From New York, it's theCUBE, covering Blockchain Week. Now, here's John Furrier. Hello everyone, welcome back. I'm John Furrier here in the ground in New York City, Manhattan for Blockchain Week New York. Also, day three of consensus 2018. It's a huge event. Everyone's here and all the action. Phillip Piper's the CEO and co-founder of, he's with Swarm Fund. Now, it's an interesting story. We've interviewed a couple other companies, Polymath, Securitize. These guys got a unique value proposition. Phillip, it's Swarm Fund. Tell about what you guys are doing. What's the value proposition? Where you guys are at? So, we are the first security token framework that is live in the market. We launched, actually, end of January to only three months after the ICO. And we focus, actually, on tokenizing LP positions and funds. And we do that with a unique legal structure, governance structure, and a, obviously, token infrastructure that actually is meant to become a lingua franca that anyone in the market can collaborate on. So, we even invite the previously named companies to actually collaborate with this because it's not a one person or one organization. And you've got a shipping product. We have a shipping product. We actually have business on it, which means that there's funds that have tokenized on our platform. Four of them, actually. We have another 50 right now in the pipeline. So, the next couple of weeks, we're going to see at least nine to maybe 15 that are going to come to the market. So, I understand your value proposition is on you guys operationalizing venture capital or equity partners? Or is it targeting entrepreneurs themselves or both? Who's the customer for you? So, on the project side, on the investment opportunity side, it's actually people that have something that they've done in the past that have existing business and where we just become another part of their capital structure. So, when you focus on a fund. So, for example, we have a fund called Andra Capital that is a pre IPO tech fund. So, you can buy into a composite of Airbnb, Uber and other tech companies where they buy secondaries off the market. They're an existing fund. They have existing LPs. They have existing business. And for them to open up to the crypto landscape, both for crypto investors as well as family offices, we're that conduit. So, for them, it's no change of legal structures. They can just do this in the existing way. And for us in the crypto community, it's an excellent way to democratize access to that. So, you can get into these kind of things that normally were only for the privileged investors. And so, the benefit to them is that they don't have to unwind or mess with that tangled web of deals and LPs relationships because it's complicated to side deals, all kinds of, not side deals, but, you know, saying like one, there's a lot of moving parts, right? Well, and even more so, they don't have to put all their chips into this one thing that, you know, we all believe that is going to be big, but who knows where they're going to paint out. So, you know, if I would approach one of those partners and say, well, your entire fund has to be tokenized, that's a pretty big deal with a lot of resistance. In this way, they can just open up a back door saying, okay, let's test this out, see how it works. And by the way, they can actually push their existing investors to that direction too. It's really smart. Because it has a liquidity to it. That's the key element that is missing in this market segment. Yeah, and they don't have to do anything different. So, it's really smart. So, I got to ask you. So, your advice or security token has been a pretty positive reaction from most folks. Hey, finally a security token. There are people are raising money. That's what we're doing. That's what we're doing. No one has products. I mean, we have a product, we still have products, we have products. The thing is, is that there's very few people that have products. So, they're basically raising money. So, call it what it is. It's a raising money token. Security tokens are now good, but as the entrepreneurs out there, they say, well, do I just pledge with my cash flow or do I put equity against it? What's your vision on how entrepreneurs should think about what they give up for the tokens? Secure, how they securitize it?  So, I'm an entrepreneur. I say I'm going to raise $50 million or $10 million on an issue with security token. And what do I get for that? So, the investor wants security. Well, the investor wants actually something that is reliable in the legal way, in the most legal way possible, which means that it is something that they can have confidence that there's something on the other end. There is a trustful asset that is underlying it, that there's a legal stress that they can put this to. And if things go sideways, that they have a voice that they can actually govern their ownership with. What is that now? What's the standard? Is there a standard evolving around what that is behind the security token? Is it cash flow? Is it equity? Well, so in our case, we pay attention to actually having a vetting process that actually makes sure that this exists. We're actually, so the swarm token being the utility, it's sort of like a, it's a token to consider us as a AWS for fund operations. So, we incentivize existing players to help vet. We're working with some of the biggest servicing firms, unauditing firms, to in the end actually put their rubber stamp on stuff saying this actually is in existence and it's being looked at in detail. And the community in the end then can actually say we want this too, or we don't want this. So, there's multiple hoops that someone has to jump through before they can actually claim to be on a network like swarm on this SRC20 token that we have. What's interesting too is that what I like about your business model is that this leveraged to it you as you do things, you don't have to do it again. So, everyone has to replicate and provision their company some way. And by the way, just extend that also to the fact that there's only, there's one investor graph that is a qualified investor graph that basically anyone can chip into. And it makes it incredibly easy for a qualified investor to move around amongst different security tokens. And not just do that like on a dedicated platform but we are taking this into existing exchanges. You can even think of a model where this works with a decentralized exchange where people can confidently actually trade one another and they don't have to re-qualify with a decentralized exchange which doesn't have an organization to qualify that. It sounds like cloud computing and DevOps in action. Bringing to crypto, so you're probably having great service. Okay, what else is going on? How much did you raise? How big is the team? What's going on with the company? What's next? What's on the roadmap? So, we actually started thinking about this end of 2016 before this whole craziness started. So, there's a lot of pen to paper that we had to put in place. So, there's a preparation into the ICO that we did in September or October. We were very restrictive the way that we did it. We had a token liquidity release in order to appeal to some of the more US-focused investors. We raised five and a half million dollars back then valued in Ether, pretty good. We then actually, the foundation still holds half of the tokens. We just were really cleared to be not a security. In this realm, we clearly separate the security from the utility function and we are off to the races with actually not just being listed on exchanges but also to actually list the security tokens on exchanges with a clear mandate by the token issuers that that's something that they are qualified to do. That's awesome. So, Philip, I'm going to give you a use case. If I'm going to do a token offering, say for the Q, hypothetical, wink, wink, what do I do? How do I engage with it? Would I use your service? How would I use your service? I'm going to issue tokens. You know, we're building the business, we're building the brand, we're going to open it up. I don't have time to deal with all those details. It's a lot of hassles do I do the Cayman Islands, special purpose vehicles. I mean, where's my entity? What's my domicile? What's the lawyer? Do I use you? I mean, would I use you guys and that would be the service or you targeting, would I have to go somewhere else? Who do I use? Who would I use? How would I use swarm? Well, there's two parts to answer that question. One is actually, obviously, we have a lot of institutional organizations on the other end that have their own custom setup. They have existing things. We make it incredibly easy for them to engage in this because we form these SPVs which are so far we've trialed this and BVI and Caymans and Estonia and Liechtenstein, but those entities become shareholders of the underlying asset. So if someone wants to list something, they go to tokenize.swarm.fund. There's an intake form that actually allows them to supply their proposals. That proposals get put through different layers of vetting. So we work with- On your team. Well, it's first on our team, but we work with external people that vet that too. And then actually it goes to auditing firms that actually then say, this is something real because before we take it to market and actually offer it to the broader community, we really want to make sure that this is actually something that has validity to it because as you know, market can be killed by the first early innings of actually something not being real. So do you pay for those services or is it paid in tokens? So it's paid in tokens. Again, the analogy is the AWS- Auditing firm, that's going to cost a serious money. So it's basically, if someone wants to list, there's a gas for a fund listing that has to be paid. And that goes to both investor qualification as well as the auditing process. The same actually applies to the fund operations. So there's gas for fund operations, which goes to the technical nodes, the legal service providers that we work with, accounting firms, people that want to do due diligence. Like say, I receive a NAV report and that asset value report- It's co-operated literally. Exactly. But if I receive a net asset value report from one of the underlying assets and I as an investor don't believe it, I can stake to say, I want to have KPMG go off and actually validate that this is actually real and it's actually- So you're bringing a lot of service providers together. You're also providing some base services. That's cool. What's next? What are you going to do this next year? What's next for you guys? Second half of the year? I think we're just scratching the surface of what this is going to do. I mean, we're very happy that actually there's a very big focus by the market on actually security tokens. Wall Street is taking it extremely serious and legislators across the world are taking it seriously. So we're very, very fortunate to be some in some of those conversations with legislators who want the security token space to be compliant with what they're thinking about. I think it's just going to be volume, both on both ends. Our target is to actually have 100,000 active investors engaged. We want to have at least 100 funds that are live on the platform on the network. And we want to stitch in partnerships with whoever wants to participate that makes this a frictionless ecosystem such that everyone can continue their business. We need more faster, better products out there. The SEC is seeing some of the regulatory issues slowing things down in the US and a lot of action going on outside of the United States so the sooner the better, right? Yeah, but I think the SEC is taking an approach to say we're going to regulate the bad actors but we're urging a self-regulatory position by the industry. And so efforts like all the ones that you mentioned and us actually going in the direction to be compliant not shying away from having security tokens in a legal fashion is the good news because the more we show that the more actually they understand that this is not some kind of evasion strategy in many different directions. Yeah, and we need to move faster, cool. Well, great job, Phillip, and we got a great job here, Swarm Fund. Check it out, they're really making it easier for investors and limited partners, the big money to actually move in a crypto, open up a door and put the toe in the water and make money, get liquid. Thanks for coming on. Thanks so much. Appreciate it. Blockchain Week, New York City. I'm John Furrier, thanks for watching.