thinking about geopolitical events, thinking about how, supply and demand is changing.
Thinking about transportation network. Thinking about, commodities, oil, all these macro pieces, which for a long time I think was for us, the major focus. We've always thought that portfolios as a whole rise or fall based on these macro trends and that, putting that into the spotlight has just aligned a lot with, what we focused on at Global Predictions.
Personally I've never really spent much time doing the stock picking. It's always been thinking about the portfolio and diversification. And downside protection and how all these different pieces fit together as a puzzle in my own portfolio. And I'm actually very excited to have just, bought a, bought my first house.
Even though mortgage rates are crazy high, we got the house at something like a 40% discount compared to what it was going at, six month ago.
BZ: So how did you find this deal?
Alex Harmsen: Tons of opportunities, honestly. We didn't have to hunt that long. I think just based on all these macro conditions and the interest rates rising, it was it just put a lot of downward pressure on the housing market and we're seeing that not just in the Bay Area where I live, across the country.
3:05 BZ: So you're, I take it you're very savvy for you to find this great house deal. And that had to have, Inspired you to start Global Predictions because the thesis is to make people smarter investors or to help people become smarter investors.
Alex Harmsen: Definitely we want to help people become more confident in investing.
I think, it started for me and my co-founder I like to think of this as the classic, Wall Street, meet Silicon Valley. My co-founder worked at Bridgewater for more than half a decade.
And my background, I've ran a, like you mentioned before, at the top of the podcast a number of different successful startups. Fundraised, tens of millions of dollars ran teams of 50 or 60 people. And my background has always been focused. Physics and modeling and simulation and AI and trying to apply that to economics and then integrating that with the investing I think provided a, just a crazy unique opportunity for us to democratize a lot of the tools that you might see in professional portfolio management.
Hedge funds, family offices, pension funds, trying to bring those kinds of tools down to the masses, to make it easy enough for me to use, my own life. And even this real estate decision, partly came about because, there was a very clear hole in exposures and diversification.
When it comes to real estate, especially when mixed. The tech exposure and the startups and, the, the other assets that I have personally in my life. It felt like over the last 10 years, there's been a significant amount of. Tools and platforms available to help people with trading and accessing stock markets.
Lots of news, lots of what feels like noise. I think to most people, if you're not doing this full time, if you're a software engineer or marketer or a dentist or a doctor, then you know you have your life to live. You're, a professional in some sense. And so we wanted to help people, give them the right sort of platform to be able to think.
How am I doing overall across all of my different assets, in one place?
BZ: Let's pretend I'm a potential Global Predictions user. Haven't heard of it until today. What can it do for me? What's your pitch?
Alex Harmsen: I like to think about Global Predictions is the intelligence engine.
We've built a recommendation platform. We've built a macro insight system. That is looking at hundreds of thousands of different trends across the world. And then we have a tool that you can sign up for free called Portfolio Pilots. And Portfolio Pilot basically lets you import your retirement accounts, crypto cash real estate investment accounts, aggregate them all into one place, and then it connects that to the Global Predictions recommendation engine to provide you analytics, recommendations, advice on what to do.
And then at the end of the day, you are in control of the, that decision. So we vary specifically, in the sign up flow. Remind people, we can't make trades for you. You have to hit the big red button. because it really feels like for a lot of people, a lot of our users, they want to feel more confident, they want to understand what's going on and then at the end of the day, make the trade the to really own that those decisions
BZ: portfolio pilot came out just this month.
Alex Harmsen: Correct. We've been at beta for like almost more than a year. We have close to a billion dollars of assets on the platform, but then like truly opened it up. Just last week, six days ago.
It's been a crazy week for us. Absolutely.
BZ: You have a new product coming out. a new feature, I should say
Alex Harmsen: As part of the sort of multi-week, launch strategy for us. We had thousands of users sign up just in over the last couple days. And then teasing a tax loss harvesting tool that we're about to launch in December 1st. And so one of the most requested things that we've received from, the people that are already using the system is being able to do something like tax loss harvesting the.
It really feels like tax loss harvesting is something very simple that can save almost everybody thousands of dollars in 2022, especially because, probably there's a few items in your portfolio that have lost money this year. Probably a few. And it really feels like only robo advisors are able to do that.
But you don't have control of that process. Basically you have to give your. Or you have to work with a wealth manager or family office. And so for the vast majority of people, I think most have heard about it, but don't really have the tools to be able to do it properly.
So we're basically launching December 1st, a do it yourself tax loss harvesting feature that we think can save you a couple thousand dollars with maybe 15, 20 minutes of time. As long as you do it before December 30. Okay. So there's a little bit of a time crunch there and, but it's not a robo advisor.
It's not a robo advisor. Okay. Like I mentioned, it's really, it's, we're trying to give you the tools, recommendations, advice, guidance to get to the finish line, to get to the point where you need to go and execute the traits yourself very intentionally, and you may think, that's a, an issue with the platform, but we found that gives people the confidence to experiment
And really understand what they're doing and then, actually pulling the trigger itself. , makes it very clear what you are and what you are not doing. Shows the transaction cost. Shows all the inputs that go into that.
9:30 BZ: Just real quick, walk us through how that could potentially reduce our tax bill come next year.because I give my paperwork to my accountant. She's great. She handles everything and I don't worry about it. I give her receipts. I give her my spending.
What is this product and how could, or this feature and how could it potentially save someone like me a little bit?
Alex Harmsen: absolutely. Even myself, I work with an accountant, come February, March, I download everything from all these different platforms, send it off in one big package, and then they try to, minimize the tax bill and take advantage of whatever it is that the house, the mortgage, the kids, whatever it is.
And the important thing I think to realize though, is that, as part of that package that I send, I am downloading from my Interactive Brokers account, a statement of everything that I sold over the last year. And, there's some sort of realized gains from my investment portfolio and the realized gains basically get added to my income tax and, get included as part of my the attacks that I'm paying at the end of.
And so one of the things that you can do if you take this step, before December 31st, before the end of the year, is sell any losses and basically cut down the amount of realized gains. So maybe I've sold, $20,000 worth of stock and, realized $6,000 worth of gains this year.
If I have $6,000 worth of losses, I could offset that. and basically pay $0 in additional income tax from the investments. Of course. Maybe I don't wanna sell those losses, because I like having the exposure. Maybe there's a bunch of tech stocks or crypto, that's down right now and I'm intentionally holding onto those because, I think the markets are gonna recover at some point in the next couple years.
So the second half of the tax sauce harvesting is basically buying very similar. to the ones that you're selling so that you can count the losses and still have the same kind of exposure that will rebound over the next couple years as the markets recover. And so it's basically selling the losses to match and bring your gains down to, as close to zero as possible, and then finding the equivalent ETF or the equivalent stock to keep the same kinds of exposure in your portfolio so that, as a portfolio, nothing really changes.
You have the same expected returns, you have the same downside protection, you have the same risk in your portfolio, but you're able to minimize your tax burden. Interesting. Okay. So how did you get Global Predictions up on its feet? It's a relatively young company, correct? We're a couple years old at this point.
Global Predictions itself. We wanted to validate that we could build some core engine that is monitoring data that's taking in hundreds of thousands of different securities, macro trends, different types of data about, what's happening in the world. We built a world monitoring service on top of.
To understand, what's happening and where is it deviating from historical trends. There's an anomaly detector that's built into that. And then we basically have a forecasting engine there that uses a couple different models. And then you have something like a portfolio management system on top of that with tools like recommendations that, plug into portfolio pilot, the consumer tool that we.
And as you can imagine, that's taken a couple years just to stand up all that infrastructure. But in many ways, this is similar to what you might find, behind the scenes at some of these systematic macro hedge funds. Something similar to what you might see at, hedge funds like Bridgewater.
And partly you need the scale, right? You need all this data. You need to look at all these things at the same. Partly because everything is interconnected. One thing in the economy affects something else. If you are just looking at real estate in New York, potentially you missed the fact that covid or inflation or interest rates or liquidity conditions, have an impact on that market.
And we spent a lot of time validating that. And our core thesis, for Global Predictions was, can we take these hedge fund level models, tools, infrastructure. And basically turn that into something that we can then build a commercial business on top of. And portfolio pilot is really the first, tool that we build on top of this core infrastructure.
because, we thought what better mission is there than democratizing access to these kinds of models? And there's, hundreds of thousands of users that are looking for these kinds of tools to, optimize to get a little bit more out of their portfolio. And have some sort of security, build some sort of confidence, especially in the downturn like we are today.
BZ: So you built pretty much built this thing, I imagine with a small team during Covid, like during 2020 when everybody was trapped in the house, like when, give me, walk me through the timeline.
Alex Harmsen: Absolutely. Like I said, it was the modeling a simulation background.
I've been doing this, for the last 15 years or so, and we've built the same kinds of hybrid AI models, tremendous amounts of data in the autonomous vehicle space, in life sciences, in pharma and then, bringing that into the sort of economics and the investment. In many ways felt like a natural extension of that.
And meeting my co-founder Reid we hired a, we raised a couple million dollars from venture capital and especially during covid when early days was sort of March, April, may of course when it felt like the world was being turned upside down. There was a whole new economic paradigm.
Everyone was looking at different kinds of relationships, felt very fitting at the time. And you can imagine. 10, extremely smart, very diverse team over the last couple years basically working on these models, bringing this data together to be able to deliver.
What we think is a relatively simple tool now to, to consumers. Where are the, I like to think that there's tons of potential now that we have this core model and that's been stress tested and works for, tons of other applications down the road. So all through Zoom calls, crunching all this data, it's a completely distributed team.
We have 10 people on the team and I've met four of them in person. Wow. And working together for years. It's distributed all over the world. People in Europe, India, Canada, the us you get one of the great things actually, I think about Global Predictions is that it's, truly global.
And because of the time zones, there's someone working on it all, around the clock.
17:20 BZ: You're a Y Combinator person, right? You're a vet from Y Combinator
Alex Harmsen: exactly. Were you able to pull connections from there too, to get this up on it feet? because I imagine other startups got the, the metaphorical door slammed in their face if they ever tried to pitch something during 2020 when everybody was remote and oh gosh, oh, you and everybody else got a startup idea.
BZ: But what was some of the past connections you have as this veteran entrepreneur that helped in this getting Global Predictions?
Alex Harmsen: I will say that I'm quite fortunate in having, existing network of investors to pull on existing network of engineers and, this community partly through Y Combinator, that's been tremendously useful, partly through On Deck as well.
Also a great community of co-founders and company builders and investors. There's, a couple different scholarship networks I'm a part of, partly the alumni network. I honestly think that there's this saying that, some of the biggest companies in the world have been built, during recessions.
And I think part of it is because you need a certain amount of, fiscal responsibility. Partly because the money isn't available, you have to innovate. You have to, be very lean about how you build a team. And so I think we've stretched the money that we have, quite far.
But I also think that, especially in 2020, the early days of the pandemic there was just so much uncertainty in the investment community that, a lot of investors did go back to. Successful entrepreneurs, people who have done it before which I do think gave me a little bit of an unfair advantage.
Especially because the thing that we're pitching is, a little bit insane. It's definitely a very big vision and I really don't think we're gonna be able to realize the true potential of Global Predictions, for another 10.years . Okay. So literally it's right on the brink of really pulling together all this, all the trends.
because if you start during Covid trends were, who knew what was gonna happen. Exactly.
19:30 BZ: So it's, so how do you test that? How do you get it started? If things are so uncertain, even now things are uncertain, heading into 2023. How do you convince a potential customer we are the platform for you?
Alex Harmsen: I think this is a great question. I honestly, I think there's, maybe there's two parts of this question or two parts of the answer. One part of it is that I think it looks uncertain if you look, with a microscope , if you look one day at a time or if you only look at, one or two relationships and I think we get caught in this a lot because it's very easy to tell a narrative and say Apple is going through this crisis because of, X liquidity conditions, but in reality it's a much bigger picture.
And so if you're able to zoom out and actually look at the macro picture, if you're able to look at all these different trends, then you know, I think you start to see a machine that actually functions fairly rationally. It's not really a surprise that over the last year, to control inflation, the Fed is at the right interest rates.
It'll. Unemployment, it's gonna because layoffs. It's gonna because these companies revenues to fall. It'll because these impacts on the stock market. Liquidity people end up delivering, right? There's a chain of events that's fairly predictable that happens every single time there was a recession, or every single time we enter into a high inflationary period.
And so I think if you zoom back far enough, history repeats itself. But it never repeats itself exactly in the. I think the underlying factors end up repeating themselves and if you can capture those underlying factors and then, so I think that's part one. Okay. And, we will never be a hundred percent perfect.
And so part two is, acknowledging that, we make certain forecasts, we understand these different relationships, but every single weight in our knowledge graph, every single forecast we make, every single recommendation, comes with a degree of. And so we like to think that we have very high accuracy within our models, but relatively low precision.
Okay. And we're right almost all the time, but in many of our forecasts there's big error bars. And that allows us to be right, within this, margin of error. There is the chance of being correct is pretty. And if you use those kinds of models, with the error bars and the uncertainty together with a good portfolio management approach, then you can actually capture the right sort of risk.
You can look, if you know where the uncertainty is coming from, you can actually build a portfolio where, say you have an I, a 20 item portfolio. With real estate and some ETFs and some, exposure to different sectors, some international exposure, if you model out where the underlying drivers are coming from for that portfolio and where the risks are, then you can actually, have them be orthogonal to each other.
You can make sure that the risks are coming from different. . And in that sense, even if you don't know exactly what's happening, if you've modeled the risks and underlying drivers properly, you could build a fairly robust portfolio where at any point, 15 of your 20 items are going up and five are going down, no matter what the macroeconomic conditions are.
Interesting. And I think that's really the principle, right? And so in a sense, we don't need to be perfect in our predictions. We don't need to be perfect in the for. to be able to build really good strategies for users to give the right sort of recommendations and, outperform markets. It's more that systematic approach that ends up being the, the core driver of that return.
23:38 BZ: So I have you for a couple more minutes and I have two more questions. One do you care to make a prediction now looking into 2023? A lot of people are, A little bit nervous about what they say is a looming recession. Give us a little predictions. What are you feeling as we turn the corner here?
Alex Harmsen: I like the question absolutely right. It's core to the business and I'm never gonna say anything with, complete certainty. But we do, technically we've been in a recession for a little while now, obviously, all of the quarterly earnings over the last month or two have shown head counts, a down scoping and expectations.
We are seeing inflation coming down, even though it's one data point, in general, a fairly optimistic that this is, starting to get under control. We see the, unemployment numbers, starting to look better in terms of, the actions that the Fed is taking, are starting to work.
Not including the tech sector though, minus the tech sector. We're looking higher level, right? And so I. Even a lot of the people we work with end up looking very specifically at sectors and like in reality, I think it's very easy for us to forget, us, us meeting, tech workers and people in the crypto space.
It's very right, very difficult sometimes to zoom way out and look at the industry as a whole, to think about oil and commodities and agriculture and manufacturing. And so in that sense, I. We're gonna be in a recession for quite a while longer. . And, the Fed in particular, is still holding the line very strongly that we need to get back to something much more manageable.
And very likely this is gonna deepen before it gets better. And into 2023, we're still gonna be in recession and then realistically, start climbing out of that in, end of 20 23, 20 24. It's hard to be able to call the bottom exactly. But this isn't gonna shoot up in, Q1 or q2.
BZ: Last question. I know that you've accomplished a lot in your career. You have a knack for focusing on these big hard problems that have a meaningful impact. What, who were your heroes? Who inspired you to go down and become the entrepreneur that you are? Do you have any sort of heroes in the business world that sort of had an impact on you?
Whether either you met them or you read about them? Who set you on this path?
Alex Harmsen: I, I think it's a great question. I think that, I don't think it's necessarily entrepreneurs and company builders that have gone through this. Maybe it comes from two places, okay. One of them is that I had a mentor in university who was an incredible astrophysicist and, spoke all over the world and contributed to some, really cutting edge astronomy and blazed his own path. Like he, he really one of the things I really admired from him is that he bucked the status quo. He decided, this is what I enjoy doing. Here's where I think I can make a unique contribution. And had a lot of fun doing that. And, partnered with all the right people and put himself in places.
To like really almost create his own luck, right? Like he created a lot of opportunities for himself as we went along. And then , I think separately, the going through Y Combinator, I think was very eyeopening because they would invite lots of speakers to come out. And it was very casual.
There was a couple hundred of us in the room. There was someone who was, a billionaire had built massive companies. He just spoke like one of us. He was a couple years away. He was on a slightly different path than I was. And I dunno, there was something very grounding about that.
And it made me think that, all I need to do is just be like a couple percent better than average, but every single day of my life. And not taking anything for granted, really using this like privileged position that I'm. and not squandering that and just continuously, every single day, just becoming a little bit better, a little bit better, a little bit better.
And I think that focus is really the difference between, bill Gates and the average guy, or Jeff Bezos and the average guy, right? , I think that's I think that's prob like both of those I think are like quite defining and something I think about like quite often.
29:00 BZ: What's your advice for a young entrepreneur who maybe has this idea that maybe, perhaps he's in Y Combinator, perhaps he wants to apply to Y Combinator. What's your advice?
Alex Harmsen: There's something about that focus, right? There's something about not trying to do it all. not trying to do it all at once.
One of the things that I do like pretty religiously at the start of every day oftentimes just when I'm in the shower, is think through what are the three things that are gonna be most impactful? What do I wanna focus on today? And even though I end up doing, hundreds of other things and have, dozens of meetings, if I get those three things done, it's a successful day.
Prioritizing. It's the prioritizing and really thinking like, what is gonna move the needle, right? because I have, I have 422 emails in my inbox right now, but two of those emails are more critical than, the other 400 and, 20 of them. And so if I respond to those two emails and push those two projects forward, or poke this one person or have this one meeting, that's gonna have a hundred x impact compared to everything else that I.
And, zooming out, macro is like obviously the, the made, topic that runs to my mind. But if I zoom out and think what is actually impactful, what is actually driving the business forward, my own life forward, my relationship forward, then you end up having real impact then, the small rocks, end up sorting themselves out.
BZ: Awesome. Alex, this was a great conversation.32m | Nov 23, 2022
- Did Madonna Pay Too Much For Her NFT - Tokenized Investments With Tal Elyashiv Founder of SPiCE VC
Topics: Spice VC, FTX Bankruptcy, Crypto Regulation, Sam Bankman Fried,NFT ,Madonna, tokens,celebrity NFTs
Anthony Noto , Benzinga Editor @iamtonynoto
Tal Elyashiv, Founder & Managing Partner of SPiCE VC @TElyashiv
Tokenization is disrupting the financial industry. It is on a rapid growth path to becoming a multi trillion dollar industry.
SPiCE provides investors wide exposure to the massive growth of the Blockchain / tokenization ecosystem.
BZ: Hello, Tal Elyashiv. Welcome to Benzinga Interviews. It's nice to have you.
Tal Elyashiv: Pleasure to be here.
BZ: So it's interesting that behind. Is a wonderful piece of artwork of Charlie Brown and Snoopy that you told me before we hit record that your daughter did. So for the listeners who might not be able to see it it's a beautiful painting.
And for those, watching this on YouTube or anywhere else where they have a visual it's obviously a wonderful work of art, and that ties into a lot of blockchain technology these days in the form of NFT. We will discuss on this show as I understand that you are an NFT expert, right? But before we get into that, I want to talk a little bit about Spice VC.
This past year has been a. Pretty much an ugly one for the crypto space anything related to blockchain. But when it comes to Spice VC you guys have a lot of good news especially for investors. So I'd like to talk a little bit about the First Spice Fund. , which you would do a great job in better explaining than I would.So what was the accomplishment with that fund that just closed?
Tal Elyashiv: So Spice I our first fund that is focused on the blockchain ecosystem launched in 2018. By the way, it was also a tough time to launch because you remember that 2018 was a year where crypto went down significantly.
And the fund is fully invested at this point. It's a venture capital fund we invest in Companies that build significant components of the blockchain ecosystem companies that build platforms and services that we feel will benefit the. From the growth of this ecosystem. And most of the investment period where we invested in portfolio companies was 2018, 2019, and 2020.
We made investments in 17 companies. The performance of the fund is through the roof. The IRR is over 50% and the multiple of the fund is above Six. But I think the most significant achievement this year, given everything that happened this year in crypto and blockchain is that we made we just completed our second distribution to investors.
It brings the distribution to. Investment capital to 82%, which means that 82% of the original capital that was invested in the fund was already distributed back to investors' accounts. And they're still invested in a fund that is way above five x what they invested, which is pretty significant for a VC fund.
Pretty significant for a year like this. So this is great. And. We're now in the process of capital raising for Spice II. The second fund focused on the same ecosystem with the same investment strategy. I think more exciting times. What happened in the crypto and blockchain space this year actually positions VC funds much better in terms of investing.
Reasonable valuations. And I think that if we continue with similar performance we will probably end up with a much better performance for Spice II than Spice I
BZ: So say I'm an investor. I wanna get involved in this space, but I feel a little bit. in recent months because of the FTX fiasco and all of the bankruptcies that are now piling up.
What do you tell me? I have plenty of money to spend. I don't really, I'm playing a role here, but if I did and I wanna get involved in Spice VC, what's your pitch? What do I get? How do I buy it?
Tal Elyashiv: There, there are two things I'll say about the blockchain ecosystem. One, any portfolio needs to have some exposure to the blockchain ecosystem.
I'm not talking about crypto, I'm talking about blockchain ecosystem. Blockchain ecosystem is way bigger than just crypto. Crypto. It's just a sliver within that. And the reason is that it's a revolutionary technology that. Impact almost every industry, definitely every transactional industry we're aware of over the next 10 to 15 years.
Investment in that ecosystem is expected to produce more than 50% c per year for the next 10, 15 years. This. Phenomenal and unheard of in terms of investment in a, in an ecosystem or set of industries. And this is why every portfolio needs to have an exposure to this. The problem is it's a very new domain, relatively speaking.
It's very complicated. It's very broad. It impacts many industries. And technology keeps changing at a rate that is totally. If you compare it to the internet revolution, for example, we're 40 years into that revolution and it's not done yet. You were talking about a revolution that will take 10 to 15 years and where with the internet revolution, the basic technology remains the same.
With blockchain, the underlying foundation technologies keep. So it requires a lot of understanding and staying up-to-date in order to invest in this industry. And so it's very hard for investors to make individual bets on companies and have a decent shot at success. And, FTX is good. An example to to that investing in a VC fund gives you broad exposure to this industry through a team that is focused on investing in multiple portfolio companies. Spice I was 17 companies, Spice II is going to be around 30 companies. And so you are spreading your investment increasing.
Probability of seeing significant returns from that. The VC industry, by the way, in general, is very uncorrelated. To market movements. People are very concerned about investing in current market conditions. Need to be aware that VC investments are totally uncorrelated to the market.
So it's a piece of the portfolio that needs to be there. If you can afford to have that that will give you long-term returns that are uncorrelated to short-term market move. How? , and I'll say that the last thing about Spice II, in terms of the pitch, it's already the second VC fund that is focused on this industry that we that we manage.
The first one performance is stellar. And hopefully the second one will be the same. There are very few, if at all, second funds in this ecosystem. Most of them are. First funds, so they're still building their track record.
8:18 BZ: So you said before that Spice II is probably gonna have 30 companies in it.
How do you find your companies? What do you look for in a blockchain startup?
Tal Elyashiv: It's not very different than any startup. We look and it's very hard to say what's more important because everything is important. But team is paramount for success of a company. We invest in early stage companies, not very much at the beginning, but after a company already has a product and market.
Presence and their market indicators that you can look at, clients, customers, and so on. So we're looking for a business model that we feel is right and reasonable with where the market is going. We're looking for, we're looking for a company that is in a domain that we believe will grow.
Significantly over the next five to 10 years we're looking at technology and products that are unique in a team that we believe. With their business plan, they can really dominate their corner of the market. And there are a lot of environmental factors as well because every company is really a piece of a bigger ecosystem.
It's very important that they're. Business assumptions on what will happen around them, jive with ours. So we believe that their model is sound given where the market is going. But at the end of the day, it's also important that the team is one that we feel is a fit. For the business model is strong enough to be able to navigate the waters even if things change and they can still navigate success.
And this is no different in the blockchain domain than any other startup.
10:30 BZ:So you mentioned something that I always try to see how people find talent in this space because like you said, it's a very young industry. How do you deepen your bench? What kind of experts does Spice have that other firms don't have?
I imagine finding true experts in the blockchain space, because it's such a young industry,
Tal Elyashiv: It is very difficult. I come for many years in the financial industry and other transactional industries. So lots of operational experience technology experience and business experience.
And I'm also a serial entrepreneur, so I sat on both sides of that table. And I've also been involved with the blockchain domain since 2016, 2017 very very deeply. Spice is the first fully tokenized Spice I is the first fully tokenized VC fund. Our token, our digital security was the first digital security in the world to.
Traded on a fully regulated digital security exchange. And we've done a lot of firsts in the blockchain domain. Not only as investors, but in actually using blockchain to further our our business and building systems around that. It puts us very much in the heart of the blockchain ecosystem.
We know the ecosystem from the inside. We have a very strong. Brand name within the industry. So obviously our access to talent and our access to companies is very different than any outsider looking in, into the ecosystem. But you're right finding talent in the blockchain domain is not easy.
And my co-founder and partner and. In Spice Carlos Domingo has been in this domain even longer than I have and is also considered one of the visionaries in the digital security space. And it's not just about blockchain. We have other partners that come from a.
Long venture capital investing and private equity investing. So the discipline and being able to look at companies and being able. Assist companies in growing and moving towards healthy exits and so on is also very very significant. So my Swiss partner Renee Eichenberger, for example, started and managed seven funds before Spice, ranging from 200 million to 10 billion in.
In assets. You build your expertise, not just around blockchain, but around investing in companies, helping them succeed and and so on, and screening companies and and so forth. So with your background, you've, like you said, you've done a lot across all different corners of the financial world in different industries.
BZ: Why blockchain? You could have done anything. ,
Tal Elyashiv: it's actually very interesting when we started Spice in 2017 and started looking building our investment strategy and focus and so on. It was the height of the ICO Period in the world. And we looked at this and it was clear to us that this is gonna go away because it's it's not gonna jive with regulations and so on.
But the technology struck us as a an amazing technology that will impact. Capital markets industries and coming from capital markets you either see it or you don't. But I saw it back then and it was clear to me that blockchain technology and distributed ledger technology has the capability to solve a lot of the problems of financial industries that became more and more complex.
As those industries became more regulations and as more regulated and as more players started forming in those industries. And blockchain technology offers very simple solutions for automating a lot of the processes that make those industries really complex. So we. Financial industries is a huge cluster on its own, and it was clear that other industries like supply chain management and and so on, are gonna benefit from this as well.
It, it is a domain that is worth investing in. I know that a lot of people back then were thinking crypto. As the main thing that that will come out of this crypto is what contributed blockchain technology to the world. But then blockchain technology came got a life of its own and it was clear to us that this will be a very significant domain to invest in.
And we were betting that it would be experiencing an a an exponential growth that is unprecedented, which was the case.
16:25 BZ: So Benzinga has this event coming up on December 7th and December 8th in New York called The Future of Crypto, and a lot of the dialogue at this event, they expect to talk about this past year and what happened, and cryptocurrency and blockchain, they're intricate.
Tied together as the technology that underpins cryptocurrency.
What surprised you in 2022? What? What did we learn? Because looking back there was a lot going on.
Tal Elyashiv: It's a mixed bag. It is a mixed bag. 2022 was a very eventful year, and it's not over yet. So we have another almost a little bit more than a month of potential eventful period.
But I think we've seen several things. One the cryptocurrency industry has grown. Really fast. And it's grown wild with no regulations, no oversight. And if you look at some of the things that happened you mentioned those events anywhere from the Terra Luna crash Celsius collapse blockfi.
And and there were a bunch of others, but now FTX, a lot of things have nothing to do with crypto. They have to do with lack of regulations, lack of transparency, lack of corporate governance, lack of financial experience and lack of fiduciary responsibility of people running those.
And fraud. A lot of this was plain fraud. And this the, I think the reason we see this more here is because crypto has grown so fast and was very attractive for bad actors and also because there were no regulations To speak off at a decent level for financial activity, because this is financial activity.
You can argue about what crypto really is, but the type of activity that takes place, whether it's banking or or lending. Or trading or providing investment advice or managing risk between investments and lending and so on, are very complicated domains that require a lot of oversight and a lot of experience.
And this didn't exist here, right? , we, the industry grew based on technology and automation, and much less about learning from the traditional financial industry that is learned a lot of things that were written in blood over the last 40, 50, 60 years. So I think what will happen now is some maturation of the crypto industry.
We'll see. Definitely more oversight than and regulations, although US is in a very strange place because of the kind of deadlock situation in the houses and so on. It's gonna be very hard to. Any meaningful regulation in the NA or any meaningful legislation in the next two years, I would guess.
But I would see much more focus on regulation and oversight in in the industry. And even good players, not just the bad players are lacking someone that will focus in and. Prescribe ways to to act. If you look at Coinbase, for example Coinbase is publicly traded, so they're under a lot of scrutiny and have significant reporting.
Responsibilities and so on. And much more transparency than any other player in the crypto domain. But most of the licenses are still money transfer license. It's not an exchange, it's not licensed as an exchange. It's not licensed as a as a. Someone managing deposits. It's not, and, but a lot of those activities really happen there, right?
So unless it's looked at this way and and managed that way, then risk exists that doesn't exist in parallel organizations in the traditional finance. We'll see that I, to me, if you ask me what the, what surprised me is the magnitude. And the speed in which things happen this year. And I think
I think anybody, including people who were predicting doom and gloom, I don't think anybody was predicting that fast of of the doom. Yes. But I, long term I think we'll see growth in. In the crypto portion of this market, we'll see much more institutional involvement.
And this will drive more oversight and and processes around things. And we'll see some changes in how crypto is run. That will make it more. Palatable to to more institutional investors. To me, what's, what was interesting is that if you look at the behavior of institutional investors, they're still focusing on the long term and still investing in creating crypto related capabilities.
There were news from. Fidelity, for example only a week ago about enabling free trading of crypto. We've seen news from. From Goldman Sachs with their digital assets categorization system, which is really significant here. All this investment is significant as part of maturing this market.
. So I think we'll see over time the recovery of this at what. I don't know. Nobody knows. I unfortunately don't have the crystal ball, but I think it will happen. But I think the interesting thing is that. Investment in blockchain capabilities, not crypto per se has continued full force.
Nothing has changed. Most banks, most financial institutions are focused on blockchain related technologies and adopting those capabilities within their processing environment. Whether it's in the securities industry where almost any major player is adopting blockchain technology for registration and for settling transactions and so on through payments, all the big payments players from.
MasterCard and and Visa to to PayPal and so on, are all engaged in blockchain technology. And they're not doing it because it's cool they're doing it because it is, . It's necessary. Absolutely. . And that circles back to why investing in blockchain, right?
24:30 BZ: I'd like to talk a little bit about NFTs. This year, the price of NFTs plummeted. We saw a lot of big companies over the past couple years get involved in this space. , you talked about institutional investors. They're in it for the long game. A lot of institutional investors are looking at NFT portfolios and ETFs.
It's definitely got a lot of people excited, but this year the price went down a lot. You had a lot of scrutiny and the board ape area and. I think Warner Media completely abandoned their NFT plans with CNN that grabbed headlines with no little to no explanation. And I'd like to read you a quote that I found from a blog that I liked.
So by Janice Greenwood, she said that “NFTs are the obvious next iteration in an art world that has become more like the stock market and less like the keeper of our culture's greatest creative treasures.” And I thought that was interesting because as an illustrator myself, and as you said your daughter is clearly an amazing artist. With that Charlie Brown artwork behind you, NFTs art, what is the point?
I still think that it's not clear to the average person that this serves any benefit to. So NFTs blew out of proportion last year as in 2021. And I think the world forgot that NFTs are basically a framework.
Tal Elyashiv: NFTs are non-fungible tokens, and they're very different than the tokens that were used before, which are all fungible. And it basically says the token represents something unique. Okay, so it's just a vehicle. To do something. It's, it doesn't have a value on its own. It's a vehicle to do something.
And it started evolving in the art space, mostly because of digital art, right? The problem that it came to solve is in digital art. If I created the jpeg, how do I prove that? I'm the creator. And how do I prevent you from copying and saying it's yours, right? And the NFT basically said, I'm gonna wrap it in a token, and this token is gonna be registered on the blockchain, which is immutable, and then I can prove that it's that I, because I own it, it's mine, right?
And the date is the first date this NFT is written. So nobody can claim that they did it. Okay. But the NFT itself is just a container that is holding my art, right? In this case, if you're an illustrator, it can be an illustration. If you are a photographer, it can be a photo, it doesn't matter, right?
It can be a digital piece and it could be. Representing a a real-world piece, with the rights to that real-world piece that I can sell. And that means if I sell you the NFT, I also need to deliver the real-world art if it represents something in the real world. The value of NFTs should be driven by the value of the piece of art that you're buying.
And because it blew out of proportion and it becames the, rich person's the high tech person's Ferrari it got, NFTs, got value on their own because they're NFTs. But at the end of the day it's what they represent. And, it will come back to the reasonable situation where, what NFTs do is they create more accessibility to artists to artists, to their audience.
They help in establishing providence over pieces of art and so on. And also they facilitate some of the financial transactions. One of the concepts that were edited by NFTs. To this world where royalties to the creator that, go through the future generations and so on. So all these are very significant value propositions.
If you let things calm down and you look at the real value of what is it that the NFT represents, rather than an NFT is like, Value proposition on its own. And I think this makes a lot of this makes a lot of sense. I would also make a comment that NFTs as a framework are going to be extremely valuable technology solution to things we'll see them very useful in healthcare industry. It could be a concept that in the US one of the issues we've been dealing with is the lack of Lifetime healthcare record of people because we keep moving between healthcare plans and so on. This could be one of the keys to solving that problem and providing this.
And it has nothing to do with art. It has to do with the technology concept that wraps something that is unique. It's definitely used in supply chain management today already. For example a lot of. A lot of luxury good producers are using NFTs in order to prove providence and authenticity of items.
A good buying a Gucci or a Prada item, you get an NFT with it. And the NFT really proves the authenticity of that item because it goes back to the company's system. And you can see the whole chain of events that brought this item to. And it proves your ownership of that item. And it's used in the healthcare industry to approve authenticity of medicine in the pharma industry, the authenticity of medicine and the ability to track that these medicines have not gone through environmental exposure that voids their validity and so on and so forth. So it's a very useful concept beyond the art world. But I think that in the art world, it will still be very valuable to to creators and to collectors. And the fact that it calmed down is actually not a bad thing in the long run.
Because we needed to be, to go back to a rational way of valuing NFTs. . And remembering it's the art behind it. It's not the NFT itself.
30:59 BZ: So celebrities like Madonna who paid half a million dollars for the board ape at NFT, did they over pay ?
Tal Elyashiv: In my mind, yes. But, at the end of the day what determines the value of collectables in the market?
And I think you can look at board apes as as NFT as collectables, and not just the pure art collectables are. Valued based on supply and demand. That's all right. Something is really valuable if there's someone who's willing to pay a lot of money for it. So the market will decide if Madonna overpaid or didn't.
Obviously when we recover from the crypto crash. But it sounds more like I love that you mentioned that the benefits that it could bring to industries like healthcare, because that to me makes a lot of sense. And in the terms. And I love that. It's a, it solves a problem, whereas in the art world, it's almost like the art of the commerce.
It's the art of the buy, not the artwork itself. That's correct. Making an impression on people. That's right.
BZ: This has been an excellent conversation. I'm so glad that you took the time to speak with us today and I hope to keep in touch and have plenty more conversations as we look forward to 2023.33m | Nov 23, 2022
- Future of Crypto With Alan Silbert North American CEO of INX
Topics: FTX Bankruptcy, Crypto Regulation, Sam Bankman Fried, INX
Anthony Noto , Benzinga Editor
INX is a fully regulated trading platform for security tokens.
Anthony Noto: Alan Silbert, welcome to Benzinga Interviews. How are you keeping warm this crypto winter?
Alan Silbert : I'm an old timer in crypto years. I've been around the space since about 2013. And and I'm old anyway, so I was around for Lehman Brothers and some of the traditional world debacles. Yeah these crypto winters have a way of seasoning you or toughening up your stomach.
So if I've been through a few of them I think I probably felt worse. Maybe when Bitcoin was at a high of $1100, $1200, then went back down to, I think it was sub $200 at the time. And that was much earlier in the evolution of the ecosystem. So I think I remember feeling at that point that crypto might be killed off for good.
And after we survived that, that kind of bear market, that crypto wind I don't have that feeling anymore. I think we're definitely here to stay. This current crypto winter it's, yeah, it's very painful. things are happening that I would've really never dreamed of in the space.
And yeah it's gonna be a little bit painful. We'll come out the other side like we always do.
Anthony Noto:It's interesting that you said you've seen worse times. And I think there's a bit of a tendency for folks to get hyped up in the moment and nervous and they forget just how far they've come.
And like you said, you've been in this industry since 2013 when it was, it's still in its early phase, so when you were in, when it was 2013, did people look at you like you. A little nuts going into this crazy field.
Alan Silbert: Yeah, thought I was nuts . So it was, when I first got Introduced to Bitcoin, I, I thought it was crazy internet money and that it would be a fad, that it would pass, very quickly.
And when I first started buying Bitcoin, I used to go to the drug store. I used to go to CVS and you had to pick up the red MoneyGram phone and talk to an operator and say, I will Send $100 dollars, then you had to walk to cashier and give them cash. So we've come a long way from there. Yeah, it's, we're far departed from. $1100 to $200 would crash. Every, everything that's in the present is always more painful. Very difficult to see right now.
A lot of people have lost substantial sums of money which is very upsetting to hear. And yeah, it's, we have to rebuild trust in the space and and rebuild.
3:33 Anthony Noto:Let me take the ball there. I know I've. I gave you a look at your Twitter, and I saw that one of your tweets I guess in the past 24 hours, you talked a little bit about having a lot of discussions over the past week with lawyers, investment bankers distressed companies and you spoke a lot about digital securities and how they could be used in conjunction with the bankruptcy process, and.
The FTX was certainly a huge bankruptcy. So two questions.
One, give us a tight explanation of what it is for first time listeners. I know most of listeners out there know exactly what's going on, but just in case give us a tight explanation of what it is that happened at FTX and how it is that INX can help.
How are they in a unique position here to help?
Alan Silbert: Yeah, sure. Absolutely. Yeah. What happened with FTX? I Things have been unwinding in the space since, late last year. Bitcoin and most of the cryptocurrencies hit all time highs late 2021. And then all the markets turned, the traditional markets turned, equities turned crypto markets turned and know we started entering a bear market territory.
And that start, that started the snowball rolling downhill of of bets starting to unwind and um, going people's bets, leverage bets going against them. And then when the the stuff really hit the fan was, the Terra Luna stable coin. It was an algorithmic stable coin.
Was created and it was supposed to always pegged one to one with the US dollar, and there were billions of dollars riding on this stable coin. It was the rails that that money was going back and forth on in the crypto space. It was very trusted that the algorithm behind it would keep it pegged at a dollar all the time.
And people also, Leveraged on top of it they lent this stable coin leveraged it. And for whatever reason there was a bank run on the stable coin, on the Terra USD coin. And it unraveled the whole the whole theory there unraveled the coin. I think something like 40 billion was lost.
And that started undoing some firms in the space, like three arrows. Capital was one of them. Celsius was one of the other ones, and this probably ended up leading to FTX's demise because. The space is all very interconnected. As we've seen. It's similar to when Lehman Brothers failed and everybody saw how the sausage was made.
And behind the scenes there's all these interconnected relationships and lending and exposure. It's very similar. Many companies in the space touched three hours capital touched Celsius, touched FTX. They had money custody there. They were lending to them, they were borrowing from. And at high leverage, not regulated in many cases.
And yeah, and the major themes are there's tons of uncovered leverage, a lot of greed regulators were asleep at the wheel. There, it's still a small relatively speaking. It's a small ecosystem with interconnected players. There's no bailouts coming and, there's no government to bail out the space.
And and a real lack of risk management by a lot of companies in the space. Having like huge bets through arrows capital or Celsius, leverage bets on top of it. So these are kinda like all the general themes.
Anthony Noto: And what happened with FTX? Did they just take, did they just make bets even riskier?
What was their deal that compared to what was going on with Terra?
Alan Silbert: Yeah. Yeah, the fact that FTX had some of the like worst controls, business management skills, systems, anything as it's unfolding, it's an absolute mess on. Everything else that I've mention. They were making bets gambling with company, with client funds.
So they were dipping into their client's wallets, taking their money, and then betting them on their associated trading platform, betting them somewhere else in the space, and, leveraged bets on top of it. So it just exacerbated things. So yeah this is a giant mess, so it's top of everything else.
You probably have, fraud stealing client funds. Yeah it's an Absolute. Mess. Some of the other players in the space are just unwinding because their bets went the wrong way. But FTX kind of took it to a next level. And the company it's it operated they put themselves out there as a regulated company, but it's become very apparent that they were really no regulators watching them whatsoever.
They were operating without really any controls. They had no real board. I think for the last several months, I think the CEO, I think Sam was the only board member. So there were no real like board controls. The financials were getting audited by some weird metaverse auditing firm. And to, so to go back to INX, to back up to the beginning of our history, we were set up in late 2017.
Which was at the end of, one of the last debacles, which was the ICO boom and bust era. And our founder, Shy Datika saw the ICOs that were just getting thrown together with a white paper and tossed up against the wall and everybody was buying into them. And, people lost tons of money in them.
And and so Shy wanted to build a crypto trading and a digital security platform just from the ground up. That was totally regulated. I think like in contrast, a lot of the trading platforms in the space have been formed by techies really? By by coders and traders. So it came with, that came with a certain benefits, but they didn't have a traditional like regulated mindset.
Yeah. And like Mount GOs was the first example. It just was put together by coders and gamers and. Like no controls there. It was mismanaged. So one of the first things we did is we pushed a, the first digital security IPO through the Securities and Exchange Commission.
It was a fully registered IPO for the general public, cuz we, we wanted to it was to show that we could do it, that we could offer an investor to an investment to the general public to mo. And give them all the protections that they should have in the crypto space. So we, we have our financials audited by young, not like a weird metaverse auditing firm.
We set up with, independent board of directors, majority independent board of directors. We have incredible board of directors really. One of the members is David Wid, who is a former vice chairman of NASDAQ. We and we did a fullblown prospectus, so it was 200. 50 pages of all the disclosures and the risks.
We, it was the INX token that we sold in this offering. The token holders would get certain benefits they'd get a 40% percent cut of our net profits. They'd get first liquidation rights to our insurance fund. If in case of a change of control or a bankruptcy, they insurance fund would get paid out to them.
We gave them like a good mix of different benefits. And, along with all the trappings of a real public company we're pub we're public in the US and Canada. And so fast forward back to the current day. We've been through this process of registering a security token.
And now you have all of these companies in the space that are distressed or filing for bankruptcy. And in the US in the bankruptcy courts, they, it offer. Fast track through the same process that we went through. The bankruptcy courts will allow you to fast track a security token. And in a security token for the bankruptcy process can, is pretty valuable.
So instead of just saying to the creditors, alright, we'll give you 5 cents in the dollar and be on your way similar to what Bitfinex did back in the day when they got hacked, you can offer them a security token. The number of rights you can give the ways you can structure it are just infinite.
You can say, okay token holder, creditor we're gonna give you this token representing how much you lost and for the next five years. You'll get paid out X percent of profits until you're made whole, or, you'll get a coupon payment of x percent per year. You can structure it a million different ways.
The bankruptcy court helps you fast track this security into existence and you have all of the guardrails of a, a regulated instrument. So it's. It's proven very valuable in the current environment. And yes we've been speaking with a lot of different companies that are in distress, investment banks lawyers, and yeah they're very busy right now yeah we're educating a lot of them.
14:22 Anthony Noto: Indeed. But I gotta ask you there you said on Twitter, this is an absolute mess. This bank bankruptcy will take forever when they unravel this dumpster fire. I wouldn't dream of operating a startup like this, much less a multi-billion dollar company. And before we hit record, you called INX, one of the cleanest shirts out there.
Are we at voting of bad players off the island moment where it should we be grateful that this FTX scenario happened. And I mean that, I know a lot of people are hurt and they lost money, but is, like you said you've gone through this. Do you have a little bit of a deja vu where this system can emerge better. In a larger scenario when Lehman Brothers collapsed, like you mentioned maybe we owe a debt of gratitude to this happening so we can, so the industry can get better. Yeah. I would hope so. It's I don't want overbearing regulations. I think, and I think what happened here was more.
That regulators were asleep at the wheel and just weren't paying attention, really. And yeah, but regulators have been paying attention though. They're, they, we have senators that talk about it quite often about how this industry needs to be Reed in, but then you have Sam Bankman freed, slept on the cover of magazines One second.
it feels within one breath he's, he's got nothing. And now we're calling him his business, a dumpster fire where he was pretty much glorified, not that long ago. So I think regulators were talking about it for a while. What would be over regulation in your point of view?
Alan Silbert: It's right now, to operate in the US is. Is pretty onerous. So it's already a burden, honestly, we, we roll up to, I don't know, probably a hundred different regulators, between our, SCC registrations and our FINRA license and money transmitter and even through state blue sky processes and, it's like to international regulators.
It really needs to be streamlined. It needs to go the other direction. So this FTX debacle is gonna set us back a few steps. In the US every, we need more consistency of regulation really. Instead of that you have. Many different regulators that have different rules and different thoughts.
But here, yeah, through political influence relatives with high up friends. Yeah. Sam worked his way into the upper echelons and was like their favorite person in Washington . So yeah. But But yeah, it's, we took the slow and boring route.
We've been plotting along over the last few years accumulating licenses and, to go back to what, what I mentioned earlier about being the cleanest shirt. Yeah it's I don't, there's very few companies like ours in the world that have the licensing that we do that are, very clean above board.
With the kind of controls, practices, licenses that we have in place. Yeah. And it's, I speak to people now, they're like surprised, but a company like this actually exists. Even some of the, like regulated players in the states in the crypto space are, not operating with the licenses that they should.
Yeah so licenses became more valuable. Absolutely. So in that case, do you consider this, is that the Silbert lining of this FTX fiasco? Because, like we were talking about before, too many people went the shortcut route. You guys went the hard way and now you're seeing it pay off.
Yeah, no, I mean for INX, absolutely. I'm sorry it had to happen this way in the space. But, we're happy to step up and help and use our expertise and and we have one of the few places probably would, probably the only place in the US that you can trade a security token 24 7 365 amongst the general public.
So for companies in bankruptcy that wanna issue a token, like a recovery token, we call it as part of the bankruptcy, we're one of the few places that could trade after the fact. Because, you might, you could issue a recovery token, let's say to a creditor, and then, know, there might be a million creditors like in ftx, just all, all the account holders.
You can, we can issue added recovery token with certain attributes and then we can start trading it on our trading platform or our ats. And maybe a creditor doesn't, they don't wanna hang out for five years and hope for the best. They just wanna get out, but then they can sell it to a willing buyer.
It just just, it, it gives 'em uh, instant liquidity to the claim if they want it. With no restrictions whatsoever. It's, it'll just be a freely trading security very soon after, they close up the bankruptcy process. So it, yeah, it's, INX can offer a lot of different avenues now. It's gotten really interesting.
Ironically, the bankruptcy process is speeding through security matters. It's a, it's a funny irony, but that's, when we did our IPO, it took us 953 days to get from the beginning of our first draft of the prospectus until the SEC kinda cleared us. Yeah, so this, the bankruptcy court makes it a much, much faster process to get us security into the hands of the public.
20:22 Anthony Noto: It was interesting Senator Pat Toomey said this wasn't a failure of crypto, it :was a failure of people And I'd like to get your thoughts on this, why wasn't it a failure of crypto? To the average person, to the average person of cryptocurrency, almost feels like really complicated algebra or calculus, which most people hate.
And the industry hopes to catch on with the casual consumer. So why wasn't this a failure of crypto? .
Alan Silbert: Yeah, so I, yeah, I actually, I met Pat Toomey last week at a conf, at the blockchain association policy summit in DC which happened like immediately afterFTX. It was a very timely conference.
And yeah, I heard him make that speech. What happened at FTX could have happened. At a widget factory, right? They just they just had a lot of money, or it was like, or Enron, it was just a lot of money in their hands that they used inappropriately. They operated in an unregulated jurisdiction in an unregulated way.
And they just use greed and mismanagement to totally implode this company. Yeah. There's nothing about crypto that made this happen, really. It was more of just the unregulated nature, greed, mismanagement. If you take Bitcoin is the most extreme example of decentralized Bitcoin itself, there's nobody that turns the levers really.
It just operates on, its. It just goes on. It's, it's always up, it's always generating blocks approximately every 10 minutes. Bitcoin can't steal your funds, can't leverage your funds, can't mismanage, you can't, can't abscond with your money. And I think when people say it's not the fault of crypto, if in a purely decentralized model, these things don't happen.
You don't you don't have to trust anybody because things operate on their own. So that's, yeah, that's my thoughts on that.
22:42 Anthony Noto: It's interesting you mentioned Enron because the Enron fixer John J. Ray III is quite a name. Yeah. Is is the one sort of overseeing FTX now.
What needs to happen for heat, for FTX to even come back? What does that look like? Can you, is there any, can you give us a quick curtain razor into that bankruptcy process? Cause I've covered bankruptcy. Yeah. I actually just love factories and stuff and banks and, but this is something a little bit foreign to me.
Alan Silbert: Yeah, I was actually, I was just listening to the bankruptcy court one of the hearings before where they were actually discussing just making sure the names of the clients of FTX were redacted were hidden from any kind of paperwork that's floating around. I think it was the Celsius, I think it was in the Celsius bankruptcy, where information got inadvertently, pushed out.
Or maybe not even inadvertently. Maybe it's just because it's part of the public bankruptcy process for that, that wherever the jurisdiction is. But in any case, that's what they're talking about today. But yeah, they, yeah, they found, they brought in the Enron fixer because this is gonna be, very complex.
Yeah. And I think you probably saw he already characterized this as like the, Historical bankruptcy and it's gonna be a mess. And that's because, first of all, they FTX or chart is, it's a site to see. It's hard to follow all the lines.
So you have to dig in all the different entities where money was moved possibly or taken. Illegally who owns what entities have value left in them that they can they can liquidate for the creditors, right? They're the company's record keeping. Like I said before, the record keeping controls, everything was like an absolute mess.
He's gonna have a his hands full. I'm sure there's many forensic accountants and everything in there. He's gonna really have his hands full, unwinding everything and seeing where money is. It's yeah, I think even I saw even today that like Sam's parents I guess the company bought them like a place in The Bahamas or something, so they have to That's right.
Sell the deed to this condo back to the estate. So there's just, there's so much crazy stuff going on. It's gonna take a while, unfortunately. To, to work through the process. But, again, this is another situation like a recovery token. It could work if there's, I believe I saw they have a billion dollars of cash or a billion dollars of assets there.
There's something there. You could form this into a recovery token for the creditors. There, there is a way to do it. It's bankruptcy in the us as of right now. There, there is a way to do this in the form of a recovery token. Yeah, it'll just it'll take some time to work through, for sure.
26:08 Anthony Noto: We have an event coming up in December December 7th, December 8th, here in New York City where I am. It's called the Future of Crypto.
We have a long list of really great guests who are gonna be talking about the industry, and it's the event is called The Future of Crypto. In your opinion, what does that future look like? What kind of a crypto startup will survive in 2023
Alan Silbert: I think the foundation has been built in the space to the point of where there's no turning back. Like it's, the crypto is absolutely here to stay. Blockchain technology is here to stay. There's gonna be like a cleansing, it's gonna fall back to like its foundation and its anchors.
Like typically the anchors have been like absolutely Bitcoin because it's like a purely decentralized crypto that's just never gonna die. And also like an Ethereum, which you know, which seems to regulators have blessed is not a security, which, has it's own features as well.
And the things you can do with an Ethereum, a smart contract are, pretty amazing as well. Like our token runs the Ethereum blockchain. It's an ERC 1404 token. We can build things into our smart contract a white list. So our token can't get moved anywhere unless the center and receiver whitelisted, it's governed by the blockchain.
So a lot of these, like technologies and features are are, Or pioneering like the next iteration of FinTech and they're not going anywhere. Yeah, you've, you gotta do things the right way going forward. It's regulators are gonna be, scrutinizing everybody under the sun that mentions crypto in their business plan.
You have to do things right from the get go.
Anthony Noto: Why aren't companies doing it right from the get. . What? What? Why not?
It's expensive. It's expensive. Yeah. Expensive.
Anthony Noto: Not as expensive. As expensive as buying a house in The Bahamas?
Alan Silbert: No, not as , I just it's just the harder, people take the easier route. This is what they, what the easier route. And that's, that's why they, that's why they do it. And we just we were just very patient and deliberate and, it's a part the fabric of our company is just, we wanna be in a regulated space and so we did everything the right way.
Anthony Noto:You mentioned before, regulators are gonna be scrutinizing the space even more Now, say for example, you have five minutes to chat with Senator Elizabeth Warren, someone who's been pretty vocal about it. What do you say to him?
Alan Silbert:Yes. Yeah, she's a funny one to choose because yeah, she's not particularly friendly to the space. This administration has been difficult in general in that things really haven't moved along. Along. It's the politicians they have their constituents.
I think Elizabeth Warren has a couple kind of traditional world like money transmitter or payment companies that are her donors. But she's not necessarily like the person to go and talk to . We try in a space, but a lot of it's just about education. You just, you just, you constantly have to educate them and reassure them and the reassurance parts what's gonna take a couple steps back and like the trust there's been.
A lot of goodwill done by companies in the space to educate and to get us to where we are today. So we're gonna take a couple steps back. We have to all kind of regroup, and just go back, try to work together to have sane regulation that protects clients, but doesn't make it totally onerous to operate in the space.
I consider the US to be on the more, more onerous side just because of all the different regulators and everything. And we try to push them regulated like the internet, the internet was given. Free reign to innovate in a certain way.
But yeah since there's money involved here, just gets more complicated.
30:57 Anthony Noto: Cause the industry does feel like it's being given to us like bad tasting medicine at this point. So what needs to happen for it to be in this. Sweet spot where more retailers adopted cryptocurrency as a form of payment.
What needs to happen for it to go mainstream? Because like you said, you've been in this industry for 10 years now. It doesn't seem like it's mainstream. A lot of articles seem to come out where it says, oh, it's mainstream. It doesn't feel that way. Especially if you look here in New York and when you go shopping online, it doesn't feel like cryptocurrency has really hit a stride.
And this year it has definitely not helped.
Alan Silbert: Yeah, I can't emphasize enough like how far it's come because it's a dramatic improvement from when I started in the space. But yeah, there's still a long way to go. The ability to use like like Bitcoins easily, we're getting there.
It's. All the boundaries have to, the UI UX has to be very easy for people to be able to use it like they use Venmo or anything else. So we're getting there. It's a problem in the US that there's no do minimus tax exemption for sending Bitcoin. Right now if you buy a cup of coffee with Bitcoin, that you have a capital gain on is technically tax.
Things like sensible things like that have to get through the government that have to be passed into law. But yeah, I think, it's got to when I first got into the space what got me enamored with it was that it's democratized money. You don't have to trust your government, the US government just, prince trillions of dollars every month.
It's kinda gotten outta hand. You can have your own money. Billions of people in the world are unbanked or unbankable just because the the banking regime will only bank certain people with a certain that meet a certain set of rules. You probably have a few billion people that are just unbanked or unbankable.
It's only fair that you have some democratized money and that people can, I don't know, send back to their family in Africa or South America just with their phone for a few dollars instead of going to Western Union and getting gouged for 10 or 20% and that's the core of the whole space.
It's not going away. There's this kind of democratized money and and. Trustless that we try to build into the, these kind of protocols. Yeah, it'll, it's definitely, it's gonna take some time. Like right now, if you send money back, let's say you wanna send money back to your family in Africa and billions of dollars flow back to people's home countries every year.
It's a major money flow. Right now if you send money back to your family, Africa. Okay, so now you sent them Bitcoin, you sent them, so now what do they. They have to be able to, put it into local currency or they have to be able to use it for goods and services.
These kind of things just take a long time to to develop and, to, for the ecosystem to develop. And it takes a lot longer than 10 years. We're, we've come very far, but know, it's, it takes a more time.
Anthony Noto: Last question. Like I said, we have an event coming up on December 7th, December 8th.
I hope to see you there. And a lot of people come to you for answers. You're clearly an expert in the space, you know so much about it, and you have that old world expertise. In a pre cryptocurrency world. What questions do you have? Everybody comes to you with questions, but is there, are there any questions that you have?
What peaks your curiosity? What would you like to see answered? What would you like to see people discuss at an event like ours and in other corners of the cryptocurrency?
Alan Silbert: I think we need to put all of our brains together about what the, the best way is to move forward in a regulated way while not squelching innovation or slowing down the space and there's ways to do it. So I think it's when I talk to people, I just try to, pick their brains for what, how they think this is best accomplished.
Do we need to consolidate things under one regulator? Do we need to I don't know, have state authorities all form a coalition together and have a more efficient path to licensing? So yeah, a lot of my kind of inquiries go to just, The space is it's gonna, everything's gonna be under a regulatory umbrella.
So it's everything that I'm curious about. It is, how can we push things forward in a regulated way, in an efficient way, and so that we can bring this technology to the world and then keep progressing it and keep these bad actors out
Anthony Noto: keeping bad actors out. it sounds INX is a good actor. So I appreciate you taking the time to speak with me today. It's been a pleasure.
Alan Silbert: Thanks so much. It's been pleasure for me too.37m | Nov 23, 2022
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