 Live from Nassau in the Bahamas, it's theCUBE covering Polygon 18. Hello, welcome back everyone. This is theCUBE's exclusive coverage from the Bahamas. We're here at Polygon 18, put on by Polymath and Grit Capital. This is an amazing event. It's really the cryptocurrency, blockchain, token economics, the decentralized future internet is happening now. The industry is forming, theCUBE is starting its 2018 run and we'll cover all the top events this year in the crypto. As you know, we know cloud, big data, we do all those other events. We're going to start covering in a big way because the ecosystem is formed. You're seeing people making money, the early whales, the big guys, now you got institutional investors coming in, a real ecosystem dynamic. This is what industries look like when they're formed. Our next guest is Carlos Domingo, founder and managing partner at Spice VC and the founder and chairman at Securitize. One of the tell signs of a maturing ecosystem that's growing very fast is companies that are adding value. You're one of them, Carlos? Welcome to theCUBE. Thank you, thank you guys for having me here. So, you know, Dave Vellante who just had to jump on a plane because of the snowstorm in Boston would comment, he would say, because we talk about this all the time. You know, you look for the big waves and you see what's happening, but how do you know when there's a tipping point in a new industry? And that's when this stuff being created, value being captured, industry being formed with an ecosystem and a community. This is absolutely happening. You're bringing a very valuable service to market. You guys self-funded this operation, Securitize. You're automating other value chains that were old guard businesses in a new way. Take a minute to explain, Securitize, why the idea, what you guys have built, what you got going on, and what's the disruption of that product? Good, so the idea came originally because last year, me and my partners we wanted to tokenize a VC fund and basically issue a security token that contains the economic rights of the fund as a way to provide liquidity to the investors because liquidity on the VC space is one of the biggest problems, right? You invest money and it takes like seven to 10 years and then you can actually get your money back. So we had that idea that Time Blockchain Capital had done, one security token was the first security token for a $10 million offering and we wanted to kind of build on that. So we went out and looked for people that could actually do the issuance of the security token in a regulated way. So the KYC, the AML, the accreditation process per country, not just for the US, then basically run the ICO in a secure way with secure wallets for different cryptocurrencies and then also have the smart contract issuing the token but also smart contract managing what happens with the token on the secondary market, which is very important, right? Because in the secondary market, the tokens can actually move from a wallet to a wallet and suddenly you're outside the regulatory framework that you protected at the beginning, right? So we went out and took polymath and a few companies were doing that and no one was actually ready with a platform last year. So we are all tech entrepreneurs and product people so we did what we know how to do. We hired CTO, hired engineers and went and built our own platform for Spice VC for tokenizing the fund. And then when we announced the project like on September, October last year, I posted the medium about the investment process and the screenshots of the platform, how it works, all the features that it has. We've also integrated Bancor as a decentralized exchange to provide liquidity. And then I started getting floated with people saying, wow, this is very cool. Yeah, we want to do security tokens, we think this is the future and no one actually is ready with a platform and you guys seem to have one. So who has built it? And I tell people, we built it, it's our platform. And then we took the decision last year to basically separate the platform from the fund and the fund becoming the first customer and we created Securitize, which is basically an end-to-end issuance platform for security tokens. And so this is really filling a void for people who want to raise money for a startup like Venture, and then also maybe want to raise cryptocurrency and capital for growing a business that they're tokenizing. That's a big trend. So you got the startup, hey, I got a great idea, we're going to white paper, we're going to revolutionize the world, people are interested. Some people call it a dumbest idea they've ever seen, which turns into a billion-dollar idea because that's the way it works. So they got to raise some cash. And then there's the business that are growing saying, you know, I can grow with working capital in a tokenized environment because the business model shifts for that. Correct. I think that what people don't realize is that, you know, getting actual liquidity in a market, like doing an IPO is either very difficult or very expensive, or both things. So I think this allows- And the hurdle's very high. Yeah, the hurdle is very high. The cost could be like 10 to 12% of the money you raise, you know, paying the underwriters and paying everyone to get it done. So I think that what tokenizing real assets like asset-backed tokens or security tokens is basically allows you for two things. One is, you know, the network of investors you can actually reach is anyone with an internet connection that within the regulation in their country are allowed to invest. So suddenly you've multiplied by a hundred the reach you have in terms of finding investors. And second is cheaper to do it. It's less friction. Third is that managing all these thousands of investors would not be possible in the traditional financial system, right? Because you will have investors from many countries with different currencies, different bank accounts, different banks, and with a smart contract and tokens you can automate the entire process. He's a very skilled person. And from your accent, you're obviously not in the U.S., not American, but you're from? I'm from Barcelona. Barcelona. So you really laid back, you're chill about this, but you're hardcore techie. Okay, so let me just go through the process here. So what's interesting to me is, first of all, I love cloud computing. I think what DevOps has done on software with open source that's clearly in line with crypto market, same mission. Automation is a really big deal. When you can automate something down to efficient process, you're doing. You guys are doing those different. Well, not different. Automated and great. But the investment piece is accredited investors, right? Is that my guess? It depends on the jurisdiction. So for most countries have security laws. So what our platform does is we'll actually identify, do the KYC and AML on the investor, and depending on the jurisdiction where you're from, we will apply a different rule because in the U.S. it's accredited investors only, but in other countries you can take a small portion of retail. Also the meaning of accredited investors is different. How you actually comply with that. The documentation you need to collect or not collect for validating that someone's an accredited investor is not the same in the U.S. than in other jurisdictions. All right, so here's the problem that I see you solving. Mick, correct me if I'm wrong. If I'm a company, XYZ Corporation, we're growing like crazy, and we can tokenize our business, and we say, hey, we can raise a token because we actually have a product and security tokens, a great vehicle. So they go to their lawyer, well, you're in the U.S., so you can only get accredited investors. If you want to go outside the U.S., you've got to go to the Cayman Islands or somewhere else, set up a new company and do all that stuff, because they have to manage the process, and they're going to go find investors. Correct. That's hard. That's hard. Okay, do you solve that problem for them? We streamline the problem, so we basically, first, the fact that you set up the company in Cayman, doesn't actually prevent you from the regulation in each country because the regulators care about where the investor sits and not where the company is. So what we solve the problem is basically allow them to provide a liquidity event, do fundraising, and provide liquidity for the investors on the secondary market. So we basically will save them the trouble of having to figure out how to do all this process country by country. So there's a liquidity value too, so it's also getting the process done streamlined, and then managing some liquidity challenges that the company would have to put cycles into, managing it. Exactly. Okay, so here's a question. So this is like a consulting hour for the people watching. I'm a company, XYZ Corporation. I want to tokenize my business. Now we've been up and running for a few years, and we say, hey, token securitize is really interesting. These guys are amazing. They're the same ethos as us. They're cloud guys, they're automating. Let's just go through them. Let's sign up. We apply to you. What do we do? Do I have to set up a new company? Is there risk issues? Not necessarily. What's your advice on the playbook? So the fact, because you're using a security, you don't actually have to go to other jurisdictions. You can just do it from whatever you are, because you're using a security that assigns some economic interest on your business. Now in terms of us, we're trying to become kind of like the quality security token ICO play. So we create a lot and decide which ones we bring on board or not. First, because we have so many, we have hundreds of leads coming to us all the time. And second, because we want to make sure that people go to securitize, they know that those are quality companies that we've betted and our lawyers have checked, that the company's interesting, that the company is going to do well, not on the fundraising, but down the road. So that's kind of- What are the legal and regulatory challenges? So again, most people do a new cope because they want to protect their corporate shield. Is it corporate shield to protect themselves? Investors always are gun-chai or trigger-happy when it comes to suing people, because she, in this economy. How does an entrepreneur protect, or a business manager protect against that? Is there, do you guys handle some of that or is it just buy or beware kind of thing? No, so we work with our attorneys, Cotton in New York, specialization securities. And we basically will advise the customer that actually uses our attorneys because they've already experienced on doing this. And then in terms of investor protection, on a security token, you know, just getting the token, you actually sign a subscription agreement, which is a legal binding document that explains exactly what the token is going to do. And there's an information memorandum which is basically describing what the business is going to do. So there's a legal framework, off-chain, if you want, alongside the on-chain token and the smart contract side. So all that stuff's happened, it's awesome. All right, want to change gears, Carlos. Talk about you. Why do this? What drove you here? Scratching in nature, you're a serial entrepreneur. How did you get here? What's the story? So the story is I've been, this is kind of like the third phase of my career. My first 10 years of career, I was at the middle of the dot-com boom, I took company public in Nasdaq, Japan, and then went to the US, acquired three companies, and then everything crashed. So I left both the app on the down. The second part of my career, starting in 2006, I lasted for another 10 years, which is I joined Telefonica, one of the largest telcos in the world. And I lived through all the mobile boom with your iPhone coming out in 2007 and 2008 and all the excitement happening in the industry. But to be honest with you, I was looking for what is the next thing I do because all these industries now are not as exciting anymore, right? So I came across blockchain and crypto through two things. One is I was doing a project on Smart Cities in Dubai where I live, where we started looking at blockchain and run some pilots. And then one of my colleagues and friend is Brandon Ike, who is the founder of Mozilla, and he actually did an ICO for a company called Brave in March last year. When I saw that, I was like... Great browser. Yeah, yeah. Batch open, great, great offering. He's a great entrepreneur. He guys invented JavaScript. And when I saw he did that, he actually, I met him actually a year ago and I met him this week as well in Barcelona and Moal World Congress. And when I saw what he did, it's like, wow, this is very revolutionary, right? So this is a completely different way of raising money and it's also a great way for investors because you get liquidity. So why not trying to get there and find a project? So started with the fund and then moved to the city. Serial entrepreneur, great story. A lot of experience coming into crypto. So you got some young guns who are inventing and making some cash and doing well, also starting funds. You got developers and business entrepreneurs who are successful and they're becoming investors. Then you got the pros coming in, alpha geeks, serial entrepreneurs, pros on the banking side, all think differently. And they see the vision. So I got to ask you, what is your vision of the decentralized internet? Have you seen how telcos work? And you know their challenges over the top, content, centralized organization, you see what Brave's doing, you've lived the dot com up and down. What's your vision of the decentralized internet? How would you describe how big the wave is and what's the opportunity? So I think that if you think about why people were excited in 1994, 1995 over the internet, it's precisely because the internet promised the decentralization back then, right? So there were all these protocols that allow you to move boys, move data, move web pages that were going to disintermediate people. And what happened is a lot of the traditional players got disintermediated, but then the wave shifted into other players which are now highly concentrated and decentralized, right? Everything about Facebook or Google. So I think that the excitement around crypto is about making reality, the decentralized internet that didn't happen the first time, right? And I think because the protocols have a way to monetize and there's an economic incentive to be part of the network, this time will be different. I think it's- Computing has also helped a little bit too because with open source and cloud computing, you have a great creative environment on the technology side. This is like open source money if you think about crypto. So I think yes, the fact that the maturity of some adjacent technologies is helping this move faster. And open source has been a proven formula, one second tier citizen when I was growing up in the open source community. I remember people were poo-pooing Linux back in the day and also now it's tier one power in the world and now you have community modeling around how that worked. How would you compare and control? And you have other things coming into this too. You got cryptography ecosystems, you got gamers and cryptocurrency and you got a cloud. How would you tease out the industry and describe the cryptocurrency in the blockchain communities? I mean, it's kind of a confluence of a lot of- I think it's a very interesting industry and it has forced myself also to have to learn about adjacent topics, right? Because you're going to understand about technology but you're going to understand about software or cryptography. You're going to understand about finance and economy to understand what a monetary policy is and how you're going to define that into your token. You're going to understand about finance. If you do security tokens, security is lost. So it's fascinating because of this confluence of different things. We were having a joke on one of our broadcasts. I said to my co-host, the startups will soon have a CTO, a CEO and a chief economic officer. Correct. I mean, this is kind of token economics. Makes all the sense. Hey, do we increase the coin rate? We're going to drop this down? I mean, it's a big human dynamic. Correct. I think this is for me why I'm so excited about it because I was kind of bored of being in an industry for 10 years. You feel that you already know more or less everything and yet there's new things coming but there are kind of incremental improvements. This feels like an exponential improvement. Something is going to really change things and as you said, it forces you to understand more disciplines than just software technology. I mean, if you use a California example to end the segment, you know, you see the waves coming and the surfers grabbing their boards and they're on the wave hanging in 10 and that's what's going on. You're seeing the best people attracted to this space because their problems or opportunities is challenges. And there's a social impact, mission-driven impact. I think people are seeing that and it's attracting new entrants into the space from banking, all sectors now coming in. They're seeing the ecosystem develop. How would you see that going? Because we do agree that the ecosystem is forming pretty quickly. It's forming very, very quickly, surprisingly quickly. And I think that one of the things you mentioned is that the fact that people like me or other people that come from long-standing backgrounds on tech are moving into this industry, it will also make the industry kind of grow faster because the industry is a bit immature if you want. In terms of everything technology, this is why there's so many hacks. The usability of the products is still not there. So as more people from the traditional tech industry move here and start building good products, this will actually change very quickly. Great leadership, Carlos, on your end. Congratulations. You're seeing an opportunity. You're making a difference. You're putting out a great product and service I think people are going to use a lot of and looking forward to chatting more about it. Of course, you've got a VC fund and you're doing some investments to put some skin in the game as well. With your companies, congratulations. This is theCUBE, live coverage. We'll be back with more here in the Bahamas. And a friend from Barcelona here, a great entrepreneur. I'm looking forward to chatting more about the decentralized economics, the technology, how the value will be captured, the technology that's going to enable that and the impact of society. It's theCUBE, more live coverage after the short break.