Vertalo, the operating system for digital assets, was conceived as a solution to fix problems in the due diligence process of personnel records at a former company, CEO Dave Hendricks, owned. This gap in record keeping nearly effected a $35 million Series D round, as records need to be tight for investors. Because of this gap, or lack of due diligence, Dave and his co-founders built a product, a sort of LinkedIn on blockchain, or agreement between an organization and an associate, to establish that someone worked at a company. The project morphed over time to include a confirmation network based on smart contracts. Then Dave wrote a white paper, and working with lawyers, they created a Reg D security token, one of the very first ones.
Dave and his co-founders couldn’t find any providers to help them so they had to write their own technology, smart contracts, and legal documentation to support the raising of money against a security token, an equity interest in the company. They found that it was very difficult to raise on a security token for a new a new company as no one knew what a security token was, and they were an unproven company with no revenue, but as Dave states, they had learned one interesting thing, other companies were getting into buying real world and digitizing their assets, but they had no tools for managing the ownership or any of the structure around these companies. So, Dave and his co-founders decided to sunset or phase out the original Vertalo platform, and started to re-architect around a cap table. They had already created an HR cap table but now they were creating a financial institute cap table.
Dave explains that in ICOs (initial coin offerings), there are issuers and exchanges, but no one cares about who owns the token after the token is issued - it wasn’t a consideration. He continues, “There was no equity, there was no regulation around ownership, there wasn’t any kind of investor-issuer relationship. But we thought if anyone was going to issue a real asset that had equity within this legal framework of the United States, they were going to need to maintain something called a registry.” That’s where Vertalo started.
In this podcast, Dave talks about some of the problems managing cap tables, and how the benefits of using blockchain as a ledger plays out. Listen here to the rest of what Dave Hendricks, CEO of Vertalo, has to say about cap table on blockchain.