- Crypto is still missing a few pieces: regulation, technology, distribution
- VEVA is engineering a new type of asset class, built to work with today’s finance but able to scale into the blockchain world when ready
- First offerings will be fixed assets in the Wireless Broadband space
In the fall of 2017, crypto was booming. Prices had raised across the board, with some coins seeing returns as high as 300X. Valuations were sky high, Crypto-analysts were regulars on CNBC, and hundreds of ICOs were selling out seemingly every day. And yet, something wasn’t quite right. Companies with anonymous founders and little more than a white paper were raising hundreds of millions of dollars. Conferences were packed and crypto was being hailed as the biggest revolution since the internet. Despite all of this, an unconscious fear of the market showed whenever small price movements were exacerbated by massive panic selling. The crypto space needed to slow down, to mature, and it needed to focus on what was missing rather than on abstract potential.
At VEVA, we recognized trust as one of, if not the, largest piece of the puzzle that was still to be solved. We believed — and still believe — that blockchain represents something incredibly powerful. There is a technological revolution brewing, and a very few number of companies around today may well be among the winners. Unfortunately, the space was full of noise, charlatans, and misinformation. Transparency was in short supply, as were regulations, data, and anything approaching consumer protection.
Out of this chaos, we built VEVA as a Moody’s for the crypto industry, and developed a protocol allowing for conflict-proof token ratings — all built as an Ethereum dApp. Our work took us to the offices of regulators both domestically and abroad, where we noticed something peculiar:
the focus and fear wasn’t on crypto-tokens but on how this would bleed into financial securities.
Everywhere we went, we got questions about Security Tokens, Decentralized Finance (DeFi), and tokenized assets. The current crypto market, immature as it was in 2017–2018, has only just started to consider these big-picture implications and applications of tokenized financed on the real world.
We initially built VEVA’s rating product as a horizontal platform to exist in a world awash for tokens (or crypto-assets). This world is still years away as we’re missing key pieces: regulations, technology, and distribution. So instead of waiting (potentially indefinitely) for tokenized assets to grow, we decided to pick a significant category (wireless infrastructure) and re-engineer assets there that would become crypto-ready, with the potential for tokenization in the future.
In our minds, the most fascinating thing about crypto is the new funding model it ushers in. Interestingly, this is often lost on the casual investor. They willingly bury their heads in the sand and choose to have a ‘principle in, return out’ mentality — a good way to form a bubble. ICOs are, at heart, a funding operation. By buying into these ICOs, investors were funding these companies. Of course, most individuals had no idea, blinded as they were by the idea of massive returns. Lost on these casual investors is the idea that, just as companies can raise funds in other ways like an IPO, the ICO model of 2017 is simply one of many ways to capitalize companies via blockchain technology, while retaining all of the advantages inherent in crypto. With its novel idea of open, public ledgers, blockchain re-conceptualizes the idea of transparency in investments. The mix of open data and a cross-jurisdictional nature changes the globalization calculus, and completely upends traditional capital structures. This new world is being called DeFi (Decentralized Finance).
We believe that the true power of crypto finance lies in its ability to leverage trust and real-time transparency, leading to full & fair pricing of assets. This is enabled by:
- Transparency: Rich and trusted data about the assets, given in real-time.
- Capital: The ability to access (or give access to) capital that would otherwise be unavailable to smaller companies.
- Globalization: The ability to expand markets by connecting buyers & sellers from across borders.
- Digitization: The ability to move all key asset ownership processes online, from creating, transferring, monitoring, harvesting and selling.
As a concrete example, consider the current state of of REIT or real estate investing. Most real estate deals fare poorly along the four axes above: data about assets is not transparent and infrequently updated (1); capital flows (rent/leases/sales) are done manually(2); most real estate transactions occur within borders, with buyers & sellers operate within the same markets(3) and very few of the assets are truly digital(4). By moving out of centralized servers and onto a blockchain, a REIT enters uncharted territory. Suddenly, all transactions are transparent and programmatic, ensuring that an investor not only knows where their money is going, but allowing them to track their finances like never before. Payments, even micropayments, can be handled via smart contracts, and are entirely trustless. This model also opens up new avenues for globalization, giving investors access to emerging markets that are simply impossible via traditional finance. But perhaps the most revolutionary element is the potential for new capital structures.
Crypto represents a freedom from banks, from private equity, from venture capital, and from traditional debt financing.
A company can now crowdsource a fundraise — from any size investor, anywhere in the world. These investors can trade these assets in liquid secondary markets sooner rather than later. Large minimum investments with a long lock up periods from only accredited and domestic investors will be a thing of the past. The net result will be more transparency, more investors, bigger markets, fairer prices & valuations.
VEVA is going one step further, thanks to our work on tokenizing assets. Our premise is simple: There are a number of growing industries in which high CapEx costs and a lack of access to capital are dampening growth. But what if these CapEx costs could be crowdsourced, globally? What if capital equipment-intensive industries could focus on their core strengths, like marketing and sales? On the other side of the equation, what if individual investors could own part of a television broadcast tower in South Africa, and a small percentage of a cargo ship in Alaska? Tokenizing assets is just the beginning. Decentralized finance is coming, and with it, big changes to company funding.
The only thing standing between traditional finance and DeFi is the gap between the technology and industry, and VEVA is working on closing this gap. There is a lot of regulatory and development work to be done, and as these pieces fall into place, we’ll push our offerings further and further into DeFi. In the meantime, we’re starting with a legacy system, but building in the components needed to seamlessly transition over to DeFi as the industry matures. Our first offerings are in the Fixed Wireless Broadband (FWB) space, an area that lends itself both to traditional finance and DeFi. FWB is poised to explode in the coming years as the U.S. makes a big push towards 5G and less concentration in the industry, leading to more internet operators emerging. The technology is right where it needs to be, public sentiment is ready, and there are ample companies building out their networks — so what’s taking so long? The simple answer is that Wireless Internet Service Providers (WISPs) simply don’t have the access to capital that they need to grow. Our first goal is to connect these WISPs with the capital they need.
Our team is well-equipped to handle the particular challenges we’ll face, with over 50 combined years in Silicon Valley, and backgrounds in telecommunications, law, finance, and engineering. We’ve built and invested in emerging products, and are currently partnering with NGOs, WISPs, equipment providers, and regulators to help grow this nascent industry. The DeFi revolution is coming — learn more at www.veva.one