Today we will speak with CEO of a very hot investing platform Simon Dixon. Expect a long text as he is a great talker!
For starters, a bit about your background. I know you come from the world of finance, but how did you get into cryptocurrency?
– I originally started by studying economics, I did a Masters at Manchester University and a Degree at Kingston in economics and I disagreed with a lot of what I learned; I thought it was based upon very unsound assumptions. I also noticed that economics was being used to run economies on the larger scale all around the globe, and yet no economist actually agreed with each other. You had the classical school of thought, you had the Austrian school of thought, you had the Keynesian school of thought, you had the Chicago school of thought, you had the neoclassical school of thought and nobody had actually solved which school of thought should be used to model an economy. I found it fascinating and amazing that these models that no one had resolved were actually being used to experiment with fiat currencies, financial systems and countries at the global macro scale, even though they still had their issues and were based upon unsound assumptions. I also noticed that the assumptions about how money was created was ignored in many of these economic models and they used incorrect assumptions. They originally presumed that a bank was an intermediary between a borrower and a lender. which they’re not anymore; it’s not a piggy bank. Banks actually create money and the vast majority of the supply is actually government endorsed digital currencies, because all money is digital with the exception of notes and coins and created by a private retail bank when they issue a loan and – so that model is inaccurate. More advanced models assume a multiplier effect where they say the government creates a base of money and then banks multiply that money many times over and therefore banks create digital currency but it’s fixed at the base and therefore, the government still controls it. When I studied this a little bit more, it turned out the government doesn’t control it, because banks can simply create as much money as they please based upon their risk appetite to lend. You also hear things like conspiracy theories talking about fractional reserve banking where the money is created by the bank and they hold a fraction on reserve and multiply that supply many times over. I researched this and realized that they don’t actually hold a fraction, and don’t have a reserve, so even that was incorrect. After this I got distracted and went into investment banking, where I spent three years working in trading as a market maker in London for an investment bank on the London stock exchange, then corporate finance. After working with a teamIPOings midcap companies at the London stock exchange, I decided I really wanted to return to understanding money better. I was getting distracted from my interests at the investment bank and was looking to return to my passion.
I started studying money again and giving lectures on money, but it was 2006, and nobody really cared about it. But then the 2007 Northern Rock event happened, and the subprime crisis in 2008, and more and more people got interested in what I was talking about. So I wrote a book called “Bank to the Future” which was about forecasting many of the technologies that were going to have an impact on the financial system. Thanks to that I went to Occupy London and met someone who invited me to speak at the very first bitcoin conference in the world. I spoke there in Prague, and bitcoin had crashed to three dollars at that point. The event was sponsored by MTGox, and there was a startup called BitPay pitching -, Tony Gallipoli, Max Kaiser and I spoke on a panel. I was hooked into the industry ever since.
I went there with the co-founder of BnkToTheFuture.com as, we were working on building an online investment platform at the time. My co-founder Bliss Dixon was very intrigued by the impact that bitcoin was going to have , so we started looking at this sector a lot more and then fell down the rabbit hole many people fall down. We saw this industry grow from about 40 people in the room to its recent peak in 2017 any bear markets occured in between, and we are more excited about the future of the industry now than we ever have been.
What exactly is BnkToTheFuture and how did you come up with the idea for it?
BnkToTheFfuture.com is an online investment platform for investing in financial technology and we help investors build a diversified portfolio in companies that might be involved in the future of finance. We allow financial technology to have a home to raise finance while doing things in compliance with securities laws in order to pull together investors from around the globe and do all the compliance work. driven by securities laws. We started way back in 2010, and there were about three companies in the UK (where I lived at the time) that were working on allowing people to pull together money online and do that in a regulated environment. Together we managed to get the UK regulator, it was called the FSA at the time, to allow for this model to continue and it was the first country in the world to actually allow this and let the market grew within the UK.
At the same time, if you listened to my previous video where I talked about my background, I was also invited to the first bitcoin conference in the world, and the company was really intrigued by it and made some early purchases in Bitcoin. Because those investments did so well, we never needed VC funding, so we were an independent company and decided to use the platform to exclusively support the industry.
At that time, no one was really interested, there was no such thing as a blockchain industry, it was just a bitcoin industry and the original model that we put together at BnkToTheFuture.com would only allow us to have UK companies with UK investors. When we wanted to support the Bitcoin industry there was virtually no UK companies and there were not enough investors in the UK that were interested in this industry, so we had to do it on a global scale in order for it to work.
After spending many years working on our compliance models and different systems to allow for investing in compliance with international securities laws, we decided to relocate to Hong Kong personally and register the business with the Cayman Islands monetary authority to work on integrating with international securities laws, building custom processes and acquiring broker-dealers – doing whatever we needed to do in order to allow this to happen. And that’s where we started.
I wrote the book ‘Bank to the Future’ which was forecasting that financial technology was going to change the financial system. I personally wanted to invest in the industry, but I wanted a way to invest very wide and diverse, and so Bliss Dixon and I co-founded the company and diversified across the industry. We really just wanted to invest in the industry ourselves and we allowed people to co-invest in the things we were investing in in the beginning. Later we managed to secure very early funding rounds for companies like Kraken, ShapeShift, Bitstamp, Bitfinex, and Bitpay, and some of the very early companies that are now big household names in the industry. That’s where it all started for us and when the industry grew, and we also went through the disruption of tokens and adjusted our models accordingly.
Now as a securities business, we’re perfectly positioned to be able to do equity, securities tokens and FinTech companies that want to sell tokenized securities in compliance with securities laws. We now have over 65,000 registered high net worth and sophisticated investors from around the globe, and we’ve facilitated over 600 million dollars of investment into funding rounds that are listed on our platform.
The idea was amazing, but making it work must have been hard. How did you get such big companies to list their businesses on your website? It is usually hard to kickstart something; it’s later that we see the snowball effect.
– I could give you strategic answers for some of the companies, but really I think it’s more of an esoteric answer, and that is we were always mission driven.
We co-founded this company, Bliss Dixon and I, based upon being inspired by the people that created Bitcoin, those that were involved in Bitcoin very early, and attending and speaking at the very first Bitcoin conference in the world. Prior to that, we were always talking about how the existing financial system needed to go through a change, but our solutions were not as convincing until we saw Bitcoin, and when we saw Bitcoin, we looked at it as a disruption in the traditional financial system by creating an alternative. That mission has really led us and guided us in all we do -the people that we hire within our company are all onboard to that mission, and therefore we create a culture that allows us to succeed.
The customers that join and invest through our platform are onboard with that mission and therefore are looking to support the industry, so when we approach companies that are looking to support the industry too, our values are aligned, and we offer value to them, even though it was hard to secure investment back in those early days as well.
From taking a few actions, taking a few risks, we started in 2010 and it took years in order to secure all the registrations with all the different companies, or get the registrations that we needed and we re-iterated many different models as a result, but we always focused one eye on compliance and the other eye on innovation. Getting that balance right was very challenging, and because we solved people’s problems, people used us, and now we have built a reputation because we’re on the same page and looking to support the industry. We’re here for the long term, we still continue to do lots of innovation and now looking at launching the secondary market for equity in some of the biggest bitcoin and blockchain companies. In 2017 we made sure we adjusted to the potential disruption in the token market, and in 2019 and beyond we’re looking to disrupt ourselves by looking how we would rebuild this platform if we were starting from scratch today with securities tokens in mind.
This mission has driven us to always think long-term and make sure we’re doing the compliance-driven things we need to do to allow us to stay here, but also mixing that with the mission, the vision of what this industry is trying to achieve and staying true to that vision.
At some point you have decided to make your own token. What were the reasons and how can it be used on the website?
– The answer to why we created it is that we were seeing a lot of disruption in our industry from the token model. We were seeing some of these cases that people were putting together, and we believed it could solve some of the major problems we were experiencing on our platform at the time when we were trying to deal with some of the growth that our company was going through. e didn’t use the token as a funding round; we were already a very profitable business and were doing very well.
We decided we wanted to reward our community and create a network effect around the token, and have our customers be more involved in some of the processes that our customers will earn our tokens through their involvement. We had several problems we were trying to solve. Firstly, the platform had grown very, very fast the year we launched the token. At some point we were getting up to thirty applications a day from companies that were looking to get involved in this industry and raise funding through the platform. We wanted a wayto actually reward the community for involving them in the process of helping us decide and be involved in the due diligence of those companies. Many of the companies were not given enough investor updates, so we also wanted a token to reward companies for providing more frequent investor updates, and for investors that wanted to support the companies in their investor relations.
Secondly, we were also getting an issue where many of the deals that were listed on our platform were exclusive, and we only work with a few at any given time. They were getting funded very fast, so we wanted to create a priority access membership level whereby those that were purchasing tokens in the network coulddeposit those tokens on our platform, (or their wallet, once we launch the BF wallet) and get priority access to those deals before others do. Different deals have higher priority levels and different subscription demands, and so the token allows them to get early access.
Thirdly when we launch our secondary market for equity and our securities token exchange in the future, we wanted a way whereby people who pay their trading fees using this token with discounted trading fees. t was a complimentary thing, and we wanted to experience doing the token sale process in compliance with securities laws because many of our clients were going through that process too. I remember that we had many equity companies that decided not to sell equity and they were selling tokens instead during the bull market, therefore, we were looking to experience the same process and make sure we don’t get disrupted by the innovation.
That’s why we created the token and look forward to bringing many more user cases to the token. It’s an incredibly useful thing for a company to be able to reward and have membership levels using a token, as well as being able to use the token and all the benefits that come from building a network effect around a token.