Secondary ATS

Speakers

Oscar Jofre

CEO and Co-Founder

KoreConX

Oscar Jofre

CEO and Co-Founder

Oscar is currently one of the Top 10 Global Thought Leaders in Equity Crowdfunding, a Top 5 Fintech Influencer, Top 10 Blockchain and a Top 50 InsureTech. He has published an eBook that has been downloaded in over 20 countries, and been distributed by partners worldwide. Oscar is a featured speaker on Fintech, regulated, equity crowdfunding, compliance, shareholder management, investor relations, and transparency in the USA, Australia, UK, Germany, France, Netherlands, Canada, Singapore, Indonesia and China. He speaks to audiences covering alternative finance, RegTech, insurance, banking, legal, and crowdfunding. Oscar also advises the world’s leading research, accounting, law firms and insurance companies on the impact Fintech, RegTech, LegalTech, InsurTech and OrgTech is having in their business.

Joel Steinmetz

Co-founder & COO

Rialto Markets

Joel Steinmetz

Co-founder & COO

Joel Steinmetz brings more than 20 years of financial services experience to the Rialto team. Joel has led efforts in building trading platforms, algorithmic systems, as well as new businesses while at Citi, Citadel, Instinet and Liquidnet. He has been involved in numerous transactions in capital markets at Citi and Instinet, and has performed deal flow analysis, structuring, and strategic integration. His experience spans the universe of business strategy, data analysis, and technology. Recognizing the obstacles for issuers and investors in the private placement market, Joel saw an opportunity to leverage the founding team’s collective experience to bring efficiency to inefficient markets, inspiring him to co-found Rialto.

Jim Caboy

Chief Compliance Officer

Rialto Markets

Jim Caboy

Chief Compliance Officer

Dr. Kiran Garimella

Chief Scientist & CTO

KoreConX

Dr. Kiran Garimella

Chief Scientist & CTO

Kiran Garimella, Ph.D., is the chief scientist and chief technology officer at KoreConX, leading the strategy and development of blockchain and machine learning solutions. A sought after speaker and author, Kiran has more than 25 years experience in information technology, consulting and financial services. Previously, Kiran held roles such as global CIO and chief architect at a General Electric company and vice president and chief evangelist for BPM at Software AG. He is also an advisor to the Alliance of Merger & Acquisition Advisors and the MidMarket Alliance, principal founder of iKnowCentral and co-founder of CognitiveWorld.com.

Oscar Jofre  32:45

Okay, everyone all right. It looks like he is there. There’s Dr. Kiran, we’re looking for Joel who should be making his way back. But Jim, you stay on there just for a little bit. Because you’re a nice guy. Everybody likes you. So Kiran and then Joel. And yes, I love your bow tie, by the way. Thank you. Thank you for that. I love the color. So we’re obviously down to the wire talking about secondary market and secondary market is the last stage after the companies live, they can sell their securities. So you know, Jim plays some role there. I mean, not only is he involved in the primary side, but it’s just as important on the secondary, having a great discussion with Kiran. So the floor is yours Kiran You were a beautiful green bow tie today.

Dr. Kiran Garimella  33:38

Wow, that is awesome. Is it St Patrick’s or something? Awesome. Hey, welcome, Jim. Love to have a conversation with you always, you know, you’ve been a great partner in you know, educated in this space, and really educating people on what it takes to do the primary and, you know, moving on to the secondary. So really appreciate that. And Jim, one thing really strikes me and, you know, hopefully, you can, you know, put some color on this one, I think the whole approach to secondary market has been, let’s build the market. And, you know, let’s start doing a lot of trading on that will all kinds of, you know, coins and tokens and stuff like that. And I think over the last couple of years, if anything else, we have come to realize that it’s not as straightforward or easy as it is because there’s a whole front end component to that one that makes it important for people to understand there is a compliance aspect to all of this, right? I mean, this is we need to know how the trading actually works. And you’ve been in the thick of this in, you know, so many different deals out there, and you’re living and breathing this. Can you shed some light on the importance of the compliance aspect? I would love to hear from you.

Jim Caboy  34:55

Sure, sure. So I will. Yeah, I’ll agree that when this first started out, You know, you and I had so many conversations for hours about what the token and the token and how do we let, and in the end, and this, I’ll act like or sound like an SEC lawyer at a conference right now, this is my own view. This is not the view of anyone in my firm, I don’t even know. But to me tokens right now, and trading in these markets. It’s not important. It was a big deal in digital and digital and the back end and how records are kept and distributed ledger technology is great. Blockchain is great. But when it comes to the securities market, and we could settle things in a day, if we needed to, we didn’t, we don’t need a token, and the way I understand it from Mr. Gensler it’s not gonna happen if I you know, that anyone’s gonna just sling a token from my wallet to your wallet. And there we go, the Apple shares that I had are now yours, let alone unregistered private shares, that we don’t, you know, only a transfer agent or an issuer may have the cap table for in the first place. So, you know, I, I, when it comes to compliance, just and in speaking with, with the ecosystem, and as we’ve been building the ATS and setting things up, you know, there are some that are very traditional that just, they still want to use medallion stamps and paper and think it takes two weeks if you don’t use a token. And that’s where you have to go Hold on everybody, there’s a middle ground, we can meet what we’re doing by using Blockchain, just not this token. That and when I say token, it’s the thing that would sit in your Metamask wallet or anything you’ve also learned in working with Doc over the last few years. Tokens mean a whole bunch of things in the technology world, but

Dr. Kiran Garimella  36:52

That’s right. It’s what’s amazing about this whole market, and this has been a, you know, it’s been a learning for us. And you know, like many people in our space, we have been at the forefront of this one too. And, you know, it seems to me that in a lot of people really don’t understand when it comes to secondary trading of any type in the space. The instruments of the hole for trading are not really bearer instruments, you just can put it in the wallet in drop it to somebody else, right, and becomes there’s just because it got dropped to somebody else, right? It’s not like a currency note, these are non bearer instruments that need to be validated independently and separately, otherwise, ownership just doesn’t pass that way. Right? 

Jim Caboy  37:35

I can’t put my private placements on a thumb drive and then leave them on a bus and go I lost $75 million. Not gonna happen when I don’t even want to be on a bus. And I haven’t seen a thumb drive in years anyway. So but it you know, like you’re saying, people think that that can happen. And I think what happens here is, let’s be honest, Reg CF, the type of crowd, the smaller investor, the crowd of the public that you’re looking for, they kind of you know, there might have been overlap with those folks that, well, I love the whole crypto thing. I’m away from the government, and bah, bah, bah, bah, and not that all cryptos, you know, away from the government, whatever, I don’t want a drone. But that kind of those folks got excited about the crypto and they saw that and people in there when this first started, we said those shares, that’s how this is going to act, let’s just move this whole thing. Fast forward at that into into that kind of digital world. And in the end, that it just the SEC just didn’t agree. And it didn’t need to happen. And so I think in the beginning, it was driven by, by that kind of, you know, those that followed the crypto and the blockchain and saw that, in the end, it’s we just don’t need that that portion of it that we just, you know, the records on distributed ledger, that’s great to be able to move things around and understand and keep tokens on folks and know who they are and white label things, all important. And it’s just that one little sliver for me of actually leaving a wallet and going to someone else’s as if it was a bearer instrument. It’s just never going to happen. So

Dr. Kiran Garimella  39:11

You’ve been in the thick of so many conversations with clients and investors yourself. And so have I ever been together on many of those right? 

Jim Caboy  39:17

And they ask, Can I keep this in my wallet and you know, issuers want to know when they you know, some come to us and say I’m looking to digitize this right away? Yes, you spend your money how you want to spend your money. But so you know, as the broker dealer that’s doing one the primary and doing to the secondary, we’re agnostic to whatever chain, you put it on, whatever, because at the end of the day, I just need to know that Joe Schmo owns seven shares, and that they’re unencumbered and that he’d like to sell. Hopefully, it’s 7 million shares. He’s liking the sale model.

Dr. Kiran Garimella  39:53

But yeah, no, that’s Yeah, that’s right. And the other important aspect of this is the safety security input. detection of the investor. Right. So in other words, you know, uh, you know, people ask, right, you know, where are my securities? What happens if I lose them? Is it a recourse to this? Right? And you know, some of them are not a whole lot of them? Right. I mean, you know, I mean, a lot of all investors, you know, that we talked to, and none of our partners talk to have really people who have real money, and they want like real protections, you know, they’re not out there to overthrow the government, and do, you know, some really weird stuff, and I’m gonna understand the angst behind that I get that. But, you know, these are the people that say, you know, no, no, no, if I lose my thumb drive, I don’t want to lose all my, you know, holdings, right? I mean, I can trust on you guys. Right? Yep, we can trust that image there.

Jim Caboy  40:42

I get I’ve got calls today, you know, and they were they tend to be a little some of them that the younger ones are the ones that don’t care whether they’re getting a certificate, you know, yeah, you don’t really hear for them. They just wonder why money’s out of my bank or didn’t come out of my bank yet. I just hit the button, why don’t I own them? Or, but you know, there are people that say, am I getting a certificate for these and we said, well, we don’t print them up and mail them, that’s an additional cost. And they’re and I say, and the certificate and then I’ll go into explain, if you gave that certificate from to me, and I paid you $100 for it. In three years, I can’t go collect dividends, I can’t sell that stock. Because the SEC in the world all still knows what we the transfer agent that was hired to record all these shares. That’s who owns it. And if I tried to go and prove that, you know, Kiran sold it to me, nobody’s gonna care. Even if I showed a receipt and a video of us exchanging it. Nobody cares, because on that transfer agent record. That’s what counts. And so I explained that to a gentleman today who’s logging into your system, he, we’re in the process of it, we’ve got two of his applications done, we’re waiting on a third. And he just wanted to make sure that third was coming. And I said, Yes, it is. And then he wanted certificates. I said, please print them, download them, put them on your fridge, if you’d like to, but know that that’s just something you might want to keep with a receipt, in case, you know, there’s some catastrophe and you need a record of something. But those are there, those are logged on there on a blockchain, it’s immutable, the records are there. And if something changes, like such as a transfer, or that is allowable, which needs to be allowable, then it’ll be recorded and still, and, and it was an education process. He understood it at that point. And I think he even went Ooh, you know, this is a little more exciting than waiting two weeks signing for papers, like I’m closing on a house, or a mortgage. And, and, you know, and writing a check kind of deal. So

Dr. Kiran Garimella  42:42

It’s those protections are so important. I mean, we know I mean, how much angst you know, our investors, you know, people have about, you know, all of this stuff. And, you know, the funny part about all this is that, you know, a lot of the crypto space as a payment instrument has sort of colored people’s views on how trading actually happens. And event as we all know, now, not just us, but everybody now knows how many scams have happened in the whole ICO space. And funnily enough, the people who invested in that were people who had a bone to pick with the traditional regulatory agencies and governments right. At the same time, when they got scammed and lost all that money. Guess what they did?

Jim Caboy  43:27

They came back to the government.

Dr. Kiran Garimella  43:31

Exactly. Why didn’t you protect me? Right. So I think they were really good lessons to learn. But so what are your thoughts on? You know, where we are with the fluidity? I mean, that’s a word that I love. And one, one of your colleagues started using the [uncertain]. That’s fantastic, right? So the big issue wasn’t so much about regulators, and the fact that there are all this sec and FINRA broken, you know, all these things happening. It’s more about is it a bureaucratic nightmare? Or can we make this transaction [uncertain]. Right. And we all have been working very hard to ensure this type of fluidity. I don’t know if you had any thoughts, specifically, in general, around the value of making these very transparent, very fluid.

Jim Caboy  44:19

It has to be, you know, already people put their order up and you know, at Robin Hood and don’t understand why they can’t get an execution. And obviously, that’s a different market where there is a live person on the other side, you see a live market, but why didn’t it go or you know, and at times, maybe some market maker will take your stock, but, you know, if, if, in the way that we’re we’re going to put matches together and the way that we will provide information to custodian so that matches can be settled and actually take that next step. That was a big problem in the beginning, the way that The SEC was allowing us to to act, we knew there’d be fails and things would fall down. And right there, you don’t want to start building an industry or in an industry, you don’t want to start building a section of the industry that is ripe for issues because it you might as well just launch, you know, all these ICOs that are going to go belly up, and no one’s going to do that anymore. Why would why would they want so we work with them and work with them. You know, Linda Lerner was definitely helped get us to a spot that said, All right, you know, we’ll do this, do this, do this. And these checks, you know, we’ll add checks, and we’ll make sure and, and it brings the the investor, especially in an hour ATS, the investors ascribe to themselves, they’re putting the order in, they don’t go into a broker dealer, they don’t they join themselves, they come on, they see what’s there. And there’s, you know, let’s be honest, the word fluidity might get mixed up with liquidity here and there. It’s about an opportunity to move or you know, to transact in this stock, whether it’s to sell it or to buy the next one. It’s not always, you know, the opportunity, it’s an opportunity, things won’t always be so liquid where, right away, you might find something, but you’ll see the market, you’ll see the last transaction, it might have been a month ago. So you know, something, I’ll tell you, it’s been a month ago, but you’ll see how you can put your order. And it’ll, it’s as if you’re a broker who’s up in in a NASDAQ terminal and putting the information and so subscribers get to put their own orders in and make their own decisions. So I think that bit of transparency as well, you know, helps them understand more about this private placement market.

Oscar Jofre  46:45

You know, he has amazed me, you always have, you know, I you and I are going to be celebrating how many years that we have known you

Jim Caboy  46:53

I didn’t have hair back then either if that’s what you

Oscar Jofre  46:57

say, no, no, it’s, you know, it’s it’s refreshing to hear someone from a compliance perspective, given a great overview. And, and I know Joel I do apologize for the, you know, these new securities resume now i, we I think we need to let everybody know, once you leave, you can come back. Zoom. Yeah. Which is really odd. But thank you go for making it. Y’all is one of the co founders and COO of Rialto markets. And I’ve asked them, Kiran, to join the conversation with you and Mr. Caboy. Sir Caboy, my apologies, Sir Caboy. Yes, he’s asked me to call him sir. And the discussion of secondary market i, and I’m going to leave you guys with this because one thing about real estate. Let’s talk about hype, where all the hype has been in secondary market is fractionalization. So I’m going to leave you with that subject. And with the because that whenever you hear about real estate, the next item is or you can fractionalize. You always could but so obviously, this is going to be an interesting discussion, because this is now the new frontier. Can it be done? Can secondary market support that and heavily supported and the mechanism and of course, with the the compliance side of it, I leave you three to juggle that one there.

Dr. Kiran Garimella  48:34

Awesome. Thank you. Let’s go take a look. Nice seeing you again. And you know, as as Jim and I, we were even having this conversation, we’re all saying, you know how many times I’ve had deep conversations around the secondary markets and making all the things with fluid? Right. And, you know, I come from the large companies space, you know, I used to be a global CIO for GE, and on the financial side. And we have dealt with the markets. I’ve been a trader myself on public markets. And several years ago, when I met Oscar, you know, and Oscar was telling me, you know, how long it takes in the private markets to actually affect a trade. And, and I said, well, in the public markets, takes like five seconds to do it. And they said, No, it takes two to three weeks to do it. And that’s really, right at that minute. And Oscar, we actually met at a conference for the small to medium enterprises, you know, national conference, one of those things, and I was astounded to learn that 50 to 60% of the world’s GDP, is powered by or facilitated through the non public the private side, right? And I said, Well, if that is so inefficient, on the private side, it’s a it’s something that we need to really look at and help. That’s always been our vision, right? I mean, we always talked about it. So I’d love to kind of get, you know, shared with us, you know, your own perspective on on that particular aspect, but also specifically, what is it about real estate and fractionalization That makes all this so attractive.

Joel Steinmetz  50:03

So I’ll start here with the first question. There were two parts to that. The first question, the first point of discussion is, what about the private markets is such a large piece? Well, that issue has actually been exacerbated over the last number of years. And the reason for it is 10 years ago, 12 years ago, an a private company stayed private for an average of a little more than four years, and then they went public. Now that average is about 13 years. So it’s more than three times as long for a company to actually create what was called a liquidity event that enabled its investors to monetize their their investment. So it’s become a lot harder to do so. So it’s not just that there’s so much wealth out there that is in the private markets, but it’s staying in the private markets even longer than it’s in the past. So finding some options to monetize your investment and realize the value of what you’ve done, has become that much more important. Now, when you go on to a secondary market, in a private security, if it’s a small security, like a RegA, where to be, let’s say $20 $30 $40 million, that’s going to be small, it’s not going to be liquid, like trading Microsoft. But there is an option to actually offer that out on a on a secondary system, that now in a sense, lets 1000s, 10s of 1000s, possibly hundreds of 1000s of users know that there is availability for an investment opportunity. So just having that access to the platform, gives you a much greater chance of finding what we call an exit ramp to your investment and realizing the value. And as you said, Kiran, it’s so much more important now, because companies are staying long, private for so much longer.

Dr. Kiran Garimella  52:04

That’s it also the fact that so many of the public companies are going the other way coming into the beginning, private.

Joel Steinmetz  52:11

Yeah. So if you if you actually look at the numbers, the the growth rate of private companies over public companies, not only are there so many more of them, like you said earlier, but the growth rate of them is more than double. So the private companies, and it’s that’s not just because so many companies, private companies are now out there. But also because some of the public companies are now sort of potentially retracting, if you will, and becoming private or seeing if they can do it in some manner, shape, or form. And so that problem has become much more acute. The challenge of a lot of these companies and from a corporate perspective, is how do I create an investment that’s investable. So if we’re going to go out to the marketplace, and I have all these private companies, and it’s the same universe of buyers, that all the public companies have, or that most of the investments come from real institutional type of buyers, then it’s not going to be a successful area, because now it’s just competition, competing for the same dollars. What’s happened in the private markets through things like RegA, Reg CF, is we’ve created a market environment the regulator’s have done. So that is opened up the world of private securities to the public to everyone that nonetheless, there’s still a challenge by those issuers to find a way where they can create a security that is investable. That would mean it’s not too complex or too complicated, a people are able to feel comfortable in it, and people are able to invest their money. So if you have someone who has $1,000, they’re able to invest in the past, you could not invest in real estate, right? I live in New York. If you want to buy a bathroom in Manhattan, it’s going to cost you a million dollars, right? You can’t get into real estate with small amounts of money. So the only way you can possibly do that is to create a security that says you will own a portion of that bathroom. Right you’ll own a portion of whatever security exists. That’s the idea of fractionalization. It’s creating a universe that can say any asset can be broken down into small pieces. Real estate is a prime place to do that, because these assets are so valuable and they’re so high net worth that in order to get into it. You’re going to have to fractionalize in order to democratize that fractionalization capability is more available now. Through digitization, whether that’s digital security or just blockchain based systems in the world has created the ability to service fractionalize assets because of the digitization of the investment world.

Dr. Kiran Garimella  55:12

Absolutely. And, you know, a lot of the conversations that I have from a technology perspective is that, you know, it’s almost like technology is seen as the, you know, way to hammer a business model. It doesn’t quite work like that the economics of the underlying business need to support that there has to be real need. And that technology becomes a enabler. It’s, you know, building fluidity, right. So that’s, that’s a lesson that I’ve learned over the years. You know, looking at this stuff, but there’s one one thing that you just said that I, you know, it just made a lot of sense to me and it’s a well phrase word, and that’s investable. So being investable, if someone securities investable, it means at least for now in this discussion, two things, right? Number one, it’s subsequently easily tradable. So I can monetize and get out of it rather than being you know, illiquid for a number of years. That’s that’s attractiveness. They also invest stability, and especially for the real estate market. The other portion of the insert, investable or not, is can it be fractionalized or not right. I mean, I think that there is there is a nice aha moment for me with the way you put it right there.

Joel Steinmetz  56:23

Yeah, so this goes back a couple of years, I was talking to one of the top five bond funds in the country, very large bond fund, and they get money. And as you can imagine, you know, 10s of millions, hundreds of millions of dollars coming in every day, that has to be invested. And they were struggling mightily. And the reason it was struggling is there were plenty of assets to invest in. But the cost of getting out of those investments was so high, that it wasn’t worth the investment. They were so illiquid, some of these bonds were so illiquid, that they factored in what it would cost to get out. And if you’re looking to make 70%. And you’re going to have to sell it at some discount, that lowers you to four or 5%, you might as well not invest at all. And that’s where I think sometimes the secondary markets that we refer to, are not just advantageous for the secondary markets. They’re advantageous for the initial primary investment, an investor is going to look right at the initial moment when I’m first getting into that investment. They’re going to make a determination of can I sell Can I realize the profits when the profits come? And that people think of Well, that’s a secondary market, and issuers will say, I’ll deal with that later. don’t deal with it later. Because when you deal with it at the very moment of your primary issuance, you are going to expand the reach of who will invest simply because they realize there are other options of getting out. So you know, if you go to any institutional community in the standard world of investment, any institution, any VC firm, any family office, any asset manager, any hedge fund, is going to ask you, what’s your exit strategy. And the exit strategy has always been something like IPO takeover, someone’s going to buy me, those are the exit strategies. Well, today’s world, that exit strategy is going to be in 8, 10, 12 years. Investors very often are saying I don’t want to hold my money up that long. If you can come back and say, I have an exit strategy, it’s going to be a fantastic one. But if you want to liquidate, liquidate your holdings and monetize your investment earlier, we also have this option.

Dr. Kiran Garimella  58:47

You know, that is such a powerful proposition. I’ll tell you why. You know, I have traded the markets myself and not a day trader, I used to be a trend following trader, I had my own system, and are going to commodities and futures and, you know, options and obviously stocks. And, you know, I’ve had a lot of conversations with those seasoned traders. And if there’s one advice that kind of stuck out for me is that before you enter, know how you’re going to exit, right? If you have no strategy or exit, then you’re not really a you’re not going to be a good investor. Right. And so that was a big object lesson for me. So one, one question I have for you, this is something and I’ve started a couple of companies myself, and if I would want to start a company, I’ve been entrepreneur, you know, what would you tell me as a CEO looking to do a primary insurance? How should I position this and what should I be? What steps should I be taking as a company to position this attractively for investors and what should I be doing in terms of a secondary market value proposition?

Joel Steinmetz  59:57

So I’m gonna that’s probably gonna A couple answers to it, I’m going to start off with some of the business ideas. And then there are some regulatory things that you really have to consider. And I’ll ask Jim to really focus on those. But from the, from the strategic side of it, you need to understand who your audience is? And how are you going to target that audience for the investment? So if you’re looking to really go to a RegA security, for example, in real estate, how are you going going to get to the retail investors of that RegA security? Do you have a fan base already people that know who you are, and are willing to come in that you can just advertise to right away? Are you going to need a marketing firm that you’re going to that’s going to drive knowledge of your company to them so that they now will come to you and look to invest? What is your customer act with your investor acquisition strategy? That’s a key component to figuring things out. The second thing is what are the incentives that are going to be delivered to the investors that will say to them invest in this over something else? And that part of it is, as we’ve been discussing, part of that is, how am I going to be able to get to reach my exit ramp? I know my on ramp, my on ramp is I come to you when I buy, but what is my exit ramp to be able to realize that because if you’re saying that you’re going to get to a certain point 10 years, maybe in three years, I need to buy a new house and I just need a few extra dollars, and you have my few extra dollars? How am I going to be able to get to those few extra dollars? Is there some way that I can monetize my investment, delivering incentives like that, to the investor community where they can start feeling very comfortable about what the investment looks like, what its potential is, and how I can realize that potential are essential elements as you’re starting things to go. That’s from a strategic level, from regulatory and legal level. You know, Jim, I don’t know if you want to pipe in sort of things they should think of, as they’re preparing?

Jim Caboy  1:02:11

Sure, I get this question from five investors a day. You know, whether they’ve already sent the money in and it’s closed and or they’re about to when they want to know. And one, it’s usually educating them that a RegA is freely tradable. As soon as it’s issued, maybe a reg CF, Reg, D. Got to sit on it for a year. They Oh, okay. All right. And well, then what happens and as a compliance guy, I’m a wet blanket, and I but I need to be fair and balanced. So I go through five, I says this five things you can do. First, this could go right down to zero, and you can lose everything. And they all I get that I get that I read that on the first page. And that’s where they stopped reading. They didn’t get to their other parts of the offering circular that might explain that. The firm and this is all legal talk. So of course, it’s a little bit vague. And it’s spelled out to protect an IP not but maybe it should be a little more directed, if you do have an idea and an exit strategy. And you’re looking at a goals, you know, so usually the language somewhere in the planet distribution is, you know, right now, there is no secondary market or venue or location for this to trade. And I gotta say I know of a few of that are coming up. And the reality of markets happens to be one. So maybe up in up in the beginning, you’re transparent, and you disclose that, yes. While we could go to zero, while we may get bought out, while we may change tactics, and you know, and I don’t redeem all shares be, there’s a good chance that you know, our main goals, maybe highlight them, you know, or be able to put them in legally without being committed, and have what we first love to IPO. But to, there is a venue that we can go on that you can put your order on to get out, or maybe someone can get more, you know, so I think in the offering circular, and there’s a way to address it. And as you know, it’s still new. So you know that language, I’m kind of learning, some lawyers are telling me it doesn’t matter. It’s there, because that’s what the SEC likes to read and see on everyone. So if you really tried to change it up, it might slow things down and ruin it. And it doesn’t say that they can’t go and list later on. But my thought is, and I’m here is because I get the question, How am I going to get my money back? How am I going to get my money? Can you know so I go through the five layers of of what could happen and provide for that and you know, everyone gets it at that point. But

Joel Steinmetz  1:04:42

So Jim often tells us and I think that he just spoke to it as well. Disclosure is just so important. If you disclose the things as an issuer, if you disclose what’s available, what’s going on in your just up upfront with everything, it’s going to benefit you in multiple ways. Number one, as far as the regulators are concerned, they now are fully aware of what you’re doing. You’ve told them what you’re doing. And they generally are much more comfortable as long as you’ve told them what you’re going to do. Number two, the investors now are fully aware of what is available to them and what might not be available to them. That disclosure is greatly appreciated by all investors, but particularly ones that are putting in more significant amounts of money. Remember, the RegA securities are not restricted to non accredited investors, there are plenty of accredited investors that come into RegA securities, those kinds of investors can put in more amounts of money. And when they do, so they just want to know that they’re being told what’s happening. And that disclosure, it goes a long way.

Dr. Kiran Garimella  1:05:58

Oh, of course, and, you know, you know, there are quite a few people who keep investing, they want to invest, not just in one in two, and you know, in the same company, they keep investing in multiple times. But this, but there’s a panel of that. And I just want to get your quick read on this one. So in the general public markets, I mean, you know, you have the OTC the Pink Sheets and bulletin boards, and then then you have the biases and the NASDAQ and the big name things, right. So being able being listed on some of those things as a pride of place. I think most importantly, you know, it’s because of the liquidity and availability of, you know, secondary trading and so on, right. And as a corporate person’s going to, Hey, should I be offering this to my shareholders? I’m just thinking at all, that the valuation of my company and who I am says a lot, if I can actually offer that because I’m coming at it from a position of poise and confidence, and, you know, making that available to investors, right. I mean, so the value of my company could be seen as higher, precisely because of that. Some any thoughts on that? I know, you guys have been in this market for much longer than I have.

Joel Steinmetz  1:07:08

Yeah, yeah. So Jim is waving goodbye. 

Jim Caboy  1:07:11

I’m gotta jump folks. Apologies. Have a great one. And Joel knows a lot more about this.

Joel Steinmetz  1:07:15

Thanks. Thanks, Jim. For it, I’m sorry, I’m sorry, Kiran. Just remind me. 

Dr. Kiran Garimella  1:07:22

This was about the perceived value of a company that has that allows that shareholders to you know, be able to trade

Joel Steinmetz  1:07:29

 Yes, exactly. So the perceived value, that perception is going to be extremely important, again, especially when you’re dealing with a RegA security, because the universe of, of investors is democratized, it’s so much wider, you’re going to very much a retail investment, investment world. And therefore that perception of value is going to be very important. The the perception of value that a company has goes up, when they say to their customers, I’m perfectly fine with giving you an exit ramp. It’s the ones that lock you in, that the value starts, people start to question, well, why you locking me in, because I’m going to have to wait for five years, I mean, not gonna really make money. But the ones that say, Listen, you can RegA security, as soon as you buy it, you can sell it, I’m okay with it. The RegA security, by definition, should give a good perception of value. Because it’s saying to the customers, if you want to sell it, I’m okay with it. Because as an owner, I think you’d be a fool to sell the security, it’s gonna do really well. Right. And that’s what you’re saying. And the same idea saying, I’m giving you a secondary market to trade it, I’m okay with that. I’m, you know, I’m comfortable in my own skin, to be able to say you can do what you want with it, because I’m going to find other investors and you’re going to find other investors who are willing to buy this. That’s a great perception to deliver. And I’m going to bring it back to specifically this, this, this session or this summit, in real estate. What so we deal with a lot of companies that are doing this, this exact thing in the real estate world. And in real estate. You know, the old adage of Location, Location Location is very true the whole way through. So there are a lot of investment opportunities and a lot of places that some investors have no clue about. Again, I’m from New York, basically, we feel in New York, that in order to even get to New Jersey, you need a passport. Right? There’s there’s nothing outside of New York, right? When when you start going to the Midwest, or you know, Canada, and it’s different places, what’s what’s there. And when you can start delivering to these customers, a comfort level that says, here’s an investment that’s worthwhile While because I’m comfortable enough in doing this, and I’m comfortable enough in the structure of the security, the ability of giving the investors, their dollars, letting them realize their value appropriately, goes a long way, particularly in a marketplace and to an investor base that doesn’t fully understand the the single most important element of that marketplace.

Dr. Kiran Garimella  1:10:27

Well said.

Oscar Jofre  1:10:27

Well, that’s a, you know, we haven’t really spoken about it. And you really tied up an interesting point there. And it is so true that a lot of companies lock up their investors thinking that’s the better, you know, and, and it’s so like, Don’t lock them up, give them the opportunity, it is amazing. To think how many people really want to exit out of that. I mean, there will always be a few, for whatever reason, financial reasons, but at least you’re not troubled by it. Now that, you know, there is a regulated environment that they can go to, to monetize their investment, I have often wondered, was that put in place by lawyers advice and saying, Hey, you don’t want to be dealing with this. But now that, that that narrative has to change, because we’re now saying, You don’t have to worry about it, it’s already there. And it doesn’t have to bother you. That’s the key.

Joel Steinmetz  1:11:23

So I’m gonna, you know, I’m gonna I, I don’t mean to just compliment you guys. But I’m going to hear and here’s the key component to it. There is we get this question a lot from companies that say, well, when normally I raise and you know, the raise is normally done in some reg D, then I’m raising X amount of money, and I’m getting 10 or 20. Investors, I don’t really want a cap table that is 2000. Investors, it’s just too complex for me. And you know, something five years ago it was, but the technology that exists today, what what KoreConX does is it basically says it’s just as easy for me to manage 5000 investors as it is to manage 50. And you’re right, five years ago, 10 years ago, that wasn’t doable, but it is now. And if that’s the case, complexity of a cap table, should be looked at as diversity of a cap table. The complexity is easy. But imagine what had the benefits of having a diverse cap cap table?

Oscar Jofre  1:12:29

Actually, that’s a that’s a very good point to make. Because you’re right. I mean, as entrepreneurs, we are led down a path thinking that we have to make it small and for the fear, and the fear was created all the numbers. And yet, you know, when when a company says, I have 5000 customers, everybody’s around applauding them saying, look at you, congratulations. How are you doing that? Well, you were smart enough to get a CRM to enter sales do the very same thing here. Right?

Dr. Kiran Garimella  1:13:00

You know, you know, I have to say this one, Oscar, this book, you remember, the book you wrote, with, you had a whole chapter on, the shareholders can be your advocates, your ambassadors, right, they’re not just simply they with the money that are out there, helping the companies, you know, spread the word and be the ambassadors. And if that is really sort of the vision that people you know, companies need to have the diversity of capital, as you so rightly controversial. I mean, that is that is vital for its environment.

Joel Steinmetz  1:13:32

And each one leverages off the other. Exactly that that cap table that is now not only your marketing tool, especially in the retail market, Oscar, I’ve heard you say this in the past, too. Those are the people that are going on to social media and saying, Hey, I got involved in such and such, the investor at Fidelity is not doing that. And when I say fidelity, I mean, fidelity themselves, Wellington, they’re not doing that. But the retail investor is going and doing that brand for you. The second thing is if you’re a type of company, that also is looking at customers, potentially. So let’s say you’re a real estate company, and you have moles, those people become not only investors, they can potentially become customers. And the customers can eventually become investors. You start leveraging one off the other, and the whole becomes greater than the sum of its parts.

Oscar Jofre  1:14:31

Yeah, it’s guys, you as you all know, we were just scratching the surface of what this discussion obviously keeps evolving. With more information, more data, we’re now seeing it. There’s the evidence is there as you pointed out, Joel, we dreamed about it 11 years ago, nobody does right. Nobody understood when we said Imagine having 1000 shareholders, nobody could imagine it because it just but now I have a new one for people you know, imagine having 50,000 60,000 100,000 You know, we know a [uncertain] that doesn’t imagine that he, he’s living that right now. And so it’s exciting times. And obviously, the secondary marketplace has a vital role in providing that new door, that new chapter in our ecosystem that allows the investors and the companies to give their investor the opportunity to monetize and just not to monetize. It’s like anything else. It’s just something else that you can now offer so you can keep growing your businesses. And to that, thank you both. And thank you, everyone, all our speakers and everybody who attended today. Once again, just it’s great to have lots of fun. As I mentioned earlier today, we have a few of new KoreSummits coming up here in for 2021. We have a number of KoreSummits that are going to be in different verticals that are going to be very interesting for everyone to see. We’re going to have one on cannabis. That’s right cannabis and RegA. This is going to be very interesting, you know, the cannabis sector is coming right back up again. Collectibles, collectibles. That’s right collectibles, people who collect you know, collect shoes, cards, playing cards, belts, and all that how are they using Reg A and How’s that gonna work? In digital securities, we’re gonna do an entire summit just on digital securities tokenization how to do you know digital security fully compliant, to be able to issue in to allow your investors to secondary market trade, because that’s what digital securities was for to provide that efficiency. And last but not least, we’re going to finish the year off with dare to dream. That’s right, dare to dream is the theme. And I hope you’ll join us. Please tell your colleagues, we’re very excited about this. Thank you again, everyone. Have a great day. We’ll talk to you soon.

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