Nick: Hey everyone. Welcome back to another episode of Reinventing Finance. As usual, I have a lovely guest with us today in the show, Alex, how are you today?

Alex: I'm fine. Thanks a lot for having me, Nick.

Nick: I think some kind of public disclosures are in order. Alex and I actually work together. We know each other for a while. I think this conversation will test whether we continue to like each other as well. I always have the tremendous respect for what you've achieved and I'm really thankful for you for taking the time and walking me and everyone listening and watching through what's next. Really great to have you here.

Alex: Yeah, thanks a lot and I still remember our great time in Berlin when we were working on a project together. It was a lot of fun.

Nick: Yes. I think in Germany, we have the saying, you know, diamonds are created under pressure. It certainly felt like pressure. I don't know where diamonds came out of, but there was some pressure.

Alex: It depends who you ask, I would say, yeah.

Nick: Now, I obviously know you, but for the few of our listeners who your name doesn't ring a bell, you know, who are you, what have you done, and maybe, you know, what have been some, as you would say, relevant milestones in your career that kind of brought you today that you think might be helpful to kind of put you into a box.

Alex: Yeah, let's try to put it into a box. I'm Alex. I'm currently one of the three founders of a company called Equity. Probably we will dive into a little bit deeper into what we are up to later in this call. Previously, Nick mentioned it already. I've been working in a consulting company together with Nick, consulting banks, insurance companies and other financial institutions, then had a short stint in an investment bank, and then had the lucky shot to meet Chris and Marius, the founders of GetSafe and InsureTech company, and really joined in the early days when we were just 10 people or so, now eight years ago, and then served the company as chief operating officer for eight years. It was quite a hell of a ride with many ups, also some downs, but at the end, I believe we built a very successful company now active in four countries, collected quite also substantial funding along the way, 250 people, and at the end, also a full-stack insurance license granted by our regulator, the buffin, and in this regulated career, I also had the opportunity to serve as one of the board members, which also was a very interesting experience of someone building a startup company, then also serving the board of a regulated company and deal directly with the regulator, so this was the story so far, and then after eight years, for some personal reasons, we got our third kid at home, so also three mini-startups, as I call them, at home. I took a break, dived deeper into topics of interest, ranging really from diving and exploring a lot of AI tools, to writing a children's book by myself, to helping some friends with their businesses, and also to the topic of angel investing, where I did a couple of angel investments along the last year, and then along this journey, also met a bunch of people, and with two of these people, it really clicked. It was Robin Busty, my co-founders at Equity, and then we decided to team up and build the company, and yeah, this is a little bit my journey, so happy to dive into each of these episodes a little deeper, but currently, as I said at the beginning, I'm building Equity. Nick: Well, I guess one thing that I'm always quite wondering, is there some counter-intuitive advice? There's so much, if you're currently listening to a podcast with Mark Cuban, it's cool, but if you're part of that kind of ecosystem, you've heard a lot of the advice before, right? I think we've all been lean startup or zero to one, so was there anything counter-intuitive that you've learned, that you didn't really expect to take out of such a journey? If it's nothing, that's fine, but I'm always looking for something counter-intuitive, it's more entertaining.

Alex: No, I would say, I mean, always from the sidelines, there are a bunch of people who give advice, right? There's never a scarcity of advice, I would say, but it's really difficult to pick the right advice, right? And I think you really have to follow your guts and have this internal compass to really decide, and there are so many decisions along this way, which you cannot find arguments for, right? It's just that you feel it and you follow your intuition a little bit. And I think, especially in the early days of building a company, this is what I now try to incorporate also with our new venture, to not discuss anything, sometimes you just have to feel it and follow one path and not listen or answer every question that is asked, why you choose this path, right? You're often wrong taking or choosing a path, probably you're more often wrong than right, but at the end, that's also building a business, right? Choosing, making decisions and choosing one option over the other.

Nick: Yeah, I think, I mean, I think kind of two things that kind of stuck with me, and this is something I'm experiencing working more with corporates, it's just, it's not, you know, you just make so many decisions and if you can kind of iterate, you know, if you can adjust the decision, it's just not worth arguing about something, because you don't really have the data, collecting the data would be way too, so you'll just kind of go ahead, and if it doesn't work out, you'll change course, and that's like most of the decisions that you're having. The other thing I just wanted to get your advice on, before we then obviously jump into equity, is recently read, first time founders focus on products, second time founders on distribution. That would certainly be one of the things I, anyone knowing me, I like the phrase, don't build what you can't sell. Is that something you would sign up for, sign up on?

Alex: In a way, yes, of course, right? I think you always have to do the test if it sells, but in FinTech, it's sometimes a little bit different, or difficult, right? Because at the end, you're delivering a service, and the service requires a lot of regulatory compliance, and at the end, also infrastructure to service that. It's not like that you can sell a shoe that you don't have, right? In e-commerce, to test the waters, but it's a little bit more tricky, but on the other hand, I think being guided by what the market actually wants is a super important topic when you build the product, right? And really go out, talk to people, talk to potential customers very early in the journey, because before you build too much, and also build broader paths for the customer journey, and not very narrow how you think the customer will walk through, is I think super important, and the learning that you really have to experience, right? And I think a lot of these things, now eight years building a company and making many, many mistakes, you just know them, and you just feel them, but it's really hard to explain them to someone who has not done this topic. Sometimes you have to touch the hot stove, right, in order to don't do it again, and there are little arguments, right? Why you should do that this way? You just feel it, know it, that it should be like that, and I think talking to the customer first, and really feeling the demand, and at the end, satisfying his demand, not in the most beautiful way, but making him pay for the service that you offer, is an important force, and then paving the road, and the customer journey, and to do it beautifully in that scale, is I think a good topic, yeah.

Nick: And I just realized you're a B2C guy, I'm a B2B guy, because you're absolutely right, because I was just thinking, now of course you cannot offer a fake insurance product, even though I believe that aliens even did something like that, and kind of just knocked them through a sign-up page, but you know, you can't really, you need to be careful. With B2B, I do believe, you know, with the kind of budget, and a presentation, and a business case, and some, you can get a long way of kind of getting your first B2B customer, but anyway, tell us a little bit more about equity, so what's the problem you're solving, or what's the elevator pitch, however you'd like to kind of start there?

Alex: Yeah, the elevator pitch is always a tough one, right, because if the audience is not aware of the topic, but at the end, we are making private market transactions of equity a lot more efficient than they are at the moment, and private markets, purposeful for those of you who don't know what this actually is, it's investing in companies that are not publicly listed, it's investing in infrastructure projects like wind parks, or solar panel farms, it's investing into private debt, or it's also private equity topics, and venture capital is one of these private markets, and currently we see that the infrastructure that is built for investing in these markets is, yeah, we would say stone age, right? There is very little technological infrastructure, most of these processes happen really in manual workflows involving a lot of legal paperwork, and thus investing in these asset classes is quite complex, and quite expensive, and very little people do it, it's done only by the super rich people, not even the rich people invest in this asset class, but only the super rich family offices, institutional investors, and that is also a consequence of lacking infrastructure, and lacking technology for these markets, and you always have to keep in mind that these markets from a performance point of view are highly attractive, they have a lot higher returns than public assets, and thus we feel that this asset class needs more infrastructure, and that's why we build technology for this.

Nick: Okay, so what's the solution then, what's the product, and maybe start with maybe your first use case, the first problem, because obviously there's a road map, and it can be big, etc., but what's the current, what’s the first problem that you're solving, and from which you want to jump forward?

Alex: Yeah, maybe a little bit of context, and also a few on the public markets, why they work, and how they work, because I want to take the example of, let's say, a product that probably many of the viewers also, or listeners also use, like Trade Republic, right, they make really stock exchange super easy, with one click you can buy a stock, or trade a stock, or ETF, and all these topics, and at the end you look at the front end, and you never ask yourself what at the end happens in the back end, why is this transaction so easy to be conducted, and there are a lot of layers, and technology layers, that at the end the business model, the front-end business model, like Trade Republic, is based on their custody systems, where this information are stored, there are exchanges, and many technology players at the end made public markets so super efficient as they are today, and you probably still remember the old movies, right, when at the stock exchange floor people were ringing the phone of the broker, hey, I want to broker three million of General Electric shares, and the broker was looking for someone who wants to sell these shares, and it was also a highly manual process, and at the end, for private markets, as I said, this infrastructure does not exist, and that's why we really started out with our technology approach to build the infrastructure on custody, on settlement, and to really be able to at the end trade private assets more digitally, and transactions more digital, so that's the infrastructure piece that is pretty universal, also super scalable for asset class like Venture capital, but also to other asset classes, and then it's always hard to pitch what this infrastructure does, right, because it's a little bit like it's back-end technology driven by blockchain and artificial intelligence, but then in order to really pitch that and make it tangible for people, we started with our first product, which is a syndication product for venture capital, and imagine the case that a group of people like a business club group or some business angels, they want to co-invest in a startup company, so normally startup companies don't want, let's say, super small tickets on their cap table, so they usually pool the investment and the investors, and for our technology, this process of co-investing in super flexible structures happens really super seamlessly via our technology and the regulatory framework that we are using, and so it's, yeah, cutting down the cost by a factor of 10 than the usual process that would involve power of attorneys, notaries, a lot of legal paperwork.

Nick: Could you walk us, I mean, or is that too complex, but could you kind of walk us through a normal process of what that would entail, or the kind of the key steps, so we can just kind of walk through and then to say, and all of this is kind of covered with the technology and, you know, these are kind of the main pin points, because I think that would be helpful, it would be helpful for me.

Alex: Yeah, sure, so imagine there's like a business angel group, so you have someone who finds an asset that he wants to invest in and then asks a couple of friends to co-invest, so how does it work normally? So normally these, let's say, four or five people each wants to invest 20k Euros, so in total 100k ticket into a startup company they want to invest, so the one person clears with the founder, hey, we want to do 100k, right, then he has to clear with all his five friends a 20k each, and then it requires some vertical, right, some vehicle, a so-called special purpose vehicle that is normally being formed, and then these five people go to the notary, right, found this entity.

Nick: Is that like a GMBH, or is that like a special?

Alex: Yeah, it's a GMBH or UG in Germany, investment vehicle, so that has to be formed, has to be set up, and then this investment vehicle buys stock or invests into this startup company, right, and then if this group wants to do another investment, right, they have to form a new entity, right, only because the shares of the entity represent also the investment amount into these companies, right, so if now only three people want to invest in a new company, they have to found a new SPV, they have to maintain it, they have to do the tax filings, and at the end, if you have super flexible investment schemes and many deals per year, it ends up with a very complex structure that you not only have to set up bonds, but imagine all these SPVs, they last for 10, 15 years, because that's the time as long as the investment lasts, right, and you have to maintain them all, and this is...

Nick: So you usually, there aren't kind of aggregate SPVs, and you manage that somehow through kind of share allocation and virtualization, that doesn't exist in kind of paper form yet?

Alex: Paper form that does not exist, because at the end, the information are stored at the notary, right, in Germany and at the handles register, where this information are being stored, who's the owner of the entity, but you mentioned quite the idea that we are pursuing on solving this problem a lot smarter, so we have created what we call a multi-SPV, who can at the end invest in multiple targets, and then investors can buy digital shares or tokens from these companies, and that at the end solves the problem or solves the same process and caters to the same need of the customer, but in quite a different, using quite a different approach and the new technology and the new framework.

Nick: And just because I'm always a bit cautious from, you know, people throw around technology and efficiency, and you've said blockchain and AI, etc., and I just kind of want to, so even without the technology, how would that work? You would set up a new GMBH, right, because technology only matters if you have lots and lots of repetitive processes. So what would be that multi-SPV, if we were just to do it kind of manually, what would be the different setup? Because I think then it's easier to understand what the technology then kind of helps you do.

Alex: Yeah, so technically, this process would also work manually, right, so this multi-SPV would still invest. I think this process is the same, but at the end, the multi-SPV securitizes the asset and builds shares, tokenized shares of this asset, and for each of these shares, you would have to write the security documents yourself, right, and you would need to employ 20 working students to do that with a very high level of legal diligence. And for our technology, like legal automation system, we can generate all these documents. And second part, we can also issue these documents in a regulatory clean framework, because we have the right licenses and the right process in place to do that.

Nick: I was going to say, so how do you, I'm not a banker, I'm more of the kind of insurance guy, so what does it mean to securitize an asset, and can anyone do it?

Alex: I don't want to go into too much detail in this podcast, but of course not everyone can do it. It requires, it's at the end, a legal framework and a regulatory framework that we are using and that we are also applying in our technology. And there's a mixture of regulatory stuff, a process, right, and a lot of automation also.

Nick: Also licensing, like could, can any GMBH securitize or do you need a specific license to securitize?

Alex: You need to be licensed by Baffin.

Nick: Okay.

Alex: And we are also providing the license too.

Nick: Okay, okay, understood, understood. Yeah, no, no, I don't, don't want to get, but, but I think that in of itself, because, you know, me and my buddies couldn't just, you know, do get a Baffin license. I don't know whether that is something that me and my buddies could do.

Alex: Like with all technology, everybody could build it, right. And everybody could like follow this process in a very manual way, but that's at the end also building, building software, right. That one, one party does it and then others and provides it to others as a service. Right. And that's what we are doing. And that's also the reason why we feel that the private markets are now ripe for this digitization, but you could have done it like 20 years ago also, because the frameworks are not super new, right. But simply what was missing was the technology piece, right. And the someone to really automate all that, to be able to do that at scale for many customers and many asset classes.

Nick: Okay. And, and so by, by doing that, I, as an investor, for example, could potentially participate in interesting, you know, I could participate at lower costs in interesting deals where I myself don't want to put up enough capital that would make it interesting for the startup, because I just want to place, I don't know, 20,000, as you've mentioned. And do you have an idea of UVA?

Alex: So. Let me give you an example, Nick, maybe that, that helps a little bit. And like one of our customers, it's a, it's an asset manager who co-invests with a couple of, let's say, semi-professional co-investors, right. And they now have access to a very interesting deal, right. I just mentioned that it's somewhere in Elon Musk company set up, located, and they have a secondary, secondary deal option for that, right. A seven digit number into this, into this deal. And now they are using our platform to, at the end, distribute this deal to these private investors. So what is happening? We securitize this deal and the co-investors on the platform can now buy smaller chunks of this asset through the platform and therefore be a shareholder, more or less, of a privately held company in this very attractive privately held company.

Nick: Okay. Okay. So you, and okay. And understood. And if you, what's your, what's your kind of go-to market? How do you find, do you, do you just go to the investors? Do you, is it irrelevant for you to create deal flow? Do you go to the big investors? Do you go to small investors? What's your current, current go-to market strategy and why?

Alex: Very, very, very good question. So we are, we are not, we are not asset manager ourselves. So don't, we don't have assets, right. There are players or there have been players like Econos, they had Forrest, for example, and they then tokenized this and sold it to, to, to, to, to investors. That's not what we do at the end. We are just operating the transaction between the asset and the, and the investors and facilitating at the end, the, the, the life of the asset manager who wants to bring investors into assets, right. It can be a real estate object like a big commercial building, for example, where 20 people want to, want to co-invest in, in that it can be an infrastructure, infrastructure project like wind park, where 100 people want to co-invest into a, into a wind park. Or it could be a privately held company, like a, like a startup where 10 business angels want to co-invest into, let's say, GetSafe or Costco or whatever company.

Nick: So, so that means you're, you're kind of targeting the asset managers because they have to have, have all of their, have the investors and the targets.

Alex: You, you get the message and the asset managers at the moment or core target.

Nick: Okay. And so, so what's your, what's your business model? How do you make money and you know, how much cheaper are you against, what's your, what's your pitch number against, you know, going to the big law firms and making everything with email and etc?

Alex: Yeah, exactly. So, so we take a little bit different approach. So when we syndicate, we take a little bit to pay a PayPal business model. So we take a share of the transaction volume and this, this share of the transaction volume depends a little bit on the asset category, on the amount of co-investors and so on. But if you let's say syndicate or do a transaction on 100k...

Nick: Like the notaries, they also take a share of the transaction. You know, I think that was like our friends that the notaries, you know, they also take a share of the...

Alex: Yeah, that's true. But their share probably is a bit higher than... Exactly.

Nick: Okay. And, and, and for that you, you cut out what are the expenses that you would otherwise, do I still need to, so I don't need to go to notaries. I don't need to incur the costs of running my own SPVs and the tax and you know, all of that. I don't need to go to lawyers, I guess, because you have templated...

Alex: Exactly. Many things are, many things are templated, right? I mean, it's a journey, right? We never say you don't need a lawyer anymore. And some notarial action might also be needed in some cases, right? For example, you have to set up this multi-SPV once, but not every time again. But at the end, those are exactly the costs that we are, that we are saving. Cost to run and set up these, these SPVs to tax filing and maintain this whole structure. You don't have to go, the single investors don't have to go to the notary anymore because they can purchase the securities, this bankable securities fully digitally. And a lot of also, let's say logics, for example, price calculation of startup shares that normally legal people or lawyers do, or often lawyers do, are also conducted via the tool.

Nick: And Okay. So what stage are you guys at? You know, you've mentioned you have first customers, are you, you know, can you, can you talk traction figures, size of the company? What are you interested in sharing?

Alex: Yeah. So we are, we are currently fully in, fully go to market phase. We have a live product. We have customers, more than, more than 15 customers already using the platform and we are, we are getting great traction. So many people are interested in what we do in venture capital syndication, but also outside of venture capitals syndication. I talked about real estate. I talked about airplanes, which is also a very interesting topic to look into a couple of friends to buy a commercial airplane. And these are topics.

Nick: You have some friends who are looking to buy a commercial airplane?

Alex: Unfortunately Not my friends.

Nick: Yeah. Okay.

Alex: Yeah love flying with them but maybe there's a chance if we facilitate this transaction.

Nick: Okay Okay

Alex: But that's what I'm saying. We get interest now in this securitization topic also from, from other private market asset classes outside of venture capital, which has been our initial go to market. I think we are picking up very, very nice traction there with angel collectives, also some VC funds, some fund of funds who are looking into our solutions. But we are also at the end scaling the technology pretty fast into other private markets, which, which at the end are facing the same topics, right. In a little bit, little bit different connotation, but at the end, it's always the same logic. The bigger the asset is that you, that you can get access to the better, the better the performance is. And if you can cut this big asset into smaller chunks, and I'm not talking about retail, like 1k investments, about like crowdfunding stuff, but really into smaller pieces, then you can facilitate access to this.

Nick: So what's next for you guys? What are you, you're scaling the product, you go to market, what does the next six to 12 months look like for you guys?

Alex: Yeah, always exciting times ahead, right? So now we launched, now we grow, and we want to keep this momentum and grow our customer base. I think we have a couple of nice projects also lined up that we want to pursue. And we are always looking for partners and believers, of course, in this business. And also looking for to close new partnerships with asset managers, as our customers or other players or intermediaries in this ecosystem to grow the business, right? So I think the next six to 12 months is really as this super nice infrastructure that we build, bringing it to more customers and really, yeah, at the end, growing the business in this way.

Nick: And now you, are you looking to bootstrap? Are you looking to raise funds? What would is there anything on is that because investors are obviously, you know, your customers as well, but they could also be your investors. So what's, what's, what's your plan regarding that?

Alex: So we are not bootstrapped. We are also venture backed. I think growing and building this infrastructure is a very interesting case. So I'm also talking to, to some investors and I would say you're always fundraising in a way, right? That you always talk to, to investors. There's always quite some interest because you mentioned it. We also are tackling problems that our VCs have as our customers. And that's why I'm like talking to, to some of them might be also some, some fundraising in the, in the future or in the near future to, to really fuel the crow.

Nick: Is there any, any kind of topic that we, that we haven't touched but you would like to, to venture into?

Alex: Good question.

Nick: No, it's a perfectly acceptable.

Alex: No, it's a perfect answer. Then I give you the perfect answer.

Nick: It's not perfect. It's perfectly acceptable. But okay. And I think you've also already given a shout out. So if I, you know, if you're, if you're interested, you know, if you're an asset manager and you're looking to get synthesize larger assets and distribute them to kind of smaller chunks I guess Alex would, would, would, would say, would reply to your, to your message. What is the best place to reach you at?

Alex: Probably you can find me on, on LinkedIn. Maybe you can share it also under this podcast or you can also contact us via our homepage is equity.vc.

Nick: And how do you spell equity?

Alex: Aqua, like, like water and T T T Y Aqua T. It also means making equity investments more fluid, right? That's where the brand comes from. So if you remember that you also find our website.

Nick: Awesome. Alex, thank you so much for walking me through an area. I mean, this, this podcast called Reinventing Finance, but everyone knows there's a strong preference towards insurance from, from my end.

Alex: And we talked to you about insurance, right? It's still a topic of, of my passion and where I do some, some, some angel investing, but this time we spoke about different topics.

Nick: Awesome. Well, this is actually a good time because my four year old is, is, is jumping in. Alex, thank you so much for your time and have a lovely weekend.

Alex: Take care, Thanks a lot for having me. Ciao. Ciao.

Nick: Thank you. Bye.