How Blockchain Helps Black Founders Keep Equity, Set Their Own Terms: HBCU@SXSW
Black founders account for less than 1 percent of venture capital funds from traditional sources, so it was hard to find a seat at a blockchain meetup where a panel of experts shared ideas on how to get funded using technology backed by the blockchain at HBCU@SXSW.
The panelists have in common the experience of helping run businesses using the new paradigm of the blockchain — without having to give up too much equity in exchange for the money they raised. They also share use cases for the blockchain that they feel passionate about.
Panelist Kelcey Gosserand is founder and CEO of Trellis, providing strategic services for companies and startups that are going through token-generating events. Gosserand has been investing and active in blockchain for three years and just launched a new media platform called Women Plus Blockchain, “so we can change the narrative around this ‘bro-ey’ space and talk about real-world implications of blockchain.”
Carl Dorvil, CEO of GEX Management, is the 11th African American — and the youngest-ever, he says — to IPO a company. GEX trades on the OTC, and is looking to move onto the New York Stock Exchange before the end of the year under the ticker GXXM. “We’re in the payroll space and looking to blockchain to revolutionize the payroll game,” Dorvil said. GEX finds human-resource and integrated office solutions.
Brian Brackeen is the CEO of Kairos, a Miami facial recognition firm that does facial recognition on the blockchain. “So if you’re going to send somebody 1,000 ethereums, you can use our solution to verify their identity before they receive it but still remain anonymous, and say ‘only this face can unlock this transaction,'” Brackeen said.
Jonathan Gagliardoni is co-founder of Shop, a global commerce cooperative that is working to decentralize and reorganize the retail core onto a blockchain protocol, allowing brands and shoppers to have a better relationship.
Moguldom was at SXSW 2018. Here’s an excerpt from the blockchain meetup at HBCU@SXSW 2018.
Brian Brackeen: Blockchain is a technology that democratizes, and it’s very easy to implement once you get your head around it. It changes the way our peer-to-peer connections work. You can have a lot of trust in a solution like that because you know it can’t be hacked.
Samson Williams: We hear a lot about how blockchain can be used to make cryptocurrencies. (Carl Dorvil is) using it in the payroll space. How do you make that jump between bitcoin and the payroll space?
Carl Dorvil: The opportunity in the payroll space to move money with blockchain, we think is going to be revolutionary. Right now we charge people and then we wait. A couple of days later we get the money and then we ultimately pay our employees. With blockchain, that could happen automatically. The space is already antiquated. Being able to bring this to the system we think is going to be pretty revolutionary. We want to leverage our public vehicle to take full advantage of that.
Jonathan Gagliardoni: It’s really important to decouple bitcoin from blockchain. Bitcoin is a store of value, blockchain is a technology that it runs on top of.
Samson Williams: How is Shop leveraging the decentralized aspect of blockchain?
Jonathan Gagliardoni: Most of you have probably purchased something online. What we’re doing is allowing for a brand to put the products (and information) that they (are selling) onto the blockchain in a decentralized ledger and leverage that to either get more insights into their customers or to make discounts for their customers. Similarly, for the shopper, the shopper can make information that they want available to the customer. Your information has a lot of value to the centralized authorities that use it every single day — Amazon, Facebook, Google — you are actually the product. I don’t want to get into the politics of (whether that’s a good thing or a bad thing). The reality is you have a value behind you and we believe in a world where the brand and the shopper can determine their value and use that for exchanging.
Kelcey Gosserand: I am really recognizing diversity in the blockchain space. It’s no secret that as a black founder — male or female — you’re accountable for less than 1 percent of all the VC funds that are out there. This is an entirely new paradigm. If you’re a woman of color, you’re less than a quarter of 1 percent, in fact less than 20 black women have raised over $1 million from traditional VC. This is an avenue for ideas to get funded that are backed by blockchain as a technical platform. I’m here to be an evangelist and to discuss that this is another means of funding for awesome ideas by diverse founders.
Samson Williams: Brian, you had an ICO. Tell us about that. Unlike traditional VC, Brian still has a majority stake in his company.
Brian Brackeen: We were able to raise $30 million from an ICO. It took about three months. We gave about 30 percent of the company. There are different ways to talk about this. All the problems that you talked about are absolutely true but there’s also, on top of that, geography. So if you’re all those things, and you live in Miami, and you live in Atlanta, it’s even harder for you to raise. Get your product up and running, get some mentorship, get to a certain scale and then, if you can ICO in the city you’re currently in where your employees are, it completely changes the ecosystem.
There’s two kinds of ICOs — one where you’re selling a utility and one where you’re selling a security. In our case, we did the latter. We actually sold actual equity in the company. We followed all the SEC laws, and by doing so, it’s better for the investor, it’s better for Kairos, it’s really better for everyone.
Carl Dorvil: We did an IPO. We went a different route but it’s simply more difficult for us to do this, which doesn’t give us an excuse — it gives us an opportunity to work harder. The unique opportunity to work hard is my definition of success. We raised just under $1 million during the IPO. I was able to retain 70 percent of the business as well and the other 30 percent — 20 percent of that I was able to give to my other co-founders. Our first year, we did about $500,000 in sales and this year we’re on pace to do about $2 million.
Jonathan Gagliardoni: We’re going to be doing a public event in May and right now we’re doing a private sale. I’ve been on the other side of raising VC money, talking to investors, and there’s a lot of “talk to me later.”
“No” is actually the second best thing to “yes”. There is utility behind what we are doing but the token itself will be able to be used on the platform. You’ll be able to purchase goods. The brands will be able to work with shoppers and offer discounts in the form of the token. The economics behind it are to drive the platform itself.
Samson Williams: All the panelists talked about running a business without having to give up too much equity. What has been your experience Kelcey?
Kelcey Gosserand: You can set your own terms with these new investment paradigms. Traditionally we were pretty much selling the entire farm. We’re lucky as founders — black, white, regardless — to walk away with 10 percent of our company. Now we’re able to leverage and have ownership of the vast majority of the company and then decide later on if you want to do another ICO. I think the terms are especially favorable for founders who go this route.
Samson Williams: Is it correct to say you got to keep the majority of your businesses and your equity? That’s awesome. I’m going to give you a round of applause. Can you give us a use case for blockchain that you’re passionate about?
Kelcey Gosserand: We look at blockchain as a super server that is way more secure than Amazon’s cloud servers. It works better than Steve Jobs’ explanation of what the cloud is. If you look at it as merely a platform, there’s not a single industry that would not benefit from being on the blockchain. I’m working on a biosciences project. They’re working to expand research on brain trauma injury, concussions, Parkinsons’ Disease, autism, and it’s all grant-funded. If you are able to access this through an open network like the blockchain that’s secure and immutable, then the possibilities of medical research are endless. So we are raising money to make the lives of children suffering from these disorders easier. I have a plethora of use cases on how blockchain can change the world.
Brian Brackeen: There’s some really cool voting applications — there’s obviously a problem there. It’s something we need to solve. Real news. I also saw in Miami (an application for) home inspections. You can have a history of how the home performed — each time it’s bought and sold — in an immutable ledger.
Jonathan Gagliardoni: To me (voting) is one of the best use cases for blockchain. Last week in Sri Lanka, the whole voting system was on a blockchain technology, and that’s so important, especially in those countries where there’s a lot of corruption in the government. My family’s from Venezuela. I spend a lot of time there. The government actually facilitates the voting and they always happen to win. In Venezuela, the government decided to do a Petro coin. (If you bought in) you’re supporting a government that oppresses its people. You’re giving this government $750 million to figure out more ways to continue to oppress its people. I hate that.