I recently had the pleasure of interviewing Darren Marble, CEO of Issuance. Through his role as CEO of CrowdFundX , Darren has extensive experience marketing Reg A+ IPOs and Digital Security Offerings to institutional and retail investors. This experience perfectly aligns with Issuance (a platform that connects digital security issuers with investors) as Darren knows what investors are looking for, and what is needed for a successful and compliant offering. Check out the interview below to learn more about Issuance.
RS: Can you tell us a little bit about what Issuance does and the long-term vision?
DM: Issuance is developing a technology-enabled investment bank for digital securities issuers–a modern Goldman Sachs. Our vision is to be the leading investment bank for digital securities, which we believe is the next mega-trend in capital markets.
We believe in regulated markets, investor protection, and are confident that the U.S. will be the leading market globally for digital securities.
RS: Issuance recently announced the acquisition of CrowdFundX, how will this acquisition be integrated with Issuance?
DM: Issuance has executed a Letter of Intent (LOI) to acquire the assets of CrowdfundX (CfX), a FinTech marketing firm known for marketing some of the industry’s most notable digital securities offerings (DSOs) and Regulation (Reg) A+ IPOs. Some of CfX’s clients include Drake’s Virginia Black Whiskey, KODAKOne, and tZERO, among others.
The dominant investment banks of the future will effectively blend digital securities technology with traditional financial services. Issuance at its core is a technology company, while CfX is a services company with notable industry clients and established revenue streams. As such, CfX is a natural acquisition for Issuance.
The transaction, which is expected to close in February, 2019, will be subject to due diligence and definitive legal documents acceptable to all parties. Once completed, the CfX brand will be sunsetted, and Issuance will be the enduring brand.
RS: How is your platform different from similar issuance platforms like Securitize, for example?
DM: Issuance is in the business of deal marketing and capital raising, which is the biggest pain point in the market. We act as a bridge between tokenization platforms and secondary trading platforms, since neither of these players are true capital raisers.
In September, we announced a strategic partnership with Securitize to give their clients exposure to the right network of investors and increase their likelihood of funding. Conversely, Securitize offers a proven tokenization solution for our clients, who require a proven compliance solution for the trading of their digital securities.
RS: How does Issuance market to potential investors?
DM: Issuance is developing an app that will allow issuers to market their deals directly to authenticated, interested investors. Issuers will pay a fee to Issuance each time they send a message to an investor on our platform, with the fee varying based on the type of investor messaged. For instance, a message to an institutional investor will carry a higher fee than a message to an accredited investor.
Issuance is in the process of partnering with a broker-dealer, which will allow us to capture success fees when investors sourced through Issuance invest into a deal.
The Issuance app is expected to be available in mid 2019. In the interim, we are selling traditional advisory and marketing contracts where Issuance serves as an introducer between our issuer clients and our network of investors. We have trusted relationships with some of the most active digital asset investors around the world, and have successfully sourced capital through this model for multiple clients. Our advisory and marketing engagements are sold in a fee-for-service model where Issuance is paid a flat fee month-to-month.
RS: Your website notes that Issuance “provides unique incentives for investors”, can you tell us what incentives Issuance offers that sets it apart?
DM: Investors generally want access to the best deals in the highest discounted rounds. Issuance has access to some of the industry’s most proprietary, desirable deals, which is an incentive for investors–particularly institutional investors and digital asset funds–to work with us.
As an example, we just signed a NASDAQ-listed biotechnology company running what it believes to be a historic digital securities offering (DSO). The company has a $250 million market cap and has been publicly traded on NASDAQ for more than a decade. This is one of most unique DSOs in the industry, and Issuance has exclusive access to the deal. The initial reception from our investors has been incredibly positive, and will further credentialize Issuance as a firm with true proprietary deal flow.
RS: Issuance “allows investors to only receive certain deals”, can you tell us how this works and how it is beneficial to investors and issuers?
DM: The problem with current platforms is that they are issuer-focused, and they market every deal they take to every investor in their database. Moreover, the majority of investors on these platforms are self-directed retail investors. This approach has resulted in a lose-lose-lose scenario for issuers, investors, and platforms alike. It’s one of the big reasons no equity crowdfunding platforms have had any real success to date.
Our strategy to solve this problem is counterintuitive, yet simple: Issuance will solve for investors first. Our app will cater to investors–the most sought-after segment of the market–and ensure that we protect both their privacy, and, more importantly, their time.
The Issuance app will gather investor profile and deal preference information up front during the sign-up process, which can be completed through the app itself, or through our institutional sales reps who will input profile information on behalf of investors.
By gathering profile and preference information up front, Issuance knows what deals investors are interested in seeing, and what deals they have no interest in. When an issuer pays a fee to market their deal to an institutional investor, for instance, that deal will only be sent to an investor who has explicitly expressed interest in that type of deal.
Think of it as a matching technology. By better matching the right deals, to the right investors, at the right time, we increase conversion, and everyone wins.
RS: Can you tell us some more about the ranking system that exists within the platform?
DM: We are developing an algorithm that we can share more about when we launch.
RS: What is the most important criteria you can recommend to issuers to achieve a high ranking within the platform?
DM: Issuance is focused on working with established businesses and publicly traded companies. Ultimately, issuers whose deals are the most highly de-risked, and offer the most fair and compelling terms to investors, will have a higher ranking on our app.
RS: Issuance offers aftermarket services, can you tell us a bit about those services and the benefits?
DM: Issuance offers aftermarket support services for issuers who successfully raise capital and list their digital securities to a secondary trading platform. Raising capital is only half the battle: issuers must continue to aggressively market to investors post-raise in order to increase the visibility, liquidity, and market cap of their digital securities.
Aftermarket support is one of the most overlooked yet critical services that digital securities issuers will need to succeed long-term. Issuance currently offers aftermarket support contracts with 6-month or 12-month terms, with our 12-month terms offered at a slight monthly discount.
RS: Is there anything else you want to share about your project?
DM: Issuance is currently raising our own round of capital, and some of our current and committed investors include Alpha Omega Capital Partners, Slim Ventures, Proactive Capital, and Business Instincts Group, to name a few.