May 9, 2024 • 21 mins
Join host Jim Jockle on "Trading Tomorrow - Navigating Trends in Capital Markets" as he speaks with Rodney Reisdorf, the CEO and Co-Founder of Verivend, dubbed the "Venmo of private capital.” Raising capital is a critical and time-honored endeavor within the finance industry. It often means a complex web of paperwork, regardless of the funding mechanism. Verivend is trying to change and speed up this process. This episode unpacks Verivend and the integration of technologies like blockchain, artificial intelligence, and secure digital platforms that could revolutionize how we handle private market transactions in the future.
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Episode Transcript
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Speaker 1 (00:07):
Welcome to Trading Tomorrow Navigating Trends in
Capital Markets, the podcastwhere we deep dive into the
technologies reshaping the worldof capital markets.
I'm your host, Jim Jockle, aveteran of the finance industry
with a passion for thecomplexities of financial
technologies and market trends.
Because this is TradingTomorrow navigating trends in
capital markets, where thefuture of capital markets
(00:30):
unfolds.
The landscape of the financesector is undergoing a shift.
We're witnessing an era wheretraditional banking and
financial standards are beingreshaped by technological
advancements.
This transformation is biggerthan just transitioning from
(00:51):
paper-based systems to digitalplatforms.
It encompasses the integrationof cutting-edge technologies
such as blockchain, artificialintelligence, mobile banking,
among others, that arefundamentally altering the way
we engage with monetary assetsand financial services.
Innovations that are not onlymaking financial transactions
more efficient, but are alsorevolutionizing capital markets
(01:12):
by accelerating traditionalprocesses.
Raising capital is a criticaland time-honored endeavor.
Within the finance industry, itoften means a complex web of
paperwork and big-timeinvestments, regardless of the
funding mechanism being used,but there's a company that's
trying to change that.
Joining us to discuss is RodneyReisdorf.
He's the CEO and co-founder atVerivend.
(01:32):
They're often called the Venmoof private capital.
Verivent was founded to delivera painless, paperless and
effortless way to move privatecapital while still providing a
secure environment for firms,funds and their LPs to transact.
Rodney is an experienced,results-driven leader of SaaS
and enterprise softwaresolutions, with a successful
(01:53):
history in the B2B and B2Cindustries.
He has served in senior leveland leadership roles focusing on
market-leading technologyplatforms, client delivery and
operational strategies.
Rodney, thank you so much forjoining us today.
Thanks, Jim, Glad to be here.
So just to kick us off, can yougive us a brief overview of
what Verivin does and the coreproblem in the capital markets
your company is trying to?
Speaker 2 (02:13):
address Sure.
So I think the title of theepisode of this podcast Speeding
Up Capital Markets fits perfect, because we're really looking
to disrupt and transform howprivate market transactions are
happening.
So we're typically known as theVenmo of private capital and
we're a purpose-built paymentsplatform to help GPs be able to
focus on why they became GPs andfocus on finding deals and
(02:35):
working with their portfoliocompanies and getting the best
returns they can for their LPsand just providing a
frictionless experience for LPsto invest and just better
security for everyone.
Speaker 1 (02:44):
So your company tagline is effortless, paperless
and painless.
Can you explain why you pickthese words and how they differ
from the way private capital has?
Speaker 2 (02:52):
traditionally been moved.
Sure, so it's really theopposite of how private capital
has traditionally moved.
It's been full of effort, it'sbeen full of pain and it's been
full of paper.
So I was actually just readinga pitch book report this morning
before I came over, and it wasall about how private credit has
ranked second in the past yearfor annual performance and
fundraising.
And then I always like to thinkabout this rise of the retail
(03:14):
investor.
So I think about speeding upprivate markets in two ways.
There's this inertia and thismomentum in that there's these
new asset classes like privatecredit coming up.
There's many reasons why retailinvestors are coming onto the
scene, from just GPs wideningtheir network of available
capital and retail investorslooking for ways to outperform
the public markets.
So there's the speeding up ofthe private markets.
(03:36):
That is happening, whetherpeople like it or not.
So GPs and also LPs are reallychallenged with ways of how to
keep up with that.
And then back to the effortless, paperless and painless.
There's just this need to speedit up anyway, because it has
been slow, it has been verymanual, it has been very
paper-based and there's justbeen a lot of friction because
nothing has changed since thedawn of time for how GPs raise
(03:58):
capital and LPs invest, and howeverybody interacts.
Speaker 1 (04:05):
In an era where digital security is paramount,
what measures has Veravantimplemented to ensure the safety
and integrity of transactionsand data?
Speaker 2 (04:10):
Yeah, that's a great question.
So at the core, it's reallytechnology and the technology
that we've built from the groundup.
But if you back up a little bit, you think about the ubiquitous
terms that are still in theprivate markets, things like
what's the check size that aninvestor writes?
Have you sent the wire?
Where are the wire instructions?
Those are hundreds-year-oldterms and I always kind of like
(04:30):
to go back and reflect on thefact that many people don't even
think about why wires arecalled wires.
Wire transfers are over 150years old and the reason they're
called wires is because thefirst ones were sent way back in
the 1870s from Western Union'stelegraph lines.
So you think about that and youthink about how ubiquitous
those methods of money movementare today.
Nothing has changed.
(04:52):
So really it's purpose-builttechnology that is focused on
transforming how people areinteracting and transacting, and
the main way to call capitaland send distribution payments
today has been exchanging bankaccount information, which is
insane in my opinion.
I mean, if you needed to pay meor I needed to pay you, would we
exchange your bank accountinformation?
No, we'd pull up our phones anduse something like Venmo or
(05:15):
PayPal or Zelle.
So that's really why we go backto.
Verivend is the Venmo ofprivate markets, because what
we're doing is just transforminghow people are able to interact
and transact, but also with thecommon denominator of security,
so that nobody is ever havingto exchange bank account
information, share theirsensitive information, and that,
(05:35):
you know, is all susceptible toget compromised and hacked.
We hear all the horror storiesall the time of wires going out
to the wrong people because abad actor was in someone's email
and then they gave themfraudulent wire instructions and
then the wire goes out and it'sunrecoverable.
Speaker 1 (05:48):
So you're suggesting I should take the spool of wire
out of my backpack that I carryaround?
Yes, yeah, maybe.
Speaker 2 (05:54):
Yeah.
Speaker 1 (05:55):
Got it.
So how do you focus ontransparency and why is that
important?
Speaker 2 (06:01):
So, looking at what the current method is of a GP
calling capital or sendingdistribution payments, I think
about it as a black hole.
So the traditional way is for aGP to send out capital call
notices.
They're typically Word documentsor PDF documents, sometimes
through email, which is veryscary because those can get
compromised, as we were justtalking about, or maybe put it
(06:22):
up on a static document sharingportal, as we were just talking
about, or maybe put it up on astatic document sharing portal,
but they're just they're waiting.
They're waiting for the LPs tohopefully look at them, to fund
them and, as we all know,there's always a rush to close a
deal or close a transaction andthe last thing you want is a
last minute surprise, right?
So, and the same goes fordistribution payments, when
distributions go out, typicallythey're sent via wire.
(06:43):
There's a document that goesout to the LPs, but there's no
connectivity between GPs and LPs.
So that transparency and thataccountability is something that
we're really focused on, sothat when GPs send out all their
capital calls, they can see inreal time how many of their
investors have looked at them,how many have funded them, how
many haven't funded them, andthen just the automation of that
whole process, everything fromsending automated reminders out
(07:06):
to LPs who haven't funded,sending confirmations when
incoming funds have beenreceived, and just keeping
everybody on the same page everystep of the way.
Speaker 1 (07:15):
And perhaps we could take a peek under the hood.
Is that specific to blockchain,or what kind of technology is?
Speaker 2 (07:25):
powering.
So I get that question a lotand what we've done is we've
taken the best principles fromblockchain and from
cryptocurrency.
So we're not blockchain bydefinition, we're definitely not
cryptocurrency.
But what we've done is we'vebuilt our own secure ledgering
technology to ledger all ofincoming, outgoing and
(07:45):
in-between transactions and thenwe are also tokenizing all of
the incoming and outgoingtransactions, so it's all fiat
USD currency.
So we've leveraged a lot ofthose great technologies from
things like blockchain andcrypto and made them applicable
and made them focused on theprivate markets.
Speaker 1 (08:03):
So, from the perspective of your clients, how
does Verivan simplifyday-to-day operations of capital
markets participants and whatfeedback have you received from
early adopters?
Speaker 2 (08:13):
So I always like to say that nobody becomes a GP or
nobody gets into private marketinvesting to do all the manual
back office repetitive tasks.
Gps aren't supposed to bechasing people down for wires or
having to manually reconcilewhose $100,000 wires is whose,
because we just received 100 ofthem or 10 of them today and
nobody knows which one is which.
(08:33):
And GPs should really befocused on finding great deals,
closing those deals and workingwith their portfolio companies
to get the best returns fortheir investors.
So that's number one.
We not only save GPs time, weallow them to get back to being
GPs and the reason why theybecame GPs and started
investment funds or sponsoringinvestments.
(08:54):
The second one is on theinvestor side.
Amazon makes it easy to buy.
You swipe to buy and that'susually why there's a big stack
of cardboard boxes at my frontdoor every day.
That is, if you make it easyfor an investor to invest,
they're going to come back formore.
They're going to re-up.
(09:16):
And you look at a tale of twofunds one that is using the old
school way of just paper, painand effort and sending out those
static capital calls, and youlook at one that's using a
platform like Verivend whereit's literally a one-click
process for the LP to invest.
Which one is the LP going tocontinue to invest in, right?
I mean, if it's easy to putyour money someplace, it's
probably going to be easy foryou to do that over and over
again.
And then again, just thatsecurity, which I can't stress
(09:37):
enough, of never having GPs orLPs exchange their sensitive
banking information, keepingeverything secure and never
susceptible to fraud orcompromise.
Speaker 1 (09:48):
So I would be remiss if I didn't bring up regulation
right.
Obviously, in emerging assetclass, there's talk of
regulatory barriers coming down.
That is accelerating the market, as well as even institutional
monies coming into thisparticular market.
So how does Verivan navigatethe complex regulatory
(10:11):
environment and how do you stayahead of compliance?
Speaker 2 (10:15):
So there's certainly no shortage of rapidly
developing regulation, andregulation is both good and bad.
If you look back at theBipartisan Jobs Act from over a
decade ago, that certainly washelpful because it relaxed
regulation.
It allowed more retailinvestors to come into the
market.
And then, if you look at theone that's in a discussion right
now it's HR 2799, but morecommonly known as the Expanding
(10:38):
Access to Capital Act that willpotentially allow up to 600
investors for a GP.
It's past the house, it's anelection year, who knows whose
desk it's going to end up on?
But there are motions and thereare signs from the regulatory
environment that people want toencourage more development and
more openness and moreflexibility in the private
(10:59):
markets.
So that's the good.
The bad part is it's really hardfor GPs and investment sponsors
to keep up and manage all theseregulations.
I mean, if you can imagine howhard it is for a GP now to
manage up to 99 investors, it'sgoing to be unbelievably
difficult for them, probablynearly impossible, to manage up
to 600 investors, just becausethe more transactions, the more
(11:20):
investors, the more chasingpeople, the more complexity that
they wind up with.
So with that, people and GPsand LPs are really challenged
with how can they keep up withthis expanding regulation, how
can they keep up with thisexpanding way that people are
going to be investing?
And, on the bad side, I alwayslike to reflect back on I call
(11:44):
it the most expensive textmessages that were ever sent.
So I remember when I got myfirst cell phones, there was all
these text message plans.
Right, you had to monitor howmany minutes you had, how many
texts you had.
Well, the SEC also does that,and just last month, they fined
16 firms $81 million, and thatequates to over a billion
dollars of fines over the pastfew years for what the SEC has
(12:05):
labeled off-channelcommunications, and what that
means is GPs and their firmshave been texting, have been
WhatsApp messaging theirinvestors, and the SEC doesn't
like it because it's all ofthese out-of-band communications
.
So you look at the expandingregulatory environment, the
relaxation of regulation, andthen just the ways that people
have tried to catch up with thatthat really haven't been within
(12:26):
the regulatory environment orthe guidelines.
They need tools, they needsolutions, they need technology
to keep up on that and to makesure that they are staying
compliant, and that's, you know,one big thing that we're always
focused on as well who actuallyspecific to private credit and
I, you know, I think of, youknow, in my world, world, in
terms of derivatives, you knowthe SEC has some oversight, cftc
(12:47):
has oversight.
Speaker 1 (12:48):
You know which bodies are, the are, are the?
Obviously things are withCongress now, but who are the
main regulators and how are theymaneuvering within those
markets?
Speaker 2 (12:59):
So it spans a couple it's the SEC, it's FINRA and
then, from the banking side ofit, it's either the OCC, for
federally regulated banks, orthe DFS, the Department of
Financial Services, for stateregulated banks.
So there's a lot of bodies anda lot of regulation that are
overseeing this, and you knoweach one has their own agenda,
(13:20):
rightly so.
So it's just looking at all ofthem and making sure that we're
staying up to par on them, butalso we're giving our customers,
the GPs and their LPs, thetools to maintain a compliant
regulatory environment as well,so that they don't get fined $81
million for sending a textmessage that all messaging, like
it is on Verivend, is kept inplatform.
(13:41):
It's all chronicled, it's alldate and timestamped.
So really there's no dispute onwho said what and when, because
it's all there and it's onesource of truth.
Speaker 1 (13:51):
And so thank you, and I was curious have you received
any pushback from the financeindustry regarding your
technology and, if yes, how areyou handling that?
Speaker 2 (14:01):
I wouldn't necessarily say we've received
pushback, but at the end of theday, we are teaching our
customers and the industry towork in a new way and to operate
in a new way, and it's reallyabout the education of it and
shining a light on all theproblems we've been talking
about where it's just it's a lotof pain, it's a lot of
unnecessary effort for GPs andinvestment sponsors.
(14:24):
There's just a lot ofunnecessary friction for LPs to
invest in these sponsors andthese GPs and just, you know, no
end in sight for the securityrisks of the status quo.
So it's really showing that thestatus quo, as ubiquitous and
standard as it's been, is notthe best way to run private
market transactions andinvestment transactions.
So that's actually the fun part, in my opinion, of what we're
(14:46):
doing.
We're, you know, we'reevangelizing a new way for
people to work and most peopleare embracing that.
I mean, it does take a littlebit to get some people over that
initial hump, but once they seeit, once they watch it in
action and realize how it canwork and not only, you know,
save them time and money andeffort and improve their
security, then the majority ofpeople are embracing it and
(15:07):
adopting it.
Speaker 1 (15:08):
You know it's interesting that you know we've
seen so much inefficiencies inother public markets.
You know I think of bondmarkets, for example.
Do you think there's lessonslearned?
Or because of the newtechnology mindset within
private credit, it will be acatalyst to market structure
changes in other, less efficientpublic markets.
Speaker 2 (15:32):
I think there's definitely a cascading effect
that's going to happen.
I mean, if you look at just thegenerational changes in both
the public and the privatemarkets, you've got more
tech-savvy investment sponsors,more tech-savvy investors and
the whole democratization ofinvestment transactions.
I think that you know we'rereally only in the first inning
of innovation for both thepublic and the private markets
(15:54):
and there's been a lot oflessons learned to your point
and I think from those lessonsit's just going to continue to
drive more, further adoption ofinnovation and cutting edge
technologies to really makethings more efficient, more
seamless and more secure foreverybody on both sides.
Speaker 1 (16:07):
And what future developments or features can
Vervin users anticipate?
Are there any upcominginnovations you're particularly
excited?
Speaker 2 (16:14):
about.
Yeah, I mean, we're alwaysplanning some really exciting
things for our product roadmapand we're very proud to have
what we call a client-drivenproduct roadmap, where my
co-founders and I have workedfor way too many companies where
there was a very cleardisconnect between the customers
and what the company wasbuilding.
And we work alongside ourcustomers and you know, one of
(16:34):
the most fulfilling things aboutwhat we're doing is when we
hear customers say, wow, I can'tbelieve it's already in our
product already, because I justasked about that a couple of
weeks ago or a month ago.
So we're really proud to workalongside our customers and
build together, because, in myopinion, if we're not building
things that are going to makeour customers successful and
we're not adding value, thenthere's really no point in doing
what we're doing.
So the underlyingdifferentiator that we're doing
(16:57):
in the main focus is payments.
We are an end-to-end solutionfor GPs and LPs to manage that
entire investment journey, allthe way from deal marketing and
launching a new fund throughproviding real-time investment
returns to the LPs.
But payments is really at ourcore and expanding the scope of
what we're doing in payments interms of just more functionality
and more features and moreeffortless transactions that we
(17:19):
can offer to both our GPcustomers and all their
investors.
Speaker 1 (17:22):
You know, during this podcast season, we did a
discussion on attracting talentand you know and obviously
there's a lot of competinginstitutions for talent it seems
like you're doing somethingvery revolutionary in terms of
taking best of breed ofblockchain but adopting it in a
(17:43):
more practical way.
Perhaps you can tell me aboutyour development staff and
what's the profile of thosetypes of individuals to manage
this customer centric roadmap.
Speaker 2 (17:54):
Yeah.
So we're very, you know, veryproud of the team that's built.
What we have in Verivend we'rea small, lean team.
Again, my co-founders and Ihave come from early stage high
growth companies that have thengone through M&A activity or IPO
activity and become very bigcompanies.
And you know, there's nothingwrong with big companies but
that's just that's not in ourDNA.
(18:15):
We're always, you know, lookingfor the next exciting way that
we can disrupt a legacy verticalwith modern cutting edge
technology.
So I think in itself that tendsto attract really, really
highly skilled talent, becausethose people that have been at
larger companies, you know,might feel like they're just
getting lost or they're just anumber there and they're really
(18:38):
not impacting the bottom linethere.
So you know, here at Verivendwhat they're doing is, I mean,
we're a great close-knit teamand everybody's got a voice and
everybody's able to impact thebottom line and work closely
together team and everybody'sgot a voice and everybody's able
to impact the bottom line andwork closely together and really
see the fruits of their labordeveloped and used and adding
value to our customers.
So I'd say, you know, just bydoing something revolutionary,
(18:59):
doing something cutting edge andultimately giving something
that is tangible, that ourcustomers can touch and feel and
use and get value from, adds alot and it attracts some really
great talent.
Speaker 1 (19:09):
So we've made it to the final question of the
podcast and we call it the trenddrop.
It's like a desert islandquestion.
So if you could only track onetrend in speeding up capital
markets, what would that be?
Speaker 2 (19:21):
It's got to be payments.
I mean, that's where we'refocused and that's what we're
most excited and bullish on,really, because the way that
money has moved in the privatemarkets has not changed in
decades, if not longer.
I mean again back to checks andwires which are hundreds and
hundreds of years old.
It's time for a change.
And the payments are really themost critical part of how GPs
(19:42):
and LPs are transacting.
Because if the money goes tothe wrong place or just the
silly things that happen thataren't so silly when they happen
like the LP saved their capitalcall notice from fund one and
now the GP is issuing capitalcalls for fund four and that LP
just pulls it off their desktopand sends money using the wiring
instructions for fund one, buta new account is being used for
fund four and it's just out inthe payments ether.
(20:04):
I mean that's just verypreventable things no-transcript
(20:31):
.
Speaker 1 (20:32):
It was great chatting with you.
Thanks, Jim, Coming up nextweek on Trading Tomorrow,
navigating trends in capitalmarkets.
We speak with the co-founderand CEO of FinPilot, a
technology which uses AI to pullinformation out of unstructured
financial data.
It's going to be a conversationthose working in finance do not
(20:54):
want to miss.
Welcome to Trading Tomorrow Navigating Trends in
Capital Markets, the podcastwhere we deep dive into the
technologies reshaping the worldof capital markets.
I'm your host, Jim Jockle, aveteran of the finance industry
with a passion for thecomplexities of financial
technologies and market trends.
Because this is TradingTomorrow navigating trends in
capital markets, where thefuture of capital markets
(00:30):
unfolds.
The landscape of the financesector is undergoing a shift.
We're witnessing an era wheretraditional banking and
financial standards are beingreshaped by technological
advancements.
This transformation is biggerthan just transitioning from
(00:51):
paper-based systems to digitalplatforms.
It encompasses the integrationof cutting-edge technologies
such as blockchain, artificialintelligence, mobile banking,
among others, that arefundamentally altering the way
we engage with monetary assetsand financial services.
Innovations that are not onlymaking financial transactions
more efficient, but are alsorevolutionizing capital markets
(01:12):
by accelerating traditionalprocesses.
Raising capital is a criticaland time-honored endeavor.
Within the finance industry, itoften means a complex web of
paperwork and big-timeinvestments, regardless of the
funding mechanism being used,but there's a company that's
trying to change that.
Joining us to discuss is RodneyReisdorf.
He's the CEO and co-founder atVerivend.
(01:32):
They're often called the Venmoof private capital.
Verivent was founded to delivera painless, paperless and
effortless way to move privatecapital while still providing a
secure environment for firms,funds and their LPs to transact.
Rodney is an experienced,results-driven leader of SaaS
and enterprise softwaresolutions, with a successful
(01:53):
history in the B2B and B2Cindustries.
He has served in senior leveland leadership roles focusing on
market-leading technologyplatforms, client delivery and
operational strategies.
Rodney, thank you so much forjoining us today.
Thanks, Jim, Glad to be here.
So just to kick us off, can yougive us a brief overview of
what Verivin does and the coreproblem in the capital markets
your company is trying to?
Speaker 2 (02:13):
address Sure.
So I think the title of theepisode of this podcast Speeding
Up Capital Markets fits perfect, because we're really looking
to disrupt and transform howprivate market transactions are
happening.
So we're typically known as theVenmo of private capital and
we're a purpose-built paymentsplatform to help GPs be able to
focus on why they became GPs andfocus on finding deals and
(02:35):
working with their portfoliocompanies and getting the best
returns they can for their LPsand just providing a
frictionless experience for LPsto invest and just better
security for everyone.
Speaker 1 (02:44):
So your company tagline is effortless, paperless
and painless.
Can you explain why you pickthese words and how they differ
from the way private capital has?
Speaker 2 (02:52):
traditionally been moved.
Sure, so it's really theopposite of how private capital
has traditionally moved.
It's been full of effort, it'sbeen full of pain and it's been
full of paper.
So I was actually just readinga pitch book report this morning
before I came over, and it wasall about how private credit has
ranked second in the past yearfor annual performance and
fundraising.
And then I always like to thinkabout this rise of the retail
(03:14):
investor.
So I think about speeding upprivate markets in two ways.
There's this inertia and thismomentum in that there's these
new asset classes like privatecredit coming up.
There's many reasons why retailinvestors are coming onto the
scene, from just GPs wideningtheir network of available
capital and retail investorslooking for ways to outperform
the public markets.
So there's the speeding up ofthe private markets.
(03:36):
That is happening, whetherpeople like it or not.
So GPs and also LPs are reallychallenged with ways of how to
keep up with that.
And then back to the effortless, paperless and painless.
There's just this need to speedit up anyway, because it has
been slow, it has been verymanual, it has been very
paper-based and there's justbeen a lot of friction because
nothing has changed since thedawn of time for how GPs raise
(03:58):
capital and LPs invest, and howeverybody interacts.
Speaker 1 (04:05):
In an era where digital security is paramount,
what measures has Veravantimplemented to ensure the safety
and integrity of transactionsand data?
Speaker 2 (04:10):
Yeah, that's a great question.
So at the core, it's reallytechnology and the technology
that we've built from the groundup.
But if you back up a little bit, you think about the ubiquitous
terms that are still in theprivate markets, things like
what's the check size that aninvestor writes?
Have you sent the wire?
Where are the wire instructions?
Those are hundreds-year-oldterms and I always kind of like
(04:30):
to go back and reflect on thefact that many people don't even
think about why wires arecalled wires.
Wire transfers are over 150years old and the reason they're
called wires is because thefirst ones were sent way back in
the 1870s from Western Union'stelegraph lines.
So you think about that and youthink about how ubiquitous
those methods of money movementare today.
Nothing has changed.
(04:52):
So really it's purpose-builttechnology that is focused on
transforming how people areinteracting and transacting, and
the main way to call capitaland send distribution payments
today has been exchanging bankaccount information, which is
insane in my opinion.
I mean, if you needed to pay meor I needed to pay you, would we
exchange your bank accountinformation?
No, we'd pull up our phones anduse something like Venmo or
(05:15):
PayPal or Zelle.
So that's really why we go backto.
Verivend is the Venmo ofprivate markets, because what
we're doing is just transforminghow people are able to interact
and transact, but also with thecommon denominator of security,
so that nobody is ever havingto exchange bank account
information, share theirsensitive information, and that,
(05:35):
you know, is all susceptible toget compromised and hacked.
We hear all the horror storiesall the time of wires going out
to the wrong people because abad actor was in someone's email
and then they gave themfraudulent wire instructions and
then the wire goes out and it'sunrecoverable.
Speaker 1 (05:48):
So you're suggesting I should take the spool of wire
out of my backpack that I carryaround?
Yes, yeah, maybe.
Speaker 2 (05:54):
Yeah.
Speaker 1 (05:55):
Got it.
So how do you focus ontransparency and why is that
important?
Speaker 2 (06:01):
So, looking at what the current method is of a GP
calling capital or sendingdistribution payments, I think
about it as a black hole.
So the traditional way is for aGP to send out capital call
notices.
They're typically Word documentsor PDF documents, sometimes
through email, which is veryscary because those can get
compromised, as we were justtalking about, or maybe put it
(06:22):
up on a static document sharingportal, as we were just talking
about, or maybe put it up on astatic document sharing portal,
but they're just they're waiting.
They're waiting for the LPs tohopefully look at them, to fund
them and, as we all know,there's always a rush to close a
deal or close a transaction andthe last thing you want is a
last minute surprise, right?
So, and the same goes fordistribution payments, when
distributions go out, typicallythey're sent via wire.
(06:43):
There's a document that goesout to the LPs, but there's no
connectivity between GPs and LPs.
So that transparency and thataccountability is something that
we're really focused on, sothat when GPs send out all their
capital calls, they can see inreal time how many of their
investors have looked at them,how many have funded them, how
many haven't funded them, andthen just the automation of that
whole process, everything fromsending automated reminders out
(07:06):
to LPs who haven't funded,sending confirmations when
incoming funds have beenreceived, and just keeping
everybody on the same page everystep of the way.
Speaker 1 (07:15):
And perhaps we could take a peek under the hood.
Is that specific to blockchain,or what kind of technology is?
Speaker 2 (07:25):
powering.
So I get that question a lotand what we've done is we've
taken the best principles fromblockchain and from
cryptocurrency.
So we're not blockchain bydefinition, we're definitely not
cryptocurrency.
But what we've done is we'vebuilt our own secure ledgering
technology to ledger all ofincoming, outgoing and
(07:45):
in-between transactions and thenwe are also tokenizing all of
the incoming and outgoingtransactions, so it's all fiat
USD currency.
So we've leveraged a lot ofthose great technologies from
things like blockchain andcrypto and made them applicable
and made them focused on theprivate markets.
Speaker 1 (08:03):
So, from the perspective of your clients, how
does Verivan simplifyday-to-day operations of capital
markets participants and whatfeedback have you received from
early adopters?
Speaker 2 (08:13):
So I always like to say that nobody becomes a GP or
nobody gets into private marketinvesting to do all the manual
back office repetitive tasks.
Gps aren't supposed to bechasing people down for wires or
having to manually reconcilewhose $100,000 wires is whose,
because we just received 100 ofthem or 10 of them today and
nobody knows which one is which.
(08:33):
And GPs should really befocused on finding great deals,
closing those deals and workingwith their portfolio companies
to get the best returns fortheir investors.
So that's number one.
We not only save GPs time, weallow them to get back to being
GPs and the reason why theybecame GPs and started
investment funds or sponsoringinvestments.
(08:54):
The second one is on theinvestor side.
Amazon makes it easy to buy.
You swipe to buy and that'susually why there's a big stack
of cardboard boxes at my frontdoor every day.
That is, if you make it easyfor an investor to invest,
they're going to come back formore.
They're going to re-up.
(09:16):
And you look at a tale of twofunds one that is using the old
school way of just paper, painand effort and sending out those
static capital calls, and youlook at one that's using a
platform like Verivend whereit's literally a one-click
process for the LP to invest.
Which one is the LP going tocontinue to invest in, right?
I mean, if it's easy to putyour money someplace, it's
probably going to be easy foryou to do that over and over
again.
And then again, just thatsecurity, which I can't stress
(09:37):
enough, of never having GPs orLPs exchange their sensitive
banking information, keepingeverything secure and never
susceptible to fraud orcompromise.
Speaker 1 (09:48):
So I would be remiss if I didn't bring up regulation
right.
Obviously, in emerging assetclass, there's talk of
regulatory barriers coming down.
That is accelerating the market, as well as even institutional
monies coming into thisparticular market.
So how does Verivan navigatethe complex regulatory
(10:11):
environment and how do you stayahead of compliance?
Speaker 2 (10:15):
So there's certainly no shortage of rapidly
developing regulation, andregulation is both good and bad.
If you look back at theBipartisan Jobs Act from over a
decade ago, that certainly washelpful because it relaxed
regulation.
It allowed more retailinvestors to come into the
market.
And then, if you look at theone that's in a discussion right
now it's HR 2799, but morecommonly known as the Expanding
(10:38):
Access to Capital Act that willpotentially allow up to 600
investors for a GP.
It's past the house, it's anelection year, who knows whose
desk it's going to end up on?
But there are motions and thereare signs from the regulatory
environment that people want toencourage more development and
more openness and moreflexibility in the private
(10:59):
markets.
So that's the good.
The bad part is it's really hardfor GPs and investment sponsors
to keep up and manage all theseregulations.
I mean, if you can imagine howhard it is for a GP now to
manage up to 99 investors, it'sgoing to be unbelievably
difficult for them, probablynearly impossible, to manage up
to 600 investors, just becausethe more transactions, the more
(11:20):
investors, the more chasingpeople, the more complexity that
they wind up with.
So with that, people and GPsand LPs are really challenged
with how can they keep up withthis expanding regulation, how
can they keep up with thisexpanding way that people are
going to be investing?
And, on the bad side, I alwayslike to reflect back on I call
(11:44):
it the most expensive textmessages that were ever sent.
So I remember when I got myfirst cell phones, there was all
these text message plans.
Right, you had to monitor howmany minutes you had, how many
texts you had.
Well, the SEC also does that,and just last month, they fined
16 firms $81 million, and thatequates to over a billion
dollars of fines over the pastfew years for what the SEC has
(12:05):
labeled off-channelcommunications, and what that
means is GPs and their firmshave been texting, have been
WhatsApp messaging theirinvestors, and the SEC doesn't
like it because it's all ofthese out-of-band communications
.
So you look at the expandingregulatory environment, the
relaxation of regulation, andthen just the ways that people
have tried to catch up with thatthat really haven't been within
(12:26):
the regulatory environment orthe guidelines.
They need tools, they needsolutions, they need technology
to keep up on that and to makesure that they are staying
compliant, and that's, you know,one big thing that we're always
focused on as well who actuallyspecific to private credit and
I, you know, I think of, youknow, in my world, world, in
terms of derivatives, you knowthe SEC has some oversight, cftc
(12:47):
has oversight.
Speaker 1 (12:48):
You know which bodies are, the are, are the?
Obviously things are withCongress now, but who are the
main regulators and how are theymaneuvering within those
markets?
Speaker 2 (12:59):
So it spans a couple it's the SEC, it's FINRA and
then, from the banking side ofit, it's either the OCC, for
federally regulated banks, orthe DFS, the Department of
Financial Services, for stateregulated banks.
So there's a lot of bodies anda lot of regulation that are
overseeing this, and you knoweach one has their own agenda,
(13:20):
rightly so.
So it's just looking at all ofthem and making sure that we're
staying up to par on them, butalso we're giving our customers,
the GPs and their LPs, thetools to maintain a compliant
regulatory environment as well,so that they don't get fined $81
million for sending a textmessage that all messaging, like
it is on Verivend, is kept inplatform.
(13:41):
It's all chronicled, it's alldate and timestamped.
So really there's no dispute onwho said what and when, because
it's all there and it's onesource of truth.
Speaker 1 (13:51):
And so thank you, and I was curious have you received
any pushback from the financeindustry regarding your
technology and, if yes, how areyou handling that?
Speaker 2 (14:01):
I wouldn't necessarily say we've received
pushback, but at the end of theday, we are teaching our
customers and the industry towork in a new way and to operate
in a new way, and it's reallyabout the education of it and
shining a light on all theproblems we've been talking
about where it's just it's a lotof pain, it's a lot of
unnecessary effort for GPs andinvestment sponsors.
(14:24):
There's just a lot ofunnecessary friction for LPs to
invest in these sponsors andthese GPs and just, you know, no
end in sight for the securityrisks of the status quo.
So it's really showing that thestatus quo, as ubiquitous and
standard as it's been, is notthe best way to run private
market transactions andinvestment transactions.
So that's actually the fun part, in my opinion, of what we're
(14:46):
doing.
We're, you know, we'reevangelizing a new way for
people to work and most peopleare embracing that.
I mean, it does take a littlebit to get some people over that
initial hump, but once they seeit, once they watch it in
action and realize how it canwork and not only, you know,
save them time and money andeffort and improve their
security, then the majority ofpeople are embracing it and
(15:07):
adopting it.
Speaker 1 (15:08):
You know it's interesting that you know we've
seen so much inefficiencies inother public markets.
You know I think of bondmarkets, for example.
Do you think there's lessonslearned?
Or because of the newtechnology mindset within
private credit, it will be acatalyst to market structure
changes in other, less efficientpublic markets.
Speaker 2 (15:32):
I think there's definitely a cascading effect
that's going to happen.
I mean, if you look at just thegenerational changes in both
the public and the privatemarkets, you've got more
tech-savvy investment sponsors,more tech-savvy investors and
the whole democratization ofinvestment transactions.
I think that you know we'rereally only in the first inning
of innovation for both thepublic and the private markets
(15:54):
and there's been a lot oflessons learned to your point
and I think from those lessonsit's just going to continue to
drive more, further adoption ofinnovation and cutting edge
technologies to really makethings more efficient, more
seamless and more secure foreverybody on both sides.
Speaker 1 (16:07):
And what future developments or features can
Vervin users anticipate?
Are there any upcominginnovations you're particularly
excited?
Speaker 2 (16:14):
about.
Yeah, I mean, we're alwaysplanning some really exciting
things for our product roadmapand we're very proud to have
what we call a client-drivenproduct roadmap, where my
co-founders and I have workedfor way too many companies where
there was a very cleardisconnect between the customers
and what the company wasbuilding.
And we work alongside ourcustomers and you know, one of
(16:34):
the most fulfilling things aboutwhat we're doing is when we
hear customers say, wow, I can'tbelieve it's already in our
product already, because I justasked about that a couple of
weeks ago or a month ago.
So we're really proud to workalongside our customers and
build together, because, in myopinion, if we're not building
things that are going to makeour customers successful and
we're not adding value, thenthere's really no point in doing
what we're doing.
So the underlyingdifferentiator that we're doing
(16:57):
in the main focus is payments.
We are an end-to-end solutionfor GPs and LPs to manage that
entire investment journey, allthe way from deal marketing and
launching a new fund throughproviding real-time investment
returns to the LPs.
But payments is really at ourcore and expanding the scope of
what we're doing in payments interms of just more functionality
and more features and moreeffortless transactions that we
(17:19):
can offer to both our GPcustomers and all their
investors.
Speaker 1 (17:22):
You know, during this podcast season, we did a
discussion on attracting talentand you know and obviously
there's a lot of competinginstitutions for talent it seems
like you're doing somethingvery revolutionary in terms of
taking best of breed ofblockchain but adopting it in a
(17:43):
more practical way.
Perhaps you can tell me aboutyour development staff and
what's the profile of thosetypes of individuals to manage
this customer centric roadmap.
Speaker 2 (17:54):
Yeah.
So we're very, you know, veryproud of the team that's built.
What we have in Verivend we'rea small, lean team.
Again, my co-founders and Ihave come from early stage high
growth companies that have thengone through M&A activity or IPO
activity and become very bigcompanies.
And you know, there's nothingwrong with big companies but
that's just that's not in ourDNA.
(18:15):
We're always, you know, lookingfor the next exciting way that
we can disrupt a legacy verticalwith modern cutting edge
technology.
So I think in itself that tendsto attract really, really
highly skilled talent, becausethose people that have been at
larger companies, you know,might feel like they're just
getting lost or they're just anumber there and they're really
(18:38):
not impacting the bottom linethere.
So you know, here at Verivendwhat they're doing is, I mean,
we're a great close-knit teamand everybody's got a voice and
everybody's able to impact thebottom line and work closely
together team and everybody'sgot a voice and everybody's able
to impact the bottom line andwork closely together and really
see the fruits of their labordeveloped and used and adding
value to our customers.
So I'd say, you know, just bydoing something revolutionary,
(18:59):
doing something cutting edge andultimately giving something
that is tangible, that ourcustomers can touch and feel and
use and get value from, adds alot and it attracts some really
great talent.
Speaker 1 (19:09):
So we've made it to the final question of the
podcast and we call it the trenddrop.
It's like a desert islandquestion.
So if you could only track onetrend in speeding up capital
markets, what would that be?
Speaker 2 (19:21):
It's got to be payments.
I mean, that's where we'refocused and that's what we're
most excited and bullish on,really, because the way that
money has moved in the privatemarkets has not changed in
decades, if not longer.
I mean again back to checks andwires which are hundreds and
hundreds of years old.
It's time for a change.
And the payments are really themost critical part of how GPs
(19:42):
and LPs are transacting.
Because if the money goes tothe wrong place or just the
silly things that happen thataren't so silly when they happen
like the LP saved their capitalcall notice from fund one and
now the GP is issuing capitalcalls for fund four and that LP
just pulls it off their desktopand sends money using the wiring
instructions for fund one, buta new account is being used for
fund four and it's just out inthe payments ether.
(20:04):
I mean that's just verypreventable things no-transcript
(20:31):
.
Speaker 1 (20:32):
It was great chatting with you.
Thanks, Jim, Coming up nextweek on Trading Tomorrow,
navigating trends in capitalmarkets.
We speak with the co-founderand CEO of FinPilot, a
technology which uses AI to pullinformation out of unstructured
financial data.
It's going to be a conversationthose working in finance do not
(20:54):
want to miss.
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