 Live from Las Vegas, it's theCUBE. Covering Edge 2016, brought to you by IBM. Now, here are your hosts, Dave Vellante and Stu Miniman. Welcome back to Las Vegas, everybody. This is theCUBE, the worldwide leader in live tech coverage. Leanna Kemp is here. She's the founder and CEO of Everledger. Leanna, good to see you. Hello, hello. What a great place to be. Good job, Las Vegas. Again, Stu and I spent a lot of time here. Why did you start Everledger? We know some might say it's my mid-life crisis, but the reality is I've been in emerging technology for 25 years. In the mid-90s, now I'm giving away my age, I was in radio frequency identification. So at the chip and inlay level, supply chain tracking, a bit boring, really. But in the last 10 years, in the last 10 years, I've worked in jewelry and insurance, and that's given me an appreciation of the size of the problems that exist in the market. And coupled that with a whole lot of nerd, we have the ability to solve the problems that we're solving today. And describe that problem. It's a problem of provenance and transparency. Is that right? Provenance, fraud, document tampering. And when you mix all of those together, you have a pretty potent formula for black market trade. And sadly, some of that trade is really running into terrorist-funded activities. So it's a pretty big problem that I think now is a very real issue that's washing the front pages of every paper on a daily event. Diamonds, of course, is one of the vehicles for anti-money laundering. And if we can go and serve to reduce some of those problems, then it's worthwhile getting out of bed for. Okay, so you're attacking the diamond value chain. Why that? Because I guess you had a background in jewelry, okay. How are you solving that problem though? Describe that in a little bit more detail. So attacking is pretty aggressive. I think we're enhancing. So we're bringing transparency in a once opaque market. You know, we're enabling with the use of technology to bring transparency into the market so that we can start to reduce some of the problems around fraud. When you really think about, I mean, most people look at us as a blockchain company. I liken us to an emerging technology company. We're using the very best of blockchain and smart contracts and machine vision as an enabler to be able to identify fraudulent related activities and reduce them in marketplaces. And we're just starting with diamonds, but it's really anything that is appreciable of value that the criminals like to maybe get their grubby mitts on. When did you get this idea? Like what timeframe? 2010, 2011, 2015? I'm looking to be honest with you. I think this has been a cocktail of experience that really has brought it together at the right time. So, you know, as I said, my background has been really unfolding like a patchwork quilt. But when you really see the heightened anxiety that's going on in market now, particularly around synthetic diamonds that are of gem quality standards, there's no greater time to be able to bring confidence back into the diamond industry and the consumer networks. I guess my question is that what point did you say, okay, blockchain can be addressed to enhance this problem? Did you look at Bitcoin and say, hmm, that's interesting, not a currency, it's a technology that I can apply to? Yeah, I mean, you know, I'm a technologist. So, you know, I'm really, I'm quite bored with Sudoku. So I would rather sort of look at what's going on in the tech space. And so when I really saw the emergence of Bitcoin, I understood, you know, where that application could lie. But because I wasn't from a banking background, it was patently obvious to me that I could decouple the currency from the ledger and really use the currency as a vehicle or a tokenization of assets. And the assets is diamonds, a girl's best friend. So why wouldn't you want to protect your assets? Fascinating, because, you know, I think back to the first time I heard of, you know, blockchain and Bitcoin, it was about being anonymous. And therefore there were concerns that, you know, some of those inscrubulous people that are trying to benefit off of like diamonds would use, you know, this cryptocurrency, they don't have to talk to banks, they don't have to talk to governments. So you've almost, you know, flipped the usage of the technology to something to help the world a little bit more. That's right, I guess when you really think about it, you know, the Bitcoin has often been assimilated with the anarchic world. And we're really bringing it to clean and transparency. So I guess there is a juxtaposition there, but everything's upside down for me. I'm from Australia, so it's perfectly normal. In the, go ahead. Yeah, it's just, you know, when you look at blockchain and kind of that core technology, you think we're really in the early days, what kind of usage do you see out, you know, beyond the ledgers or there are other applications beyond the diamonds that you guys are looking at? Yeah, you know, it's interesting. So in the early 2000s, I worked in WAP, you know, and I was so excited. I thought, wow, this tech is really gonna do something. So, you know, I empowered a team of 30 in Australia and wrote out an application. And I felt like nearly six months came into the tech and all of a sudden I woke up and I went, where the bloody hell did WAP go? Just disappeared. There was a very real danger that this technology was likely to face the same ill fate. And we often see in any emerging technology where there are heightened promises, they often end in disappointment. So actually, most of the decisions I've made in a startup, we're only 18 months old, have really been counterintuitive. You know, when it's the time to put the pedal straight down, I've often held back to really wait to see where the maturity of the technology was gonna lie. And in any emerging technology, and if you're a CEO of a startup, you have to be completely articulate about where the problem is that you're solving. But not only that, you need to take the time to really distill the technology to its purest essence and then enable that to be the potent shot, you know, that goes out first and foremost. And so this is a nascent technology. And maybe, you know, it has the parentage of a multilingual PhD scientist, but the reality is it's only just been born. We're not even nappy-fed-y. We're not even out of our nappies right now. So we need to give it the time to really grow. And we've chosen a niche market. It just so happens that it's a bloody big niche. So what took longer to figure out the problem or the solution? You know, I think, you know, the... I don't know, that's a really good question, actually. I think the problem, for me, I understood quite early, but I just didn't appreciate the size of the problem globally. And the extension of that problem into other areas. And really I think it's taken some time for the technology to be understood. We've taken a view that we'd like to see ourselves with the custodian of the technology. We don't want to go to market too early. We want to be sure that whenever the message is delivered to market, that it's something we've already delivered that we have built, that the engineering effort has already been afforded. You know, small acorns grow into mighty oaks. And so for us, it's about ensuring that we take the time to really give the right fertilizer to the growth. And that's a $50 billion problem you said this morning. Is that right? Is that there? Just in insurance. But we have banks as our clients too, so, you know, we're shooting hoops. So you're saying it's a multiplier of that $50 billion? Of course. Yeah. I mean, counterfeit. I mean, counterfeit good, if you extend it into luxury goods, it's $1.7 trillion. And you talked about the sort of value chain of rough cut, $15 billion, and then you maybe triple that when it gets polished, almost $50 billion. And then another one and a half acts at retail. Where's the, where are the holes in that value chain everywhere? I mean, are you seeing fraud occur throughout that value chain? Effectively. You know, we don't have a visibility of complete provenance through the supply chain. And in fact, it's not just limited to the diamond industry. I mean, I guess the diamond industry has, you know, there's the allure of luxury. You know, there's the backdrop of affluence. And then of course, there's the atrocity of what goes on in terms of, or what used to go on so prolifically in blood diamonds. You know, effectively the industry isn't as burdened with technology as say financial services. It doesn't have the legacy of 50 years of technology that it needs to unwind. So when you really consider what's going on in the market today to bring emerging technology into this space, not limited to blockchain, even enabling new technologies like high definition photographs and machine vision, our marketplace has the ability to consume that technology quite rapidly. And when you think about the problems in our market or the restrictions in our market, it's really a lightning rod moment for us where we've just been fortunate enough to be able to build out a solid engineering rod to be able to capture that lightning bolt of problem. We've had a lot of discussions with, you know, IBM executives this week and they feel security is one of the things that IBM does really well. Talk a little bit about your relationship with IBM, you know, what IBM does well, what they're good at partnering with, how is it to work with IBM? What they could do better? Yeah. Absolutely. Let's, you know, we, in the very first 12 months of Everledger, we managed to onboard, you know, a million diamonds and most people were applauding the efforts of our engineering team and we certainly applauded ourselves but Christmas was a very lonely path for me because I started to become shivered by the thought of what would this mean if I went from a million to 10 million to 15 million and then into rough being able to track 320 million carrots of rough diamonds across 80 countries around the world. So when you're a startup and you're faced with some of the largest organizations and governments around the world, that let's face it, the industry is 130 years old. You want to be able to look towards a technology innovator like IBM that has been around and reinvented itself over a trusted 100 years and that transactional trust is at the very core of this fabric. So some of the things that you look at in terms of a startup, maybe actually too isolated. A lot of technology companies that are in the blockchain space are just looking at the blockchain fabric. But for me, it was painfully obvious we needed to stretch further. We needed to realize that we have to deliver this into a cloud solution. We have to deliver this technology in such a form that has to be secured and the security needs to really be from the ground up at the root source, right the way through to the front end. And there's no other partner that's actually doing that. There are other service providers in the space that shall not be mentioned, but there of course are just taking whatever nascent technology has been built and putting it into the cloud. IBM has really taken the time to sew together the right security fabric. And that's about scale for you, right? I mean, you wouldn't be able to scale without it. I sleep it not knowing that we have IBM. As a CEO, I sleep it not. My understanding there's a container technology that you're using in here. Most people I think in containers is security is one of the holes there. So how do you feel with the security of containers today? And maybe you can share a little bit about what IBM's doing specifically for that. Yeah, I mean the container services team that we've been working with and today I had the absolute privilege. It was a diary note moment for me to present on stage with Donna. Her background in security has afforded us the ability to really deliver this quite quickly. The work that they have been doing is recognised not only, and I touched on the surface of the three markets that are real concern or focus for us is fraud and theft and cyber. And when you consider the container services and the security team that's wrapped this around I really think that actually one of the silent winners in this is the reduction in cyber crime. And that maybe that hasn't been focused on too largely and the $50 billion that I was talking about was really around document tampering and the overinflation of insurance claims. When you really think about it, it's actually cyber crime that I think we could actually truly solve as a part of this solution itself. So explain again, Leon, how does it work? So each diamond has a unique identifier. It's got a fingerprint on there. How does it get on there? So there are existing processes in industry. There are two parts to the market. First is rough diamonds and the second is polished diamonds. And as diamonds are crossing borders as a part of international trade, they're often inspected by gemologists. Those that of course have received licenses in the skill of identifying diamonds. And that's a spot inspection, is that right? Correct, but there's also actual machinery. So there are certain types of science that have been applied and have been applied for a number of years. And one of the challenges that we faced with ourselves is to IoT enable the diamond pipeline. So some of these machines have been in existence. They're highly calibrated and they have precision. But that data is often black boxed. It's not indeed ledgered or stored for public view or even inter-office view. And so one of the tricks that we've enabled is the ability to take all of those data points, 40 meta data points, as well as the reputation or the expert opinion and lay that data into the blockchain. So we're layering really a reputation score, not only of the person, the machine, but also the diamond and the validity of that diamond. And that can only come over time with large aggregated data sets. Okay, and that is your provenance. You said the world's provenance is locked in paper. Right, seeing how you're locking into the blockchain. Of course. I knew we had to talk to you, we better listen. Okay, so, all right, so, and then can you explain the banking crisis, the liquidity crisis in the diamond business? What's that stem from? Yeah, absolutely. It's really affecting the middle part of the pipeline. We have very large mining companies and of course, quite substantial retailers, but it's the middle part of the pipeline that's really being caused in terms of a squeeze. And so they are the diamond cutters and polishes, really generational businesses that have perfected the art and the skill of cutting diamonds. It's the middle part of the pipeline that's really being affected at the moment. And as I mentioned, there are two brave Western banks that remain supporting industry. The largest, which has been really in industry for quite some time, is ABN Amrow. And proudly, they still remain, and Barclays Bank. But we've seen an announcement more recently, we've standard, being pulling back out of the industry for a lack of transparency and a burden on their balance sheet. This, of course, has come from Bazel 3 and some of the regulations that's been pushed down from them. And if we're able to take certification and extend transparency, but also bring certification to the next level to enable a collateral management system to be built so banks can take the security on the underlying asset rather than just take a balance sheet position. It will lift the burden on their balance sheet. It will give them security of the diamond, and let's face it, diamonds are worth something. And as I said, when you start to understand the true effect of rough to polished, to track the diamond through its life cycle and give security is something that banks are open-minded about. Yeah, it's okay. So it's not a chicken and egg problem. It's a transparency begets liquidity. Is that right? That's the premise, anyway, that you're testing, basically making that bet with your company. We know much time, but I want to ask you about your company. You're an entrepreneur. You started the company, you said 18 months ago. Funding, VC, give us the low-down. Sure, sure, sure. So I mean, I came into London in October of 2014, and I was desperate to talk to insurers. And so one of the largest insurers in the London market is Aviva. And they had a hackathon at Google. So I thought, hey, this would be all right. I'm just going to Trojan horse the event and see if I can have a talk to the CFO and COO. So I went there, they opened up some APIs and because I, of course, had a technical background, I thought those APIs are hopeless. There's not much I can do with that. But if you want to solve some of the problems here, this is what you can do. You can take diamonds, take certification and put it on the blockchain as a way to reduce fraud. And at that hackathon, I was awarded the innovation prize, but the managing director of Barclays Techstars was one of the judges and came to me and invited me to join them as a part of their accelerator in London, which began in March 2015. And of course I thought, this is crazy. Why would I want to do that? Why would I want to be in London with a bank? It doesn't really make too much sense. And let's face it, I mean, Australia is a much nicer country to spend your holidays in rather than London. But in any event, I returned and participated as a part of the Barclays Accelerator and have been supported through the process of the acceleration. But Barclays is both a bank and an insurance company in Africa. So the penny dropped and we put our head down. We wore some letters off the keyboard and Everledger was born. And away we go. So Barclays funded in part? Barclays in the Techstars Accelerator program have a seed funding event, which is a part of the acceleration program for startups if you're chosen and we were fortunate enough to be chosen. And since that time, we've been, we haven't disclosed who one of our backers are, but we will in time. And so we've been funded by a selected name in industry and we're actually just about to go into our Series A. So we're looking towards that in the next number of months. We're not even in Series A yet. So you've done this far without even getting to your Series A. 980,000. Well, we have revenue. So this is my last startup. I had to go through an intervention with my family to enable me to be here. So this is it. This is my last. We've heard that before. I promise, right? No, it's true. Opportunities beyond diamonds? Or is that just getting too ahead of our screens here? Diamonds, watches, art, fine wine. You know, and I'm completely empowered by how do we bring what the diamond industry did so well in the reduction of blood diamonds and bring ethical trade really to the forefront of the mind of the consumer and also the mind of the financial services market. So, you know, for me, it's really around that part of the world. If that Nexus Point comes together, then I'll keep getting out of bed for it. Awesome. Great story. Impressive entrepreneur. Thanks for coming on the queue. Yeah, thank you. London's not so bad. Keep, keep, comment? No, London's probably watching. All right, thanks again. Keep right there, buddy. With Stu and I have a back with our next guest. We're live from IBM Edge in Las Vegas. We'll be right back.