Hey. So fintech catherine. My name is John. And with me as always, Is Steve. How you doing? I'm well well John. How are you? Good. You know, I just realized that we have something in common. Oh. We've both worked for companies that we're trying to facilitate private investments. Isn't that right? Oh, that's... Yeah. Look at that. Small small world. Yeah. Who who did you work for? I worked for a company called Round 1 private capital Marketplace. Way back in 4001, and trust me. That was as long as it lasted. How about you? So the the the the first boot boom cycle. I worked for a company that was... Yeah. I think at first called e date, equity and liquidate, and then initially changed their name to Forge Global before the web public. You know, we we both messed up. We should have worked for our next guest year. Which should have turned out much better. Yeah. But, actually, at least we're lucky to have mel Joe and Do, the Ceo of Link 2. Welcome to the podcast. Hey, guys. Glad to be here. Oh, man. Yeah. We're we're glad. You're here and that link is thriving unlike our our failed attempts. So we kinda left the market to you. Well, you know, I think timing is everything. I business, and we were very fortunate to have launch link to at the time that we did rather than maybe you know, 10:15 years before them. So it it's just that as you said, the market is since developed, and the the the single most important develop and has been that the very largest institutional investors in the world having that you know, intervening period, made a decision to allocate a much greater level of their portfolio towards alternatives and specifically towards venture and environment. Yeah. Yeah. No. It's the timing is a a big part of it. Yeah. And 1 thing III remember if it was a big part of it for for us anyway, was getting all the compliance, the Sec rules, getting everything right so that you would do avoid any trouble. And and it's tough to gonna get something like this started. How did you guys first get going and get those first listing. I'm I'm always curious though how new startups can can really get the ball rolling. You know, where we're very, very I'm so it can delhi right get. Unlike most other startups that raise God's venture money, and then you know, spend it, and then after spending most of it realized that they haven't made money yet and start focusing on how to make money. I wish you had told me that a long time ago. We think we did the. We're a bootstrap. We're very old passionate. But so we raised very little mud. With the premise that we were going to either get the product markets say quickly and make money or we were just gonna, you know, go home and figure out something that did work in that fashion. Right? No point in spending, 10 years spending other people's money only to my dad it does what. So we we raised a very small 1 amount of money, a small series a, it was under 2000000 bucks and 20 19, and we launched Link private investing platform in February of the following year. And by the end of that first year, we were cash flow positive and profitable. Oh, wow. That's really quick. Yeah. But part of the story, and this is the bootstrap part, but also answers your quest that how we how we really able make our first investment. Was, you know, by the time we wanted be were pretty much out of money. We were working on fumes And me and the founder and, the Cto, that was basically all there was at agreed too at the time. We we we James and t shirts not as a cultural thing, but that's all you had left. That's all we had left. And, you know, I was kinda chopping when you said I wish me had worked back And because if you add, we'd probably be homeless and, you know, I don't know feeling crack on the street right now. So luckily, we we... So what we did was me... We we just made a decision to defer our pay until we can... We we we got the ship, you know, on course. And and then we went out to to try to buy some stock with without any money. So we were able to convince this 1 guy who is a fairly high ranking executive today. And sits on our board, and is a dear friend of mine. His his name is Warren Reed, and he's the Ceo of biden Us. He had been the chief risk officer and at at Ripple. Right? So he had a whole bunch of ripple stock from his time there. And we were able to convince poor norm, 1 to sell us a bunch of his stock on consignment meaning we didn't have to pay cash. So we actually were able to find people that were willing to, invest in. And 2, we we've gone to agree that instead of paying in a hundred percent cash at the price that we would agreed we would pay a 50 percent. And the rest would give them way too stop. That is a a good friend to have, John. I know. Although know that The happy. It does have a happy ending. Because if you asked them today, nor would probably tell you that is that link to stock got is probably the best damage investment you have he ever make. Right? Because he's he's well in the money, on that stock. Because obviously, we gave it to him at the price we we were raising money back. Then and today, It's it's it's a different story. So today, link to is a an investment platform that's got over 400000000 of smaller accredited and investment capital investing on it. And has been consistently profitable for the last 4 years and is continuing to grow in roots in that. So, you know, hopefully, you know, hang on to that 2 stock and it'll it'll become a even better story for at the very end. So to take AAA step back here, what is the value prop for both the employee and the company of having a secondary mark mark marketplace for the pre Ipo shares? I think the the value in our case is quite specific and and some respects are different than the value profit. You know, your old, company Steve former company forge provides. Right? Because the guys at forged for that matter, all the other brokerage platforms, and that's what most of the platforms that are in the private market today are the brokers. Their business model is basically based on getting you as a seller to cross your your offer and your stock with a willing bidder on the other side of that trade who's willing who wants that same stock likes the price you're offering at app and is willing to buy it. And by putting the 2 of new together, you're able to earn a commission on that trade. So you're broker. You've got sellers listing you in and you're you're you're offering this this property you, to a whole bunch of buyers. And finding a buyer that's you willing to to buy that property price you're offering. Our business model is fundamentally them we different? And I I can explain to you guys a little bit why why we decided to make it difference. Just a minute, But it's different in that we're not a broker. We're a principal. Meaning, if you come to us as a seller, and I like their stock and Unlike the pressure offering it at. I'll just buy it off of using our balance sheet. That means that you don't have the risk that I won't find a, a buyer. You don't have to pay a brokerage commission because I am a buyer, and I can execute on that trade today. Now we've still got to go to your your company to get permission to get consent, go through the right of first refusal process, but you don't need need to find a buyer to match your offer because I am the buyer. You have certainty at closing, and you know who I am. At day, that we we will start that discussion. So I think... Yes. I... I think that this makes sense from from an employee side? Do you get access to to... Like, liquidity, do you... Do you also offer employees a chance to maybe be able to exercise your options? Is that as service so you offer employees? Or Are they on their own kind of... Yeah. Okay? Great. Yeah. So if somebody has... As long as we we have evidence your options are... Best and therefore sizable. Part of our purchase agreement is basically allows us to gives you the option of us financing that option exercise and we'll put up the cash. Got it. And then I'm I'm also curious what is the value prep for the... For the employer as well? Because I think John and I were having a bit of a debate be before you joined, and he seems to think that there's actually a detriment for employ for employers, I think it's the opposite. Where where do you land on that? And how do you see this as as helping companies maybe either retain workers or keep him happy Sort of what what what again has is the value for for the employer's side of this. You mean, the the general value prop of, allowing your employers to obtain liquidity... Out, allow your employees to attain liquidity? Exactly. John seems seems to think that this will basically this incentivize employees and we'll make them say, hey, I'm not as invested in this I I wanna leave my thinking is that it it'll will help them basically, you know, give employees more access to cash and make them happier maybe allow them to... You know, engaged, in a large purchase like, home or go vacation and get a car. I have a baby whatever. So what what's your thinking on this? You I I think that's 1 of these situations where it's hard to come up with a general principle that applies to all cases. Right? Because the the real answer is it good or bad is that it depends. Right? And and and so let me kinda explain because we have this discussed. All the time with issuers. It it... It's good if the employee, the employee's need for liquidity and is legitimate and doesn't make them lose or doesn't reduce their commitment to the enterprise, which is what Make sure cares about, which is why the issue that employee to begin with. Right? The the on the other side of it, right, the the employer in a way has made a promise to that employee that at some point, if not today, that employee is gonna get liquidity and be able to basically take them deferred compensation and realize it. And many times, employers too are not able to make good on that promise because their Ipo get delayed. Their liquidity that nets get pushed out. So there's a balancing of on the 1 hand promise you know, the legitimate desire and need of the employee for liquidity, especially if it's been par postponed, And on the other side, that Legitimate need on the part of the issuer the company to ensure that it's employees remain committed. And that their equity plays a part in, you know, maintaining that commitment. So the way I think that ends up in managed is there are mechanisms. Right? And we many times we'll work closely with issuers because we don't want Trump, you know, their rightful for imperatives in terms managing their business to to to abide by those. So many times, they'll they'll say, tell us when we have employees that are coming to liquidity. And then we will work with you and them to orchestrate a means of giving those employees some liquidity without necessarily us losing our ability to you, making sure they haven't. They have continuing incentive. Right? So... And that's sort of how it works. And every company will have different ideas about how much equity their people, especially their key people need to retain in order to maintain that level or committed. And when we just hopefully work with them in a some coop cooperative fashion to to achieve that while also giving the employees liquidity being needed want. Taking take care of them and then taking care of their long term term, plans as well. It may make sense. But is that a big driver of the the business or is it more institutional, what what's keeping linked to growing these days? What what kind of trades? Yeah. It's it's... There's there's emphasis on both sides, but where I think we're particularly, just as I said, we're unique in terms of the way we interface with sellers, right? Because we're not a broker and we can guarantee execution because we are the buyer the the the ultimate buyer of of their staff. And also because we're institutional, we we can we can work with a company in in a way maybe that in an individual buyer of their stuff might not be able to. On the other side of the business where we're bringing in investors into the space. We we have a unique value proposition as well. Right? Because think about what what it looks like if you're an accredited investor trying to allocate a certain portion of your wealth on a continuing and on a systematic basis to this class of assets. Right? Number 1, you you don't have continuing access to high quality vehicle, because maybe you don't live in Japan or spent you live in you know, Cleveland Ohio. You don't know a guy who knows a guy who knows a guy to get into these deals. Right? Second, you only have so much money to spend. You you you're not. Your last name isn't in Rockefeller. Right? So, you know, you're you're relatively affluent, but you you don't have, you know, a boat load of money. And you still wanna build a diversified portfolio of private as part of your your your wealth management plan. How do you do that with relatively small dollars. And then the third ways... The third thing is how you do that in a really simple easy way. So you're not spending, you know, half your day. Trying to research companies and trying to figure out how to go through a process where you gotta hold funds in escrow and wait for the ro for the consent to occur, you know, what happened and make sure you avoid ro, all of those pitfalls, you can avoid on the Link 2 platform because we a number 1, we've used our own capital and we're not gonna offer that investment to you until after we've cleared ro, and we're long the stock and are sitting on the cap table. Right? So you don't have to worry about all of those things. We've der risked the transaction for you, and we've made it immediate because now we're along the stock. There is no more get stuck with no more escrow. Did you... Don't you get stuck with those holdings sometimes? How do you yes manage that balance you risk. We we have internal risk management disciplines because, like, like any firm that is acting as a principal. Right? You've got risk on your balance sheet. And we do. And so, you know, we we've got a chief investment officer and a team of professionals that that think about those things and manage at risk date day to day. But if you're guy Cleveland, Ohio, now now you've got a way to make an investment very easily from a mobile app and an easy to use web interface, you could invest as little as 5 grand. So if I've got 50 grand I can spread it across. Still too much for, Joe. Still too much. The 5 grand too much? Yeah. Yeah. As we scale our customer base, believe me, John, we're gonna... We're working on getting that number down. Right? It's just a matter of economics scale. So, yes. I mean, absolutely to fully democrat the product, it's gotta be as as small as possible. Right now, that's the number that makes sense for us. But even then, right? We could you can do that. And the third big advantage is that you you you you can access our our platform and get lots of information and and and do the research that you wanna do. Read up on stuff, get educated, build that diversified portfolio, make that in that make those investments simultaneously instantaneously. And oh, by the way, if down the road, you decide that certain of those portfolio holdings, you're no longer as bullish on. And you wanna rebalance your portfolio by adding other holdings and and getting rid of the holdings you originally did. You have liquidity on our platform. We'll buy those units off of you, and you can reinvest in other things. In other companies. So that combination of simple and easy, instant, t 0 investing and liquidity. Of investment are in our view, quite unique. And and they are what enable the smallest investors the people at the very bottom of the, you know, wealth pyramid of a should wealth, participate in an active way in this asset. Class. If you look at for those business, 50 percent of is institutional, 0 percent of our business is institution it's all it's all retail in the sense that they're all individuals. And they're not individuals who have family off since that's not that kind of individual. It's like individuals like those of us on this podcast. That's. It's like regular people like us. So so off of that market left so that you can still continue to grow with your existing offerings? Or is this leading into, like, further services and that's how you take off. Was the question how big is that market opportunity? Yeah. Yeah. There's still a lot of market opportunity out there. For this to private investing? Or... Yeah I mean, or do you would you have to expand your product line, more services, institutional to to to grow further. We reckon there's still a lot of headroom. I me you share some numbers with you. So today, we have approximately hundred and 60000 registered accounts. On the platform. Right? You j suppose that number against a number of a accredited investor in the states. That number is about 30000000. In the world that number is about 80000000. If you look at just affluent people, people that have certain means, but may not necessarily meet the net worth test of the Us Sec. That number is probably closer to 200000000 ground road. So we have so much headroom to grow. Mh And then on the invest universe side, I mean, we've invested that roughly 400000000 of capital that we've advocated some small investors in approximately 65 companies or so. Right? But you look at unicorns alone. Here's are roughly today, you know, I don't know, 2000 of them with a total private market value of about about 2000000000000. We've got lots of room in the invest universe as well. And the thing about it is population around the world isn't declining. It's grown. Wealth isn't at receding. It's expanded. And So more Expenditure internationally. Say that is... Done. You you expand internationally then? Yeah. We already are, although it's a relatively small portion of the business, John, it's it's about 15 percent today. Is is is it outside the Us. You know, as you can even imagine the big the big customer concentrations outside the Us usa and the angles right there in places like the Uk. Australia, and New Zealand, and those parts of Western europe Europe where you have, you know, English is relatively well years like the Netherlands Germany and switzerland and places just like that. K. Can you also, go go back to the Us? I know that earlier this year, the house passed, basically. An amendment to expand the definition of an accredited accredited investor, which I assume has increased the size of your your potential client base. Can you speak to the effect of that regulation on your business and with within and sort of your view and on how this will change private investment going forward? Yeah. So that regulation basically said in the past, prior to that that change, you had to pass 1 or both a 2 financial tests. Right? 1 was based on income. In the states you to have more than 200000 bucks of annual income in the last 2 years and and, you know, reasonable basis for believing you'll you'll exceed 200000 in the car. And or you had to have a million bucks worth of net worth top counting the value of your pitch score. Residents your home. Right? So those are financial tests and their tests of of of of wealth and income. The the amendment basically said if you hold 1 of 2 securities licenses. Series 7 or series 65, you also qualify an the credit investor by virtue of your financial sophistication. So it's not a wealth test. It's a financial sophistication test. Well, if you look at the... If you look at the database of Finra, you'll see that there's, you know, today, several hundred thousand securities license holders or Series 7 in Series 65. So that that's an automatic expansion mark totally addressable market right there. And have you seen the the effect of that on your business also is that, I are you seen more getting more more more traction and more folks trying to get onto your platform. It's still early days, but I think that's that's gonna be a big driver of growth. And obviously, I I think that if you look at the direction of regulation, I'm hopeful that it's gonna travel in in the direction of something that eventually will approximate what I call the original intent. Of the securities as. Right? Because if you look and read the actual securities act, the the the forties Act, and you look at that section that has to do with who is eligible for invest for investment in non public listed companies, you'll immediately see in the text. That all they were thinking about was financial sophistication and risk taking capacity. There was no wealth test as a as a matter of fact, the wealth test that are in today's regulation didn't come into regulation until the 19 eighties. Oh, wow. They're relatively young. Yeah. Yeah. So we we think that the world is gonna go in the opposite direction eventually. And we'll allow more people to participate in this asset class. So long as they have a certain level of financial sophistication and the capacity to take on a certain level of grit. This. Right? I mean, it's... 1 thing to say, you know, look, if you've got... If your income is only in the heavy. Then you you can't invest more than 5 percent of your networking worth in this. I I would rather have that kind of a regulation that outright say, well, Sorry. You're not rich up. You just can't. And I say that I can go by. He can buy an unlimited number of lottery tickets at 07:11. Which have far worse odds of giving him a return. Right, than than investing in in on the Link platform more alternatively, go put, you know, his entire salary on black in Las Vegas. And no one's got. Prevent him from doing that. No 1. Yeah. And... I I I'm curious on the other. Right? It seems like there's... The Ip market has an exactly set the world on fire in the past say 6 quarters or so What's the sort of how do you see that taken in shape so that, you know, is... I I can... I'm happy to say that I make more than mh 90 a year. So I can probably, invest in in your platform from now. But, what's the benefit from me, Do do you see the Ip market, taken off you know, in in this year or or next year or sort of what's what's the upside? How how would you sell me as a customer on your platform on on all this stuff? Yeah. III don't think it's a matter. It's not 1 of these... It's not a binary decision. It's not either or 1 of the other. Rather, it's diversifying into an asset class that has proven over the last 20 years to be the best source of of of of returns. More so than the equity markets. Right? They're, you know, alternative investments in particularly Vc, have outperformed equities by a significant margin and in in in the last 20 years. That's just the fact. And it's the reason why the very largest institutional investors out there have increasingly allocated more of their portfolios towards the asset class. If you look at, the the most recent wealth surveys, they they show that the largest, and the most conservative investments you which are the pensions and union endowments. They're you know, now allocating at median about 30 percent portfolio to alternatives. Right? And the biggest portion of alternatives are real estate and private. The largest family offices around the world, the global family offices. They are less conservative more aggressive they are now investing 60 percent of portfolio in alternatives. So if you're if you're a regular guy like us on this call, We're not that we don't have to do 60 or 30 percent, but it's gotta be some number materially above 0. Otherwise, we're letting all the smart money run away with the returns. And back not participate participating. Yeah. And is that... Is is this the kind thing where where you see a company, like, linked to our other sort of really trying to d democrat access by doing things like fractional shares, lowering the barriers and sort of, yeah. How how do you see the the the evolution of of this space in the next 3 to 5 years or so? I I see that as a result of both increasing education, you know, understanding by regular folks and hopefully, a lot of that comes some educators like you guys. Right because less and less... Us especially the under generation is relying on their information from traditional media and and more on on people like themselves who combine, you know, the the media and sp native your communication with with with not hard knowledge, which you you guys like we have. Right? That's that's gonna be a big driver. And and and I wanna alongside that, we'll be just the the the the mere fact that more and more of the invest universe is gonna be in the present mark. I mean, the number of companies in the public markets has shrunk considerably. What used to be the the Russell 10000 now the Russell of 2000. Yeah. Right? So that's slow now. The the total number of companies in the public market today is about 30 percent of what it was 20 years. So, so many more companies are private in our remaining private and The implication of that is is this. Right? If you if you kind of visualize a company's value creation as a curve, that until it reaches maturity and decline is, you know, upward and to the right. Right? More and more of that curve is occurring during the private phase of a company. And therefore, if you're missing out on that stage of value creation and waiting for that company to become public, before you get exposure to it, you've missed out on the significant and perhaps potentially the most significant portion of it's a growth curve. I, you know, I I did wanna ask you about Fintech though. You you see a lot of private companies coming across your desk I'm sure? Any any fintech that you thought were especially interesting or... Well, the last fintech or the most recent fintech. Investment we made was in the company called strike. And, you know, we, we spent a long... Did you say strike? Yeah. Yeah. Oh, okay. I I think I've heard of them. Yeah. And, you know, not that they're an unknown quantity. Right? Because they... Even though they're a b to b, they are so embedded. In so much of the financial payment infrastructure today and increasingly so that, you know, even to people that don't know them at point of sale. They they may have heard of them or read about them. But what we we took a long time to get comfortable with that investment guys because valuation was at a nominal level really high. Yes. A lot of payments and companies have done very well. We we had to dig hard and finally get conviction that that evaluation was justified. And we we fundamentally, got comfortable with that and and and pull the trigger on it. We think not only is it gonna be the next Paypal, it will sup Paypal entirely and become the the the sort of name brand financial payments infrastructure in in for the rest of of of the Millennial. That that's the company that we're betting. Really? Yeah this do you guys end lives and so still a lot more growth to... I mean like you said there. Always pretty, pretty big in a lot of places. Yeah. But they still see a lot more. They're they're they're I there's a... I'm on... I'm registering on your platform now. I gotta get a piece of that. So we we we we we like that. You like that a lot. We we invested in know a bunch of Fintech and now in the public space. So So far was 1 of our investments. Mark ke was another 1 that we and our investment community invested in. So those are 2... And and then, Coinbase base, which is in the crypto space. Was 1 of our earliest investments. And, it, to date, when we look when we do our historical returns analysis that represented the best... The single best, returning the investment for our customers and us. So anything on your platform, you guys have have done a a review. It's not like there's anything on there that any dogs on there or anything that you you guys wouldn't have invested in yourself essentially. Well, because of our business model, by definition, everything on there was not just our our not just companies that we invested in ourselves. And have skin in the game on. There were companies we invested in before any 1 of our country investigating them Right? Because we we take the whole risk. If if I buy 5000000 bucks worth of stripe, that's all linked to exposure on Linked to balance sheet. And if not a single soul in the work world for whatever reason ends up liking stripe as investment. Then we're sitting on 5000000 dollars of strike risk or whatever the company, just because of the nature of the business model. Right? So III think, while that may give our shareholders partner, and we have to obviously make sure we've got... Really good risk management so that they're comfortable that we're managing those risk. What it should give our customers is comfort, comfort that I'm not just a broker. We're a principal who who's actually made the investment selection based on a certain level of conviction and the willingness to sit on the entirety of that risk if I for whatever reason decide I don't wanna. Well, I'll do what I normally do on on the podcast. I'll give you a magic wand, and you can change something. For the company, for the world, whatever that would help your company grow or some obstacle, what would you what would you wish for? They hope link to good to the next level. I would waive that wand over the Sec, and I would... Yeah. I can... I think a lot of people wanna wave 1. If they would, if they would have them change investor rules is something that is a lot more democratic. Okay and allows the participation of regular folks like us in an asset class that has driven returns for all the largest... That's what I do. Alright. And, you got the second best thing, you're on a on a fun and create podcast. Thank you prepare for the wave of a customers. I appreciate it. And I'm gonna I'm gonna hunt you guys down so we can go grab a drink or a bite together in city something. That sounds. We are in the same area. Yeah. Yeah. Well, yeah. Thanks so much for joining us on the podcast. And thanks for taking my side on the debate with... Steve there. Really do you appreciate that. Coverings in the middle, guys. I was in the middle. Yep. That's funny. Well, that's Joe Ent. So the Ceo of Link to. Please hit subscribe to keep up with the latest in fintech news. And thank you for listening.