Richard Johnson on Transforming Capital Markets with Blockchain (E5)

(logo whooshing) - I'm Phil Larmon. - And I'm Douglas Borthwick. - And this is "Old Men, New Money." - Now we've got an exciting episode today. Today we've got Richard Johnson with us and Richard's with Texture Capital and CEO. And welcome, welcome Richard. - Hey guys, good to be here. - So we've got lots of questions. I think 2019 is when you started Texture Capital. Can you tell us why you thought digital securities would be the next big thing? - Hmm, if I can rewind a bit more from that. I'm a traditional finance Wall Street guy, spend a bunch of time in trading. Why did I think security tokens were the next best things?

I'll go back a little bit further than that. I started my career in traditional finance and Wall Street as a trader on the field of Wall Street trading desks, doing electronic trading as a very fast growth area. In 2000, when I started, there was basically no electronic trading. By 2014, it was 99% or something like that. And I was looking for something else to do and I started looking around. I was looking for something else new and innovative and that would be high growth. And I discovered Bitcoin around that time in 2015, went down to Bitcoin rabbit hole initially as a trader. I thought, "Oh, we can build algos.

We can build smart routers for this stuff." And then I realized only $50 million a day is trading onshore in the US. It was a tiny market back then. Anyway, I did some consulting for some companies, a couple of startups. One of them did very well, ended up becoming Paxos. The other one, not so well, not so much a household name in the space. And then after that, I went to a company called Greenwich Associates, where I spent four years as a market structure analyst, covering the FinTech and blockchain space. And I read my first paper in Bitcoin in 2016.

Our job there was really to educate some of the people who didn't know about what this technology is and what it could do on the potential. And we conducted a lot of like primary research and did a lot of kind of custom studies and stuff. And it was a great seat for me. And then in 2018, the ICO started blowing up, where the ICOs came out and started blowing up. Jay Clayton was the SEC chairman at the time. He said, "Every ICO I've seen is security.

These platforms need to be regulated." And that was my light bulb moment, my call to arms, 'cause I agreed with him in the first like, I came to the space 'cause of the tremendous potential of the technology. But I also agreed with him that a lot of people were just using ICOs to raise capital for their projects. And we looked at what happened. There were no investor protections. A lot of people lost a lot of money on that thing. Also, I thought that it was a great kind of combination of my background having come from the regulated securities world, been in blockchain for a while. This is the perfect combination of the two.

So we went about setting up a broker dealer, went into FINRA, one of the first people in the door. I know your former company was very early as well. And we said we wanted to use blockchain in capital markets. And they're like, "Okay, we're gonna put you in this pile over here, which has got a 18 month delay on it." So we were in that pile for a while. One of the first to get approved. And here we are now. I think I've answered your question there, Doug. - Yep, absolutely. But you could have just got into the regular securities, or you could have started up a crypto trading company, but instead you decided on digital securities.

And what was it about digital securities that you found to be exciting or innovative? - I think the opportunity is actually larger right now in terms of revenue capture. The crypto company is making a lot more money, but the total market capital, all the crypto out there are still, what is it, two and a half trillion or something like that? The largest company in America has that kind of market cap. If you look at the overall size, there are different numbers out there of the total security space out there. It's 500 trillion and up, depending on how you're gonna count these things. So the opportunity is greater.

I spent a lot of time, as I said, on Wall Street. There are a lot of problems that I don't think are necessarily well-solved. We've got a lot of, especially in public equity, we've got a lot of legacy technology built on top of layers that kind of makes everything work. But when you look at blockchain, it's solved almost from the ground up. You've got so much of capital markets is about a transfer of value. That's what blockchain fundamentally is. It's about having a single source of truth. How much time do we spend when capital markets are doing reconciliations, settling trades at the end of the day?

So the settlement process obviously is a lot longer in some asset classes than it is in crypto. So all these things just seem like tremendous opportunities. And I think probably what, maybe it's one of your questions I'll get to early. One of the things I've perhaps underestimated was the length of time that's gonna take some of the larger firms to get into the space. - And as they're getting into the space, they're still taking their time, right? Blackrock's in, but they're doing ETFs or they're doing Buildle, right? Which is essentially tokenized money market funds. Are you mostly looking right now at private companies?

Is it private companies that are coming to you? Or are you also doing tokenization of public companies? - Tokenizing public companies is very difficult and nobody's really done it right. I think Binance tried to do it in Europe and they got shut down by Baffin. - They did CFDs, yeah. - Yeah, exactly. I think that you gotta do something like that as a way to do it. But because, and the other thing you can look at, the other example you can look at is Boston Security Token Exchange, which tried to be the first security token exchange. But when you're on exchange, you have to comply with Reg NMS.

About that shutdown, that exchange, was that Reg NMS has something called the trade-through rule, which means that you have to route an order to the exchange with the best price. And when one exchange is on blockchain and all the others aren't, they weren't able to route orders between them. So that was essentially the death knell of that exchange. So it's very hard innovating in public equities. We are doing public-private companies. We do a lot of that. So text-to-capital, for your listeners here, we are a financial member, digital securities broker dealer.

We help companies raise capital through different types of securities and exemptions, like Reg A, Reg D, and Reg CF, Reg S. Some permissions for the registered offerings as well. We have an ATS, the secondary trading, and we also have kind of a marketplace solution where we offer our technology to other companies and help them on a white-label basis to launch their own marketplace. So in our own proprietary marketplace, we see a lot of early-stage companies. We work with funds, and we do equity and fixed income as well. So we're not...

I like to think we're positioning ourselves more as digital securities infrastructure, and we're not asset-class specific. So if you have real estate or if you have private equity or whatever it is, we'll help you launch a tokenized marketplace. - So I've seen that as well. I've seen that I think it's T-RISE and raise finance.

So essentially you're using your engine as the background for a number, but also I think you're a bit of a silent killer in that there's eight issuers that I see on your website right now that you're raising capital for, and yet, which is more than I think any other security token, broker deal or ATS right now that I can see. And you don't use a lot of publicity to say, "Hey, we're here." It's very interesting because I think that the other folks, there's certainly a lot of talk, but there's not a lot of action. There's a lot of other people that are very noisy, but they're not really seeing, I think, the results that perhaps you are.

I've also seen, obviously, like I just said, the T-RISE and the raise finance, which to me are these are groups that sound like they're tokenizing things, but they'll use you as their engineering infrastructure behind it. - That's exactly right. We have five marketplace partners right now. There's a couple more unannounced, so there was gonna be press releases coming out on those soon enough. Yeah, maybe we're being a bit silent, I don't know, whatever the term you used just there, but also I think it's a fact of running a startup. In the early days, we spent a lot of money on conferences.

And some of our, I see a lot of people still doing that. I'm really wondering what the bank of the buck is, 'cause we didn't get a lot out of it. We found that those types of events, a lot of kind of preaching to the choir, I love hanging out with you, with having drinks at the bar, Douglas, but we weren't signing any deals together. And I looked at where our deals were coming from, and they were coming from mobile network and other types of avenues. Yeah, so that's been informing our strategy to date, and it seems to be working. - Yeah, but I agree. I think that the conferences, there's lots of them. It's the same people talking.

Same people saying the same things. Reminds me of foreign exchange conferences after a while, where it's just a bunch of old guys at the bar talking about when is this gonna start picking up? And yet, there's plenty of issuers out there and folks looking to raise capital that are now beginning to look at doing a digital securities offering as opposed to the traditional offering. And I think that I'm certainly sensing a pickup in that activity and that excitement.

The most successful token raise, I'd say, probably is the block stream that's at Stoker right now, and then maybe building that's over at Securitize in terms of dollar volume or in terms of dollars that have been paid out or the success of the raise. There's a lot of guys that do raises, and then the token just sits there and languishes. I think one of my former companies would probably be a good example of that. Now, you talked earlier about the Boston Stock Exchange. I thought that they ended up getting approval, but then it was just shut down.

And I've always wondered whether it was the New York Stock Exchange invested in T0 so they could essentially catch and kill that project that would have taken away from the New York Stock Exchange. But I guess that's a discussion for another time. When issuers come to you and they want to raise capital, are they automatically pushed towards doing security tokens or do you also do traditional raises as well? Yeah, we always definitely always do also do security regular raises. We may use blockchain in the background anyway, 'cause that's what it's supposed to be. It's supposed to be the plumbing, basically.

And, but some people want to have it buried. They want to be able to put it into people's wallets so their investors can see the security next to their USDC. And other people just want to raise capital in the most efficient way. And we can help them with that as well. And what are the reasons that issuers give for why they want to do a token? I think a lot of them are in, let's say, web-through adjacent space, or they're in a FinTech space, or they just have to believe in it, or they want to, like I said, they are creating some kind of platform or that client base is in that area.

It tends to be, definitely tends to be a certain type of issuer who's already halfway there. We don't, I don't think we've ever convinced anyone that's wrong, but our job is not really to convince them whether to tokenize or not. We can certainly tell them the story, but most of the time people come to us with a decision made. If they haven't made a decision, we'll just work with them. And I think really the benefits of the blockchain come in more on the secondary trading side as well. So a lot of companies when they're just raising and doing a primary offering, they're not as interested in that.

If an issuer is coming to you thinking about the secondary, then that's when it really helps to start talking about everything we can do with the blockchain. - Now you talked about wallets there. One of the interesting things I think is custody. - Yeah. - For traditional assets, I don't care. It sits at Morgan Stanley as far as I know. I buy a share and it sits there and what do I care? But when it comes into the digital securities arena, then we're talking about wallets. And some guys have decided they're not going to do wallet infrastructure. Others have decided that they want to use an anchorage or a big go.

What's texture decided when it comes down to custody? - We try to be as flexible as possible here. So we don't have any kind of custodian affiliation. We have some partnerships, but we're not wedded to any custodian. We're not proposing a certain model. Generally speaking, I think what the issuer wants and what the investors want aren't always the same thing as well. I think most investors, like you said, they just want to log in and see what their security positions are. There are scenarios, I think, where they want to have it in their wallet or have a representation in their wallet.

So we'll support the wallet to self-custody where you're also using a transfer agent or maybe for the listeners itself, where you can have a go. Self-custody with a transfer agent is an acceptable model. You can have the investors using a qualified custodian, which is, and there's quite a lot of qualified custodians out there, or there's the more heavily regulated scenarios like an anchorage. But with the latter, as you go along that stack, the fees go higher and higher each time. So it's what makes sense for each investor in each issuer.

- Let's talk about a use case that maybe more of the mass listener can relate to and that is real estate, right? So you can do real estate on a commercial standpoint where you're raising either a fund or a syndication or a single property. But then also I see that there's some residential home equity aspects that could be used as well. Can you help our listener understand how this could be used in real estate? Because a lot of them aren't involved in private equity or maybe the traditional finance world that's Wall Street, but they have maybe bought a home or two. - Yeah, they probably bought a home or two.

So they understand real estate to a certain extent. And if they've done in the last 15, 20 years, it's gone up. It's been a nice little investment to them. But they probably haven't done any other types of real estate investment. And that's part of the problem, is that it's a very large market that's very inaccessible, which is why you've seen so many issues flocked to the real estate space or start off in the real estate space. Yeah, I think I've seen stats like it's $100 trillion or something commercial real estate.

You've only got, I don't know the exact number, but a very small proportion of that is in some kind of investible real estate investment trust or REITs traded on public equity exchange. And if you get a REIT, you're getting like a hotel REIT, which is a bunch of different hotels, or you're getting whatever it is. I think there's some storage REITs perhaps as well, or whatever the kind of flavor of them is. But with the ability to use this technology, you can get more granted easily. So have very specific projects in certain towns or certain types of real estate that may be appealing to different investors.

The other thing is that old men with new money or old men with old money make a lot of their money in real estate, put it that way. And 'cause they can afford to sit on it for a while. And over time, it grows and grows. And they end up rich at the end of the day. But not everyone can afford to sit in it forever. And so that's where the liquidity aspect comes in. And that people have life event, like a typical real estate project or fund could be like five to seven years. People have life events. They wanna be able to have some optionality around that. So being able to offer secondary trading on an AT&T test like Textures is a good way.

I've spoken to a lot of issuers who says it helps them in the primary raise by able to say, hey, we've signed an agreement with Textures. - Absolutely, yeah. - We're gonna make this available later on down the road. - That's what was really appealing to me. 'Cause my day-to-day is in real estate. And being able to have that option and talk to an investor who says, look, we understand life happens. But the ability to get out and it not be a big deal where you have to go through all this additional paperwork or they have to go find someone to buy them out or we're talking about a buyout at a discount or blah, blah, blah, blah, blah.

That is very appealing. Now, are you aware of any type solution that could be used in a 1031 exchange that could be used in this type of environment? 'Cause I've been all ears and eyes trying to find something because I think that would make it even more appealing to the real estate industry as well. - Totally. So 1031 exchange is a basically even move out of one real estate asset into another and delay the capital gains. So I've looked into it. I don't know if any of your listeners on this podcast are interested in doing it.

I think the only way to do it would be through Delaware Statutory Trusts, which is a type of, so I think a lot of people in the kind of private space, they'll do it with literal, oh, I own this building and I'm gonna buy that building kind of thing. Delaware Statutory Trusts are the only way I've seen of having this natural structure around it and entity type that could be traded. So I've had some conversations on the edges, but if anyone wants to launch a marketplace, the secondary trading of DSTs, they can give me a call on white label or tech. - Okay, that's very interesting.

'Cause I think that's a solution that needs to be delivered because obviously, like you said, a lot of people were in real estate for the tax benefits. And again, it's a great hedge against inflation and real estate's been good to a lot of people. But they also don't wanna, they also don't wanna pay that tax bill if they get hit with the capital gains that they... - It's the most popular, if that's the word, asset class. Most of our issues are in the real estate space. You mentioned a couple of our partners there. And I think an interesting one I'd like to do more of is the fractional real estate investing.

Oh, you mentioned home equity as well. I think that's a great use case. We did, we were working with a partner for a while, but unfortunately, they were not able to move forward. But I think home equity investments is where a homeowner sells a portion of their home equity to an investor. So it's not a HELOC, 'cause they're getting equity participation. And the homeowner is getting... The investor gets a good return. They get some built in, a little bit of built in leverage and they get a good return because they get exposure. And the homeowner gets some capital when they need it and they don't have to have a job.

So they don't have to have good credit 'cause they've already got this asset with the home equity. So that's an interesting one. And I think a lot of it you can do in fractional investing through what's called series LLC structures. I'm a big fan of the reggae offering and then you can do series LLCs for all the underlying houses in there. So an investor can invest in an individual property and an individual zip code. But for the issuer, they can manage it very easily. So you can get, I think there's some scenarios that like $500,000 assets in there, which would be too small to do as a single standalone, but you can do it as a series LLC.

- Let's talk about that, the home equity real quick because I recently heard a stat that there's something like over 50% of people actually own their home outright. And some of these interest rates weren't exactly appealing if they wanted to go take a home equity loan or take out a mortgage because they're so high. How does that actually work if they're selling? So are they just literally selling a portion of the upside to an investor? And is there any sort of like interest associated with it or is it upon a sale this investor would get X, Y, Z? - Yeah, it's upon a sale basically. But yeah, that's another thing.

There's no payments, there's no monthly payments to the investor, but they get their return at the end of it. And there's no fixed monthly interest rate, but there is some of the firms are basically just selling them 10% of your equity. The deal is something like at the end of it, the investor gets 19% or something. - Got it. - So they're guaranteed to double their money in a way. But assuming the house probably continues to go up, it should be a winner if it's structured the right way. I think there are some constraints from the CFPB on the maximum return 'cause they don't want it to seem like a two predatory or anything like that. - Got it.

I know I'm seeing some of the fractional ownership in Malibu homes, some of them on the water 'cause they're very expensive and it's very difficult. It's a very small niche amount of people that can afford those spaces. And then they don't think about the actual insurance that it comes with having a property directly on the water. But I'm seeing that out here in California. Have you guys- - Yeah, that's I think a different model. Was that Picasso I think is doing that? - I think it's through Picasso. - Yeah. So that's more like a high-end that you're paying, you're still paying like 800 grand for- - Yes. - The kind of timeshare, those ones.

- That's how I always looked at it, yes. - A really expensive timeshare with a lot of insurance. But the kind of scenario I was talking about is that more investment opportunities and you're a fractional owner in the home and it's getting rented out or whatever it is. - Got it. Got it. - So on your site, you've got Reg CF's 506Cs under Reg D as well. Where are you seeing most investors coming from? Retail or family offices, accredited investors? - Yeah, it has been since around FTX, Luna. What was that, 2022 into 2023? The large check writers pretty much closed their checkbooks as I'm sure you guys know. So they were the Reg D 506Cs.

Part of our motivation to start doing the retail, the reg A's and the reg CF's was because of that. And also companies were struggling to raise capital. They needed to have these other options. So currently, what has been probably since like late '23 through middle of this year, I'd say more on the retail side. Now I think there's a lot of positive signs in general about capital raising. I think some things have settled down. So maybe it's evening out. - So when it comes down to marketing, is that really the issuer's responsibility when it comes down using texture? - Yes, on the retail side, yes.

- So the issuer does put together a marketing campaign and then your compliance looks at that campaign to make sure they're not over promising. - Oh yeah, there's a lot of those types of things you gotta do as a related broker dealer. Yeah, we manage the offering, any kind of marketing communications. Reg CF is much more restricted than reg A in terms of the rules and whatever because it's much earlier stage riskier companies. Reg A as well, from a broker's point of view, it doesn't make sense for us to be expending human capital, making calls or doing emails for $1,000 checks. We put that effort towards the $50,000, $100,000 checks.

So it's another avenue. It's, there is a fairly significant marketing spend that issuers need to be aware of. They need to commit to upfront and the offerings that fail most likely fail because of that. But at the same time, you can control a little bit more. You're not gonna get, I had somebody, I was talking to an issuer recently about they were doing a reg A. And he said, no, I don't want the minimum to be as low as $1,000. I can't take all these phone calls. I'm gonna be getting to my investors. He'd done a couple of funds before. I'm like, listen, if they're putting in $1,000, they're not gonna be calling you up.

It's when they put in $25,000 or $50,000 that they're gonna be in your shorts all the time. So there's a trade between these things, so different type of investor. And there is the expense in acquiring them, but maybe less expense in managing them. Put it that way. - And can you talk about where are these issuers? Where are they advertising? Is it TikTok, Instagram, Facebook, Google, all of them? Are you seeing any sort of trends there? - Yeah, I think it's Facebook and Google is what I see. I don't really look at the, where they spend more than the content itself. - Now as web three is still continuing to grow, right?

We need this progression to hit web 2.5 and then merge into web three. There's a lot of opportunity around financing films and music royalties. I've executive produced a number of films. And I think one of the things that was always frustrating to me is that sometimes the financial side was like a black abyss, right? You'd have these P and A's, which was printing advertisements and you'd wonder what is the flow of money? When is it actually getting to me? Is it right? Are you trying to hunt someone down? What are the benefits of doing this through digital securities? Is it invoke a little bit more trust to the end investor?

Make it a little bit more simple that they get their payouts or their dividends and they're not having to chase folks down? - Yeah, I think you brought up web three there. So let's compare web three and web two basically. When web two came along, what ended up happening is that there were a few very large winners basically. I'm talking, let's start with Netflix. I was talking about movies and Netflix basically owns all the customers. They buy the movies and they're paying, they're writing nice checks and whatever, but my understanding is there's no residuals or anything like that there in the customer base.

And I think the opportunity to decentralize, a lot of people have talked about, we haven't seen yet, is to create, what would a decentralized Netflix look like? Where you wanna try and build, bring the content and the consumers together. So you could potentially have a marketplace where the films are funded through this network, through this decentralized network. And if they're being funded and there's some kind of shared economics and they're getting dividends from it, that's gonna be a security token.

But at the same time, they're able to leverage their community base, they can launch NFTs as well, potentially, so it's a clip of a movie or limited edition, whatever. And so instead, I think the theory is, instead of Netflix making tens of billions of dollars every month, maybe that could be decentralized to the benefit of both the consumers and the content producers. I think it's not gonna be much harder to put into practice. - That makes a lot of sense. The community is key, especially in web three. We look at Dogecoin and ShibaNu and they've got these large communities, but there's really not necessarily a use case for them yet.

But if they band together and do different things like that and create initiatives, that could be quite appealing. - Yeah, I think so. I think a lot of security tokens, even the worst ones have a lot more innate value than some of those coins you just mentioned there. And I think there's a lot of it, but again, the other thing I think is, why are people investing in these things? You're saying no, have no value, right? Is because they're hoping for the 10X or the 100X or the 1000X like we saw in the early days of crypto. Whereas you've got, you wanna invest in a company that maybe do 10X over the next 10 years or something like that.

It's a different, I think the mindsets are not adjusted to the security tokens or securities. They're not lottery tickets. - Now, one of the early promises for security tokens was that not only was it a security, but the utility side to it as well. And so we've seen that a little bit in the security token arena with the Aspen coin. Right now that's something that if you own a number of, I think you get a discount if you stay at the hotel. With the INX token, if you owned a certain number of them, you will get a discount on your crypto fees if you trade crypto. Are you seeing the utility side being picked up at all by issuers?

- Yeah, it is interesting. Not so much to be honest. I think there is opportunities there. Sometimes I think you would stare at, maybe there's a kind of companion token that's an NFT or something like that, but not inherent within the actual security token. That'd be great if you go to a hotel and show them your wallet and you get a room upgrade or something. - Yeah, and that's what I guess what I call the consumer. It's both the investor and the consumer in something.

And if you're an investor, if you own 50,000 shares or 100,000 shares or a million shares of a company, then shouldn't you be getting something back from the company if you're also consuming from them? And I guess that's my idea. That's where we're gonna go in the world. I walk into a shopping mall and I own shares in Nike and this company and that company. And if I'm buying their goods, I'd like to be able to, in some way, be able to show my wallet and get a discount because I also own equity in that company. And I think that, I had a lot of conversations in my past life with Fortune 500 CFOs who were looking to do that.

They know everything they know through their marketing departments about their consumer, but they've got no idea if their consumers are actually owners of their equity. And as a security token gives you that knowledge. - Exactly. You hit on an important point there. So a CFO of a large, highly traded company, when you look to who the shareholders are, it's gonna say Charles Schwab and Morgan Stanley. - That's right. - The Bernstein, et cetera, because all securities are held in street name, which means basically that the street name came about during something called the paper crisis, I think of 1963 or something like that.

Anyway, we have street name because basically the centralized systems can't handle a number of investors. They're saying, okay, any broker dealer can hold accounts and we'll just know the broker dealer and the broker dealer keeps records of all the underlying shareholders on the other side of that. And this is one of the things Larry Fink has talked about, one of the true real benefits he sees from tokenization, he's our best admin, by the way, is that you can get insight into who your underlying investors are. So you could drop them promotions or something like that.

If you were the CFO, oh, we're doing a limited time offer, try out our new hotel in Boca or whatever it is. I think that is really powerful. And also corporate governance. There's something called proxy voting where basically if we all own shares in Amazon or whatever, we're not voting on the corporate resolutions Schwab is or whoever our broker dealer is. Being able to, I think there's some potential to be able to get more kind of governance from the grassroots as it were. But at the same time, I'm skeptical how much average investor is gonna read these big, long documents. - So yeah, they are certainly boring, those documents. - Yeah.

- When someone comes to you, Richard, and they want to do this, what type of timeline do they need to look at? What do they need to have prepared? How do you know if this is right? What type of process do they go through? - Well, it depends. As a broker dealer, it's a security token. So we have to do due diligence. We don't do tokenization ourselves. So we work with other partners. Sometimes they'll have, usually they're a transfer agent. Sometimes they'll have their own token or blockchain they want to issue on. It all takes a bit of time, right?

I'd say Reg D, probably get going the quickest, but then you're limited to accredited investors only. You're talking about some of the fastest I've seen probably there is maybe four weeks. Reg CF, maybe two months. And then Reg D, Reg A, you're looking at more like six months. - Did you do a Reg S as well? Do you have Reg Ds? When you do a Reg D 506 CG, I did a Reg S too? - Yeah, it's my default, right? Yeah. But we don't have a big network of international investors. - That's what I found with my raises is that it's always, it's the foreign side, the Reg S, that is the noisiest.

And also I'd say raise about two thirds of the capital for each of the companies that I've been doing under Reg D, Reg S. International, especially in Asia, just seems to be a lot more understanding of the product. So. - Yeah, no, I was talking to somebody recently and they looked to raise money in his first office, Asia, based here in San Francisco, and it's his first flights to Asia to tap up some investors. So I think there's definitely capital wanting to come into the US from overseas. - Yeah, I think I read that more than 50% of family offices in Asia have digital assets of some kind already in their portfolio. - It's that.

- It's interesting, 'cause I think that it's been very slow to catch on, but also because the regulations over here are still onerous. - Yeah, there's a lot of confusion, I think, around that. There is a so-called, yeah. Yeah, it gets frustrating. We don't wanna go through the whole list of it, but certainly suffice it to say, I speak to a lot of folks. I guess more on the kind of corporate side of things who just say, we're not looking at the US right now. It's just not worth them figuring it out. I can tell them that, listen, I know we're regulated. We've got a pathway to do this. I can tell you what you can do and what you can't do.

Don't worry, I got you. And a lot of them will be like, eh, it's easy for us to focus on Europe, whether they've got MECO or whatever, or the other kind of digital securities type regulations that have moved forward. So that has been certainly disappointing, especially coming from the person who supposedly taught a blockchain course at MIT to then become, to do what we've seen going on the last few years. But hopefully that era is coming to an end. Yeah, hopefully. Now you have race horses listed on here, on your website. Have you guys done a race horse yet? No, I'm dying to do one.

I've exposed a couple of firms doing race or three firms doing. This is a series that I'll see structure as well, doing race horses. So basically there's one very well-known one out there. And I think that horse won the Kentucky Derby or something, but the way they do it is you raise a gay, but each underlying LLC is its own horse. If you just want to invest in the one horse, you can do that as opposed to just buying into a portfolio of a bunch of them. And the interesting thing there, that could be confusing to the vendors here, but one of them does, speaking of utility, they offer the investors access to the paddock.

Oh, they get a share of the prize money. They get access to the paddock. They get training videos, things like that. It's pretty cool. I get really excited about horses too. I was at the Kentucky Derby a couple of years ago, and a couple of mint juleps talked to a number of different owners. And tokenization, we all agreed, was going to be the next big thing. And then once the mint juleps wore off, everyone was a little bit more relaxed about their thoughts on it. But I do believe that is something that will energize the industry. And I think race horses is something I think there is excitement about.

Race cars as well, something that's exciting about. Pop music groups that essentially are selling their futures. Royalties, yeah. Royalty-based tokens, I think, could be very exciting. And I think that probably the easiest guy to raise capital is someone that already has a following of some sort. Because they already have that mailing list that they can go out to and say, hey, we're raising capital. When I think of anyone that's got fans, that's got a following, that's been sort of something that I've always worked towards.

And I've always moved away from corporates that are maybe in the industrial sector, that are a little bit boring with their raises, or what they're raising capital for. I've always thought that maybe isn't for security tokens today, where someone that's got a following, that's probably better. You have any thoughts? Yeah, if you're targeting retail, definitely. I mean, I spoke to somebody who wanted to do-- I don't know if it was Riggs here for Reg A, and it's air conditioning units. They had a really good air conditioning product. This is not-- I don't think it's the best market for you.

Yeah, like you said, it helps to have a large following, especially for the reg A's, the reg CF's mass distribution type offerings. Yeah, I've also thought that about real estate. There's some guys that come and you say, look, I want to sell 132 Copie Avenue in Chicago. And my view is that's a building that doesn't have a lot of sexiness. It's not very exciting. And I'm making up the building name. Whereas if you were tokenizing, let's say, the Empire State Building or Trump Tower, that might be a lot more interesting, exciting for groups.

So I think that issuers need to think about who are they selling to as well as the type of company selling. I actually can't believe he hasn't tokenized Trump Tower yet. I don't know what he's waiting for. I think that would be-- and we're talking about a committed investor base that he'd go after for that. I think that would be very interesting. Anyway, let's not go there. I think that's what people thought World Liberty Financial was going to be. It was going to be tokenization of the tower instead of a DeFi project. So it's a missed opportunity.

They have the approval now where private equity can come into the NFL, where minority investors can own up to 10%. And they can do it for up to six different teams. That's what the regs are right now. Now that may change. Would you see an application where someone could use your platform for that? So I saw that rule. Prior to that, it was very difficult to buy a team here to get approval from the other members. It was like a cartel almost. But let's take another step. What about investing in NFL players? Is that something you could do? And I've seen some companies trying to do that.

I think there's a couple out there now where their rookie just signed to an NFL team. And they want to write a contract to an LLC where the LLC is going to receive whatever it is, 20% of that person's income for the next 10 years in return for whatever, $1 million upfront. There's a lot of risks to that for the investors, but also potentially for the players. But it could be a good way for that player, let's say, to get some additional endorsements or whatever. So I think we're starting to see a lot of these types of things coming out. Yeah, I've pitched a lot of celebrities on tokenization. And what I find is that you bump into the agent.

And the agent always wants some cash up front before they suggest something to the celebrity, because that's generally how it's based. They want to know there's a guaranteed x coming in, or they won't bring it to the celebrity. And I think that agents need to be educated much more. That this could actually be worth a lot more to them than just a simple commission check. We need to go to the agencies. Was it CEA? Yeah. Yeah. And I think Phil and I have talked to a number of these agencies. But still, it's not the celebrity that's against it. Well, they're a little gun shy, because they hear of celebrity endorsers of crypto being a problem.

And the agents are gun shy, too. But it's the agents that are really the gatekeepers, as opposed to the celebrity that's the end zone. So I think that this all just comes down to education once again, that folks need to understand that it's legal to do these things. It's not illegal. And this isn't a crypto meme coin that you're selling on a private jet and talking to people on a TikTok. It's actually something that would be investing in a security that's related to your future. Yeah. Exactly.

And if they trust in themselves, it's them saying that they don't trust it as if they don't trust themselves in their own career and what they're doing and how they operate and how they make money. It's another avenue for them. I think they are traditionally boxed into the agent and the managers to doing things. But now they've got a way to decentralize that process and build up a following and build up an income stream on their own. This has been-- this is great. I think on this episode, we've talked more use cases than we have to date.

And I think that's one of the keys is everyone starts to understand the different ways that this can be used. It's almost endless. Yeah, absolutely. It's been a fun time. And we could go on. I think having to scratch the surface of some of the things we could be talking about here. So maybe we'll come on next season as well. This has been fantastic. Richard, thank you very much. I think there are probably very few leaders of their security token businesses that could come on and talk about the breadth that you've discussed today. So this has been really a breath of fresh air. I'm excited to see what texture capital is going to do here.

And thank you so much for joining us. I appreciate the opportunity, Douglas. And it was great to meet you both. Thanks, Phil. [BLANK_AUDIO]