Name: Balancing The Ledger: AngelList Alum and Republic CEO Kendrick Nguyen
Uploaded: 2018-09-13
Duration: 9 min 11 s
Description: Republic is an investment platform that allows anyone, anywhere to invest in startups.

[MUSIC PLAYING] Welcome to Balancing the Ledger, where tech and finance intersect. I'm Jeff Roberts. And I'm Robert Hackett. And today, we have Ken Quinn, the CEO of the investment platform Republic. Welcome, Ken. Thank you for having me. It's wonderful to be here. Let's get a better idea of what Republic does. You said any investor can go and invest in projects on your platform. And you have some crypto, including a token project from a 12-year-old. Do you want to tell us a little bit more about that? So we're an investment platform that anyone, anywhere can invest small amounts in project we've curated. So out of thousands of applications, we pick out the ones that we find suitable, and we launch them on the platform. If the crowd-- maybe students or millionaire-- take an interest in it and invest and they meet their requirements, then they can close the round. But one of the projects on there is actually being run by a 12-year-old? Correct. I'm not making fun of this. No, absolutely. Quarters is active on Republic right now. It launched a couple of days ago, and the CEO is 12 years old. I think he's been known as, last year, the 11-year-old who knows more about crypto than most. He didn't just create a company and come to us, and we launch him. Before launching on Republic, he has already raised something like half a million dollars, $400,000. And there's the advisor to support us behind that. We look at the white paper, and we think it is credible. The way that we view the strength is similar to all of the projects that we launch. I can't tell you to invest in his project, just that I would encourage that you invest a small amount in all of the live projects that are currently on Republic. But you know, long term, I do think that they're amazing entrepreneurs building amazing things on Republic today. Republic has been around for a couple of years, but you only recently decided to allow crypto companies onto your platform, sort of in the heat of the mania in December. Why did you guys decide to do that? The vision for Republic, ultimately, is to be Amazon for private investing. You can't be Amazon of anything if you just sell one product. [INTERPOSING VOICES] Exactly. As we look at the ecosystem, it became very clear that crypto tokenization blockchain enabled startups will be a key component of the business of the economy. That was just a natural expansion of our core business. What is it about crypto that interests you or that you believe in? I came from a Fintech background, having been a securities lawyer. After that went into asset management, much of the financial services ecosystem is built on the middleman charging a fee, whether custody, fund administration. Blockchain enabled the dis-intermediation of that middle function and provide value back to the counter parties at the two end. All of that necessarily leads to a tremendous change in impact and potential for every single sector that I can conceive of. Your company actually has a TV show where you have the Draper family, big time investors. They participate and invest in some of these projects. Tell us a little bit about that show. Yes. Meet the Drapers is a show on Sony cable TV. Similar to Shark Tank, entrepreneurs every week pitch a panel of judges. Except that people at home, if they like a company or if they like a judge decision, can invest along by going on republic.co Do you see much activity from audiences who watch this show? We're filming the second season. First season was a beta test, and logistic legal issues took a lot of effort. In terms of actual engagement, it was relatively low. But I do think that in a couple years, hopefully you're going to see Republic media doing these kind of shows around the world, similar to The Voice, American Idol, or some of those shows. And your background is you were the general counsel at AngelList, the very well regarded platform for investors, but for wealthy investors. And you pivoted to this. Is that right? Correct. I was general counsel in the course of that-- played a bit of a role in the law that enabled investment crowdfunding. What's the difference between an Angellist and something like Republic? So Angellist, under the sister company named Coinlist, only accept accredited investors, that means loosely defined millionaires. I mean, that leaves 97% of the population out of tech investing and crypto investing. Republic is solving that. We've seen over the past few months crypto has been getting absolutely crushed. Ether, which has been one of the high flying projects last year, is down something like 90%. How do you go about trying to protect the investors who go on your platform. Early stage investing and crypto investing are highly speculative and highly risky. So by providing a lot of disclosure, we hope that everyone knows that they should only invest the money that they can afford to lose. That said, I'm very long in this technology and on the impact it potentially will bring. So I think it's fair to say that I do encourage everyone in small amounts participate and be a more engaged citizen and supportive of innovation. You don't allow just anyone on your platform, right? You have a pretty healthy screening process, right? Well, any investor can invest but, for the companies absolutely. Our acceptance rate is lower than Harvard. I think it's one out of 30 that we eventually launch to the public. And how many crypto projects do you have right now? Active right now, I believe there are three. We've closed three of the crypto projects prior in the year. What will investors on Republic receive if you put money into a crypto project? Is it just sort of conventional shares in the company, or is it going to be tokens? It depends case by case. One scenario is in a forward contract. I put in $1,000 today. When you, Jeff, issue your tokens, you're going to issue those tokens to me at $1 per token. That's one example. The other one is if you already have tokens to be issued. The agreement can say that, hey, I'm buying tokens outright at this moment. And in some cases, certain tokens do represent underlying equity. And that will be structured in a different environment as well. One problem that crowdfunding platforms have had is a project will go on there. A team will raise a bunch of money, and they can abscond with it. How do you hold projects to account? We dish out an instrument in the spirit of investor protection in that we hold-- for some projects not all-- we hold the proceed in escrow and obligate the project to meet certain milestones before we release them. Compared to a lot of ICOs out there, which investor deliver money and they can go to Monaco or Vegas and spend all of it with no accountability, that's probably no longer the case, at least not in the US. But we take it a step further to productize that escrow investor protection function. So you're almost acting a bit like a venture capitalist then, supervising, coaching, providing accountability. I would call us venture capitalists plus that is we do take on even a further component of investor protection, because VCs deal with sophisticated investors, LPs, whereas we deal with you know everyone. The threshold, the obligation is higher for us off from the perspective of the SEC. And now, republic is actually going to release some of its own equity in the form of tokens for people to buy. When will that happen? What will that look like? Yes. It is actually the very first time that we publicly announced that we will be issuing our own token and intending to sell them next year. The token will represent-- there's an equity revenue component to it, as well as functionalities. And you're going to sell the Republic tokens on Republic? On Republic, off Republic in several formats that enable for widespread distribution, but of course in a compliant manner. And you said this can be a revenue stream attached to them. It's almost these dividend paying tokens. Is that the right way to think of it? There will be. We're going to issue our white paper in a few months. And I would love to share more details at that time. We'd love to read it. Ken, thanks so much for coming by. Thank you for having me. I'm Jeff Roberts. And I'm Robert Hackett. Come to fortune.com for more balance in the ledger. See you next time. 

Balancing The Ledger: AngelList Alum and Republic CEO Kendrick Nguyen

Finance

Republic is an investment platform that allows anyone, anywhere to invest in startups.