The Pomp Podcast - 342: Kendrick Nguyen on The Future of Digital Securities

Episode Date: July 22, 2020

Kendrick Nguyen is Co-Founder and CEO of Republic, a crowdfunding platform with a mission to democratize fundraising and a vision to become a true marketplace for private investing. In this conversation, we discuss the state of digital securities, COVID-19's impact on early stage fundraising, how the Republic Note works, and how Kendrick believes digital securities are likely to evolve over the next five years. =============================== The BTSE exchange allows you to trade confidently. They are the leader in futures, which means they are pioneering Futures 2.0. With BTSE, you can trade next-level futures: freely choose and combine your margin and settlement assets and trade with up to 100x leverage. You can also sign up for a BTSE Elite membership that gives you unbeatable discounts and bonuses across the BTSE Exchange, OTC platform, and more. Go to BTSE.com/pomp to get a 10% discount on your BTSE Elite membership. =============================== Crypto.com is the only all-in-one platform that allows you to BUY / SELL / STORE / EARN / LOAN / INVEST crypto all from one place. Join over 1 million users currently using the Crypto.com app. Download and earn $50 USD using my code ‘pomp2020’, or use the link https://platinum.crypto.com/r/pomp2020 when you sign up for one of their metal cards today. =============================== Pomp writes a daily letter to over 50,000 investors about business, technology, and finance. He breaks down complex topics into easy to understand language, while sharing opinions on various aspects of each industry. You can subscribe at https://www.pompletter.com

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off. Kendrick Wynn is the co-founder and CEO of Republic, a crowdfunding platform with a mission to democratize fundraising and a vision to become a true marketplace for private investing. In this conversation, we discuss the state of digital securities, COVID-19's impact on early stage fundraising, how the Republic Note works, and how Kendrick believes digital securities are likely to evolve over the next five years. I really enjoyed this conversation with Kendrick and I hope you do as well. Before we get into the episode though, I want to quickly talk about our

sponsors. The first is Bitsy. It's spelled B-T-S-E. That's right, Bitsy. It's got one of those tech names. The Bitsy exchange allows you to trade confidently. They're a leader in futures, which means they're pioneering futures 2.0 with bitsy's you can trade next level futures where you freely choose and combine your margin and settlement assets and trade with up to 100x leverage 100x you can also sign up for a bitsy elite membership that gives you unbeatable discounts and bonuses across their exchange their otc platform and much more you can head over to bitsy.com slash pump Again, btse.com slash POMP, and you'll get a 10% discount on your Bitsy Elite membership. If you're interested in futures, leverage, or anything else to do with trading crypto,

head on over to Bitsy, btse.com slash POMP. All right. And then if you're a retail user, you can use our second sponsor, crypto.com. They're an all-in-one platform that allows you to buy, sell, store, earn, loan, or invest crypto all from one place. They've got a mobile app with over a million users and Crypto.com is fully focused on driving mass adoption. So if you want to use futures, go to the Bitsy exchange. If you want to use the retail product, go to Crypto.com. And when you go to Crypto.com, use their mobile app.

You can buy, sell, store, earn, loan, or invest. They got so many things you can do, I can't even say it. So buy, sell, store, earn, loan, or invest crypto all from one place. It's literally a mouthful full of product functions. Crypto.com, dope URL, and also where mass adoption is occurring. So lastly, don't forget that I write a daily letter to over 50,000 investors about business technology and finance. I break down complex topics into easy to understand language while sharing my personal opinion on various aspects of each industry. You can subscribe at Pompletter.com. Again, Pompletter.com. All right, let's get this episode with Kendrick. I hope you guys enjoy it. Anthony Pompliano is a partner at

Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. this podcast is for informational purposes only all right guys bang bang kendrick is back for i think round two maybe round three but i think round two uh thanks so much for uh for doing this man thank you so much for having me pom uh it's such an honor and always a pleasure absolutely so for those that didn't listen to the first one we did together maybe just let's start with kind

of 60 seconds on your background and kind of the things you did to get to uh republic and start that business? Yes, sir. I started out as a securities lawyer. I was an AngelList general counsel and launched Republic about four years ago. At first, nothing to do with blockchain. In 2017, I helped AngelList to co-found CoinList, set that up, and CoinList is a phenomenal team. They didn't need me anymore. So I went back to Republic, but we're basically an investment platform one of the largest by now 700 000 community members uh and investing in uh from seed stage all the way to like free ipo some of the projects uh crypto projects um but you know most of our deals still are in traditional equity got it and so one of the things that's really

interesting i think about what you guys have done is uh and you really gave me kind of a crash course on these Regulation A plus type offerings versus other types of offerings. And so maybe give us a quick update, just what has gone on at Republic for the last kind of two years or so? How much of that is through Reg A plus versus maybe other types of regulations

where the fundraising is occurring? I'll start with an offering that we have right now as a combination of Reg D and Reg A, which is our own token for the Republic note token. But why don't we just give a very quick overview of all of these regulations in a way that is for mainstream consumption. So there are really only three ways for which non-accredited investors in the U.S. can acquire private securities or digital securities.

Either the company has gone IPO, gone public, and that's a really high hurdle. Obviously, very few opt for that route. There's a regulation CF, Stanford Crowdfunding. very easy couple thousand dollars any project or company after two three weeks can go through a platform right like Republican raised but there's a cap a million dollars right now soon to be five million meaning you cannot take more than a million dollars from non accredited investors then there's reggae

which is between rec CF and going public cost about a couple hundred thousand dollars probably about six months to prepare for and then either a company or a project like Republic or Blockstack or Props can raise up to $50 million from non-accredited investors. And I say non-accredited investor loosely, but it essentially means anyone and everyone. You can be a student, you can be Bill Gates, and you can invest openly into the campaign. So how is relevant to digital securities or token offerings in the US is that I do very much believe that the challenge, the roadblock for industry adoption up until now has been the lack of everyday folks participating. And there are a couple of reasons for that. One of which is that

most people are not accredited, right? In the US, like 95% of everyone are not accredited. And so they have not been able to compliantly get in, which is why you see the industry more or less the same as it was two or three years ago. Got it. And so when you guys work with companies that want to raise funds, are they doing both or all three, Reg CF, Reg A+, and Reg D, or do you just work on the Reg D and Reg A-plus side? The different exemptions, the different tools, got to be case-by-case analysis on how they come to to apply and that's why there isn't really anytime soon like a sas model that hey you come to us no human touch by advice is needed and boom you launch no because it depends on you know what

your customer base you know look like and and and how much money you're looking to raise uh so very few projects would do all three of them either you do a reg d which is what any company and token offering in recent years have been doing. And you add on the REC-CF or REC-A component for non-accredited. And interestingly enough, in the United States today, still there have only been two REC-A offerings for token offering as far as I know, which is Blockstack and Props. And Republic is working on the third one. Got it. And so when people are coming in to vet this, What's the type of information that they're getting today, and then what does that look like in terms of, you mentioned 700,000 kind of people on the platform, what does that

look like in terms of capital raised so far? Yeah, if you go to Republic today, you see the public arm of Republic, which is companies that we have onboarded under either REC-CF or REC-A, meaning anyone can see, even a student can invest as little as $10 or $20. Now, the information that each company posts goes through our standard process, so they kind of like the same there's a video there's a little bit of like a few bullet points on on highlights and then there's a link to their financials posted on an sec website which is very different than deals done privately we do have a private arm deploying private capital

under what is known as rec e and that is similar to how the venture ecosystem works very opaque not a whole lot of information only for sophisticated investors that can look at a company and make their own assessment of whether or not this is a deal worth doing and on that side you only see a deal once we're done with it unless you're invited as part of the network we've deployed capital into carter uh spacex relativity uh you know all of robin hood most recently so the the profile for projects are very different one leaning later stage and the other one is on the earlier stage. Got it. And then maybe talk a little bit about some of the projects themselves in terms of what those companies do. For those that are just listening, you're sitting

and you have a Zoom background and the two posters, one of them says investing crazy ideas and the other says investing crazy visionaries. So maybe talk a little bit about what are some of those things that you've seen come through on the platform and be successful? Yeah. I want to share a fun fact and uh up until recently i think our industry people think of like blockchain as like a standalone you know completely bifurcated from the rest of the world and i don't think so at all i think blockchain is just a technology that's like interwoven with fintech uh you know necessarily so so um the investment and the products that we do even on the surface seems to have nothing to do with crypto or blockchain down the road uh we are working on tokenizing

all of them and there will be defy products uh you know on the back of the investment that you're seeing right now but diving back into to your question right now you know there's a company called teo t-e-o-o-h and it's essentially zoom 3d right and they while they were raising on republic they also closed a investment from spark capital which is a you know a top tier vc but technologies that people understand because you're talking about mainstream presentation and people typically take less than two minutes to look at the deal page and make an investment so it has to be technology that people generally understand so we see a lot of deals in that framework and i think snowball money is the deal that most recently closed and that's a blockchain

company uh but in a way that's very relatable you know work uh obviously in in finance i think the block stack, the traditional protocols probably won't get mainstream adoption just because it's harder to understand. And so the adoption will come later, whereas I think DeFi and tokenized securities are things that will drive the industry forward quicker. Got it. And then maybe talk a little bit about how much capital has been raised on the platform or kind of what the average deal size looks like so people can understand that. Yes. Again, it's still breaking down between the public platform and the private platform, but in the aggregate, we've done over $150 million since inception. Much of that, which is

over $125 million, came in the past 18 months. So it's just a snowballing effect for what is a nascent industry. But this year, we do hope to close the year at over $200 million in total investment volume. That's awesome. Congratulations on that. There's a lot of people who say, hey, digital securities, I've heard this narrative before, right? I thought that this was going to be a massive thing in 2018, 2019. It doesn't feel like it kind of accomplished what I thought it was going to accomplish. Not saying that it won't in the future, but just it kind of didn't happen as fast as I thought it would. How do you talk through that with investors or kind of think about that, given that you kind of a front row seat to this every day? It's a great question,

And Tom and I have been getting that question a few times in talking to institutional investors as we were looking to fundraise about six months ago. And the answer is this. If you have this notion of so-called digital securities that change, I mean, 80 years of financial ecosystem, financial products, Wall Street, we're talking about making it possible for the masses to participate, easily buy and sell, bypassing the NASDAQ, you know, the OTC desk of the world, naturally, it will take a little bit of time. Everyone thought that, back in 2017, I certainly thought that by 2020, the world of finance would be much more

decentralized and blockchain would have played a bigger role. And I was wrong. I was definitely a little bit too early for a number of reasons one is that technically the the functionalities the feature sets that would enable this didn't quite exist back then that is how do you conduct know your customer anti-money laundering how do you verify accreditation how do you block jurisdiction uh barriers you have to do all of these things to be in the good ways of the sec and FINRA and all of these regulators. So when it comes to digital securities, you do have to account for government and regulations and that whole compliance framework. The technology did not have adequate features to make that possible or feasible. Now, as of like the end of last year

and earlier this year, everything is there. Even the legal and business framework, we had it back then, but no one has gone through it. Back in 2017, there had never been a reg A involving digital securities. The SEC finally, slowly went through that process. So there were a few missing components for the industry that necessarily prevented adoption technically and legally. And then there hasn't been, I think, a major asset that people look at it. Your doctor, who's retired now in Milwaukee, didn't know very much about blockchain. He looked at the asset and said, huh, I get it. This is relatable.

We haven't seen anything like that. We've seen real estate properties, some class B properties somewhere being tokenized and available to accredited investors only. How can we have active trading, active market and adoption with that kind of nascent emergence? But that said, though, now I do very much believe that over the next 12 months, you're going to see a renaissance of sorts when it comes to STO and digital security. And so when you think about that, what type of asset do you think could be kind of the breaking of the dam in demand? Like what type of asset would that take? A little selfishly and self-promotional, but I obviously think that the Republic Note token,

which we launched the public sale a few days ago, and glad to share that the soft cap that we put was oversubscribed within just a couple of days. We have a very large community, and our token, I should describe it a little bit, is a profit-sharing token. That is, when a company on republic season exit we realize some proceeds and we pay that proceeds out to the token holders proportional to the token that they have so if uh someone buys a republic token and robin hood or space acts goes public in two years and it's going to be a very small amount but an amount being paid out to to the token holders that is relatable meaning people can look at it and say here's a regulated business with clear revenue with over 150 million dollars have been invested

and they have upside in these deals and we have this community which is 700 000 uh and growing so we do think that the the our user base alone is larger than many exchanges uh and so we have the ability to to in and by itself feel that liquidity and demand but we are just you know basically the first of many to come our goal is to identify major movies sportly studios real estate portfolio help them tokenize and make it available to to the masses um but yes i mean the the use case for tokenization i think are just countless uh and uh the concern is once the floodgate has been opened and people see the value in it how can the system accommodate you know let's say all at once uh 20 different very large enterprises wanting to tokenize but that's a good

problem to have for sure and maybe explain a little bit more about uh the republic note token because i saw a couple of announcements uh online but my understanding is uh an investor can come in they buy the token all of that money gets pulled together uh it gets invested into deals that go through the republic platform and then as uh there's profits it gets distributed back on a pro rata basis to investors or am i misunderstanding that yes no no i there's no reinvestment in this one sense i think of the easiest way of looking at it is this if i may use an analogy uh you know back in 1996 if amazon were to say that hey we're gonna issue pre-minted fixed 800 million token and then we're gonna put 25 of our revenue from there on whenever 25

revenues generated they're gonna make a distribution out to these tokens on an evergreen basis at the time probably was a modest uh distribution uh but obviously fast forward 20 years each of those tokens would be i don't know how many hundreds of thousands of dollars in value the same concept here which is we pre-mint a fixed pool of token and then on a perpetual basis we will make distribution of profit back to the token holders what are those profits well we have an upside we every company that raises on republic we have an upside potential whenever a company sees an exit that upside potential is realizing cash that cash is paid back through a stream an issuer and going back to the token border so one way of another way of looking at it is that when we

started out with this project and where i think we were binance first portfolio company we had done only about 15 raises and we've raised less than six million dollars uh and even at the time binance was like there's a potential for this or the pool of future profit and asset over a year and a half two years now it's over 150 millions in total amount raised and the pool of asset is probably worth at least 20 times what it was in 2018. so if we continue for two more years it's just increasingly amplified on an average basis yeah that that's awesome and what's really interesting about this is the profit share is basically the profit of all of the successful companies that go through the Republic platform, right?

Because if they're unsuccessful, there will be no profits, but when they are successful, it's a way to kind of almost index your exposure to a bunch of different companies, it seems like? Correct. So the unusual attribute of that, and you being one of the most prolific and known venture capitalist in the space as well as you know generally speaking we all know that if you just invest even if you um were to just invest in one or two or three deals and no more i mean there's a high high risk of you seeing very little of that money back right so the name of the game

is obviously a number game even among the very best venture capitalists so what's unusual about the republic note token is that it gives note holders indirect exposure on an evergreen basis meaning at one point say 10 years down the road republic has done 15 000 deals through uh crowd capital that every note holder as long as you hold a note when a company out of that pool exit you're going to see a payout which lends itself to a very unusual token economics issue that is people will be reluctant to sell because the moment that if i hold a note token and i will sell it to you uh palm and all of a sudden robin hood sees an exit the payout will be to the new note holder not me so out of that that that psychology of wanting to hold on for long-term return

rather than permanent i do think that it's going to introduce an interesting but probably a positive dynamics to to token economics compared to what we have seen in the past couple of years yeah it's super interesting and i guess how does this impact the traditional markets right so we see like a coinbase for example that's been talking about uh or at least rumored to be talking about potentially going public uh i know that brian armstrong previously had said that like the most on-brand thing would be to digitize or tokenize the equity of the business it sounds like maybe now they're exploring the traditional side at some point it feels like those two markets like they meet right and either they merge together and play nicely or one ends up winning

and the other ends up losing. And so just kind of how do you think about digital securities versus traditional market over like a very long period of time? I'm obviously going to guess, make a guess here on the decision-making process at Coinbase. But I think at one point, the management team at Coinbase made the decision that, hey, we're so large now in an institution that it's easier to go through the IPO, the traditional going public process. than dealing with digitizing and digitized tokenized securities, given that the traditional

process is a clear roadmap, there's less of a risk, there's less of a gray area. It comes with a lot of hurdle, but it's exactly what they are, what they are. Everyone, people have done it before. And yes, it is a way to provide public access. That said, there are still limitations to the traditional model in that once and if Coinbase is listed on NASDAQ, it's not easy at all for a Chinese resident, an Ecuadorian resident, Peruvian, Vietnamese to participate. Those people cannot easily buy Tesla today and they will not be easily have access to Coinbase in the future. I think down the road, I think it will take probably at least five years for the traditional public market it to be digitized and modified by what we will see in the STO world, but over the next

year or two, the change in STOs and digital securities for early stage companies and projects, I think will pose a serious, or at least raise a serious conversation for the NASDAQ of the world, because they know that in five years out, they won't have candidates to go IPO given that people would already have opted for digital offerings much sooner. And so it sounds like it's fair to say that people can go from traditional non-digitized equity and digitize at any point in the life cycle of the business, but it's much harder if you start out with digitized equity and this token structure to go back to the traditional world.

So at some point once you cross over, it's hard to go back and say, if I raised money early on through a digital token structure as equity to then go get listed on the NASDAQ or the NYSE would be pretty difficult? Well, it is rather than difficult, I would say it's an unknown. And within that kind of highly regulated world, any unknown poses a risk. So I would say that it's rather than it being difficult, as long as in your structuring of your digital offering, you know, your STO early on as a private company built in there a framework that is good for investors, good for token holders, but gives you the ability

that if you so choose, it becomes so crucial for the company to go public traditionally, that you have a way to give return back to note holders and basically be able to claw back those tokens in a way that token holders are happy with and random shares in return. So there's still ways for you to go, you know, to reverse and undo things. At least, you know, we do see a path for that. But that is a big unknown. And, you know, a question in my mind is whether or not the IPO model will continue to exist five years out, 2025 and above and beyond.

I don't know that you will see the kind of like, you know, Uber and Coinbase IPO that we are seeing now. And we already see in the traditional world, there's definitely some movement or change, right? So we've seen the, you know, Spotify's and the slacks do direct listings. We've seen the Virgin Galactics go through these kinds of SPAC acquisitions. And so there's definitely some pressure there or some change. It feels like digital securities is kind of further out than just a one or two year thing. But to your point, if it can solve some of these problems, there's lot of companies say why wouldn't I do that if it's just a better path and not

only that truly the SPAC and the IPO process is only for the Coinbase of the world and even then compared to the 90s the number of companies you know the number of public companies out there in the US I think something like 50% less than it was like 30 years ago so it it has been a trend that's like less and unless companies choose to go public, the notion of digital securities and STOs is such that it's usable, applicable to even seed stage companies and projects.

So I do think that currently in the near term, the two models serve very two different demographic. Coinbase is probably the only company that I imagine that there was ever a board conversation of, should we tokenize our equities and and make it available that way or should we go public and they seemingly chose to go public but for pretty much everyone else that's not a dilemma that they have to deal with i i don't think yeah it's absolutely fascinating to to kind of hear like what is your pitch to entrepreneurs

as to why should they do this um especially the earliest stages of the business rather than just raised through the traditional means um the the the easiest way to think of it is just i mean republic is uh an example why do i answer that question uh in the context of why we decided to issue a digital securities we are a fundraising platform and the reason why we ended up you know choosing to launch as a crowdfunding or crowd investing platform is that we think that if a customer consumer community member has skin in the game he or she would be that much more you know ardent in in eventualizing and buying more product and telling people about it and that value proposition is played through and through uh there's no clearer example of community community

ownership than the fact that airbnb and uber before they went ipo asked the sec permission to give equity to the drivers and the people you know the the list to an airbnb at the time the sec said No, no special exemption. If you want to do it, use basic standard regulatory framework. So the value proposition of community ownership is very much there. In our case, there are two routes. One is that we can run another crowdfunding campaign for Republic ourselves and bring in 10,000 of our community members, each of whom hold a PDF or save or prefer share in Republic. The second option is figuring out a digital security to make it available. If I were to have done or conduct a crowd offering for Republic, it works for those who get in right away, but it doesn't allow them to transfer these things easily.

It doesn't allow me to make a distribution of $2 per share per token back out. If someone holds three shares, what, am I going to wire or do an ACH payment? So the automation behind payment settlement, transferability, KYC, AML, and international transaction, none of that would be possible with a traditional crowd investment campaign. So that's why we opted for it. And we have seen even just in the past few days and the months leading up to it, the engagement that a token model can drive and how it incentivize people to be more active is undeniable. And we believe that that value proposition is applicable to pretty much any business model with a community, maybe a sports league or a new project or a digital exchange based out of Somalia, wherever it may be. If you have a community, digital tokenization and a token model can apply to Amplify. Yeah. It's really interesting, I guess, too, because what you guys have seen is you've basically brought this to some of the most innovative types of companies in the world.

We know that unaccredited investors have a very hard time investing in startups and technology companies. It's very much of an insider's game. And so it feels like this is one way to kind of break down some of those walls or democratize access to some degree. How have entrepreneurs responded to the fact that now they've got a whole bunch of equity holders or new partners, and those people may have access to certain types of information that's considered sensitive or confidential. How does that play into this? That's a great question, and I want to clarify one thing is that no holders have indirect

access to these companies. We only provide information that is public information. We would never provide information that the company hasn't released publicly for a couple reason deference to them is one thing they also may be inaccurate if i hear that the company might have done something and i saying that oh geez company acts is about to get acquired and turns out that they didn't or aren't that's going to be a major problem so we only provide you know thorough but public information only the at the level of a crowd investing or crowdfunding campaign for a company like Republic to take on a thousand new investors, we have to go through a pretty

creative legal process to make sure that that's manageable. But one example at how manageable that is, is the fact that Republic now, through the Republic note sale, now have more than 6,000 new investors coming in and counting. So if we can make it manageable, you can trust that we make available that same process to the companies going out on our platform. But it's a little bit too boring and archaic of a legal deep dive on how exactly that is achieved. I'm more than happy to go in, though, if anyone is curious. And obviously, all of this has occurred during a global pandemic that has led to a recession, but is seeing stock prices explode.

and we just live in this like really weird complex uh kind of uncertain time how have you seen covet 19 and all of the the kind of impact of that affect fundraising for companies or even companies wanting to go and use the platform first i want to share that even fundraising during the pandemic i'm sure is not as challenging as planning for a wedding during a pandemic and so on that note just want to say congratulations again um the uh the past six months has been i obviously an surreal time for all of us i do think that companies looking to raise from venture of raising venture capital or traditional institutional capital have been going through a hard time meaning the public stock market has been performing better than anyone had expected

perhaps irrationally so, but that doesn't mean that institutional investors looking at private capital haven't slowed down a lot. And you may be a far more experienced person than I am to share a view on it. But from my lens, I think a function of that is given the volatility in the public market, a lot of family offices and institutional investors are delaying and are much more cautious It's about investing and providing more exposure to the private market, right? So the process, at the very least, has been dragged out longer for founders and projects looking to raise traditional venture capital, institutional capital. On the other side, though, retail capital has been doing very well. April was our best month yet, and May was much better than April, and June was like a banner month for us.

And it's the same for other players in the market. It's not a story that's unique to a public. There's one clear solution. There's one clear answer. One is that people have a lot more time now. So the value of like private investing and quite frankly of blockchain as a technology in general,

most people up until now have too little attention span, like nine seconds online. Like by the time you finish saying equity crowdfunding or, you know, SAF, you know, simple agreement for future tokens, people lost interest. Now they're stuck at home. So they're like, well, you know, between webinars and podcasts and newsletters and all of these things that they have more attention to follow.

And I think the value proposition of private investing, which is obvious, there's one interesting stat. I think it's from the Boston Consulting Group, that in the year 2030, 10 years from now, 75% of Fortune 500 companies in the year 2030 have yet to exist today. So you're talking about a huge swath of technologies and household brands who change how we work and live. And yet in someone's garage or in someone's head today, the notion that you can put $10, $20, a pitcher of beer, wood, in some or more of these potential ideas and play a role in it, I think it's naturally compelling. I don't think that anyone should be expecting to get rich out of private investing because they hear it in the news. It's just a wrong way of looking at it. But it's a really compelling thing to say that you've got to be a bit more of a direct participant in entrepreneurship, given that it's changing how we are as a civilization.

So I think that the message finally is getting through. And because of that, retail capital has, and I predict will continue to do very well. probably at one time larger than institutional capital yeah it's it's crazy to see the impact and how institutions kind of froze up and retail uh invested a bunch and um in the public markets obviously that was very beneficial for retail investors because stocks exploded kind of with all the feds yet reaction uh in the private market it's a little less obvious right in terms of our companies doing better or worse just because that there's not kind of that daily stock price to uh associate it with. Help me understand. Go ahead. Let me add on another point there is that after

the last great recession of 2008, that's when you started to see, I think Airbnb launched in 2009, WhatsApp, Stripe, Square, like major companies, corporations now launched right after following the recession. So that's the value of private investing is that it's not as affected by near term psychology and volatility, and only time will tell. And I do think you're going to see a similar batch of household brands coming out of today's pandemic. Yeah. Help me understand where we're going, right? Digital securities, you guys have obviously helped pioneer this. You're able to show that there is a community of investors. You're able to show that there is a community of entrepreneurs that want to use this as a way to get funding

for their businesses and kind of continue to build. How does this evolve over time and where do you see this going kind of over the next five to 10 years? And then what are the obstacles in the way from where we are today to kind of that milestone? Two answers for that, and that's a hard question, is forward looking. I was wrong about how quickly STO would be adopted back in 2017, but

I'm very optimistic that you're going to see that in the next 12, at the latest, 24 months, and seeing what, if that's the question. I think the easiest way of looking at the signal of maturation in this space

is when you have the Spider-Man, the X-Men movie franchise, or something comparable in sports. With clearly many millions of fans around the world and when they're looking to raise to finance the movie or the athlete and make it through the only way to do that still and will be in the near future is through this blockchain technology make it possible so that you know a student in india can invest five bucks two dollars into this movie to be produced because you know she loves the

the people and there's a non-fungible token on her phone that shows that hey she's you know an investor in this new superman movie and that if she goes back to her school and can sell it to her classmate you know very quickly for 10 percent more and the token would come with it and that's a new mark of being an engaged citizen that's like the equivalent of like wearing a chanel bag like what do you get in on and what do you own just a little sliver of it that happening at scale i very much hope to see that in 12 months no later than like 18 24 months now once that's doable and once you see something like that happening um the the iterations of tokenization naturally will come.

It's very hard to predict the full scale of it because I fundamentally, I mean, I believe that this technology will fundamentally change private investing or private asset classes as we know of it. First is people getting in at the primary level and then the secondary market will develop. That will naturally unlock the gold bars

that people have in Africa, in Latin America, in Asia, that up until now, they hide under their bed. That's the only way, that's the best way to save because they don't believe in the national currency and they don't believe in the banking system. Once you unlock all of that, yeah, I do see a vastly more prosperous world and that perhaps we, I don't know,

we may not see another recession again. They will really throw traditional economics completely off its rail. The challenge is and will be how fast and how aggressive the regulatory framework can adapt or hinder this process. DeFi is a very good example. So you see something like over $2 or $3 billion worth of assets now locked in various DeFi instruments. Still largely unregulated. And so people take these various positions on whether or not it's even regulatable, given that it's a direct transaction between, you know, two parties.

That said, you know, you have yield in double digits. I think some instruments yield over 100 percent, you know, annually. It's bound to be, you know, fraud and harms and all of these things. And so the SEC and FINRA and their equivalents in various countries, I think, will come in and will operate, will collaborate, and will hinder. And how that conversation or these conversations will take place in each country, I think, basically is the one single factor that will enable one to predict how accurately or more accurately how fast or how slow this industry will move through. But that's something that's why, you know, I very much believe in the conversation with the legislator and regulators rather than ignoring and pretending that they're not there. Absolutely.

And then maybe talk a little bit about the international nature here, right? And kind of how this opens up accessibility. You hinted at it a little bit with the DeFi stuff, but maybe just touch on that. In the case of finance, it's a straight up, up until now, it's not a globalized world. it is a national world. That's why Tesla, if you're in Vietnam or Ecuador, you can't really buy a public share of Tesla. It's crazy, but you cannot. And so these territorial or national borders, a function of it is that up until now, these governments are unable to stop the cross border transactions. And so over time, with so much activities going on, that they have to fire

way to legitimize it and so a function of it is driven by technology and a function of it is going to be driven straight up by conversation and that in smaller countries seeing how this technology can improve lives of people in their country allowing them to invest in things that are not organically available locally but available you know on a global scale that i do think that that these borders line will get blurrier and blurrier over time when it comes to financing particularly you know private investing which is what d5 is by definition just truly decentralized yeah what's next for you what what do you think at republic in terms of what are the things you guys are focused on over the next kind of six to twelve months yes uh after we're done with our

public sale and we even though we oversubscribed now we're gonna i can open a small allocation just to make our community happy uh and after that is focusing on a few more things which is uh you know qualifying our reg a application to make sure that we formalize the process of getting non-accredited investor in after that is really around community engagement the whole process of making sure that we provide information for for the note holders but beyond that i would say the next 12 months using the framework that we applied that we created and now apply for the note token for other businesses we're really working with a few so you hope to you know we hope you will see more uh digital securities issued by major enterprises with very clear value

propositions and a massive community you know issuing tokens to those communities in the same way the republic is doing to our own community and so the my my interest and effort i think focus squarely, probably 100%, just on the notion of making tokenization hopefully mainstream at last. Still a little bit of a way to go, but we think it's there. I love it, man. You continue to push the pace of innovation, so it's impressive to watch. I've been super excited about what you guys are doing, and obviously the Republic Note

token I think will go down as people will say, hey, that was a pretty good idea, and they will end up copying that type of mechanism. So congratulations on all the success. Where can we send people to learn more about you or Republic? First of all, thank you so much, Pom, coming from you. It really means the world. You've seen everything in this space

and advising guidance over the years have been so crucial for us. Yeah, we're at republic.co.com.co slash note, N-O-T, pretty much the entire white paper or relevant information can be found at site. And I do want to clarify that as all things related to private investing, high risk, don't invest money that you don't expect or can't afford to lose in its entirety.

And if you do invest in something new, invest a very small amount. Think of it as having fun with it and make sure that you read everything that is available to make that informed decision. But I hope you jump in and have some fun. Absolutely. So republic.co slash note. Please guys, go check it out if you think it's something that you may be interested in. And then Kendrick, thank you so much for doing this, man. I'm super excited and glad that we got caught up in terms of just where digital securities are today. And hopefully the path that you laid out moving forward, not only one kind of occurs, but happens even faster than you think it will, which would be fantastic for innovation in the finance industry. So fingers crossed and I'm cheering you guys on. Thank you so much, sir.