Security Tokens: The Future of Capital Formation!?
This week we are welcoming Todd Wier from Preflogic, on a mission to:
“build the future of capital formation”
Which problem is Preflogic trying to solve?
SMEs and individuals need access to other people’s money (capital) to fuel progress. We’ll show them how to get it. Until now, Wall St. has had a monopoly on the OPM (Other People’s Money) process. Our objective is to empower SME’s and individuals with the tools they need to access capital and propel their financial progress.
Please walk us through the process of a SME that wants to raise funds via Preflogic?
Engage the Matrix and follow the instructions, it can be that simple. Our objective is and always will be to simplify the capital access process to improve user experience and capital raise results.
Why exactly is a STO cheaper compared to traditional means of raising funds?
Elimination of middlemen costs: The goal of the Matrix is to provide an organized and simplified path for the issuer to prepare and conduct an offering of securities. With the Matrix, he’s provided ready access to incorporation services, PPM builder to construct his offering documents and filings, issuer insurance, custody services for his investor assets, and much more, all in simple fashion so that he can make his offering online, direct to investors, without having to engage placement agents which can cost up to 15% of the capital raised.
Why should I invest via an STO? What are my advantages and potential disadvantages as an investor?
The value of an investment is defined by the terms that are extended to the investor and the earning power of the entity. The primary advantages of Digital Security structure are that they offer access to a global pool of investors and the potential liquidity that comes along with that large market. In addition, much of the compliance function involving transferability can be managed by the token function.
In your opinion, what are the biggest challenges for the whole Security Token ecosystem in order to thrive?
The MESSAGE, Cost and Liquidity:
MESSAGE: This market, blockchain, smart contracts, etc. are all complex and the entire market is caught in the rut of teaching the audience how to build a watch; when what they really want to know is, what time it is. We don’t show up at Google wondering how the algorithm works, just give me my search RESULT. Benefits sell, features bore. It’s our job (all of us) to reduce the complex to simple and provide tools that yield results.
Issuers/Individuals want/need capital to propel financial progress. PrefLogic’s Message: We’ll show ’em how to get it!
Onboard costs: reduce costs, increase market size
Liquidity: Liquidity attracts investment. I think one of the most compelling attractions to the ICO was that individuals could invest in early stage companies and gain access to the early volatility that comes with them. A risky proposition, but it seemed to fulfill a market desire.
What is the one thing you believe in regards to Security Tokens most other experts within the industry would disagree with?
Don’t normally like to take a swing against the experts, but some challenge the thought that capital can be raised compliantly and credibly without them? I disagree wholeheartedly.
*I’ve heard opinions that while low cost, improved tech, JOBS Act and network effect/low cost advertisement create a world where almost anyone would be able to raise capital, some feel it could lead to more responsibility than the average issuer can handle. Mainly, I hear this from financial services experts and it kind of sounds like the “kettle calling the pot black”. Being candid, it’s the financial experts who led us into the sub prime market meltdown and global financial crisis. The ability to raise capital is a powerful asset and like anything else, if leveraged properly, should provide benefit in the form of job creation, development and forward progress; on the other hand, if not used responsibly, it could have negative effect. Should the ability to raise capital become common to all, I think that over time the market will figure it out.
The most important aspects of a successful securities offering are that it is
A) Compliance with regulations
B) Funding is achieved
With the Matrix, offering preparation is simplified, explained and supported with access to independent legal review offered. Cost is significantly reduced by the streamlined and organized nature of the software. The less it costs, the larger the market becomes!
What makes PrefLogic unique if compared to other infrastructure providers?
SIMPLICITY: I believe the Matrix truly simplifies what is typically a complex process by providing full explanation of purpose at each step and offering a lifeline of support/assistance when needed. In essence, if an SME or individual shows up serious about their intent and is willing to apply some effort, they/he/she can dramatically improve their financial position.
What advice would you have given your company 1 year ago?
Haha, if only. Be more confident in what your gut was telling you.
35 years ago, before the cell phone, fax machine, social media and the JOBS Act, investor acquisition involved a stockbroker dialing his index finger raw making cold calls with the hope of building his and his firms client base or assets under management. This was how the capital access audience was gathered and why placement fees and commissions were justified; in today’s world and, on both accounts, they are not. Today, influence is gathered online and is accessible at far less cost than the traditional 10% commission, 3% non-accountable expense and warrants traditional firms charge for access.
It’s a new world, the game has changed and quite frankly, anyone in this space is still early.
What is the most exciting happening you are waiting to see in the Security Token Ecosystem in 2020?
A digital security infrastructure related issuer that offers EQUITY participation and sees a 2X or 5X on their first day of trading
OR
Big brand name that offers an asset in digital securities form. Let’s say the Waldorf Hotel?
Either would attract attention enough to light a spark in the market.
What’s left of the 20M original crypto enthusiasts still represent more than $200B dollars of crypto assets, that in my opinion would find its way into the issues above and LIGHT THIS FUSE.
Being candid, we all resist change and it’s easier to follow the smoke.
Which person do you follow to improve your learning curve?
Our attorneys and the SEC.
Thank you for the Interview!
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