Next Coast VenturesDave Hendricks is the Founder and CEO of our portfolio company SeriesX, an Austin-based company that turns traditional assets into a security token for blockchain application. As part of our E2E: 20/20 series with our portfolio CEOs, we spoke to Dave about the hype around blockchain, its applications and their new blockchain-based platform, Vertalo.
‘Blockchain’ has become one of the hottest tech trends, did you set out to create a blockchain company?
I think a lot of the problems that you see in this new blockchain craze is that you’ve got people who come in and say: ‘Blockchain is really cool so now I’m going to find something to do with it.’ We didn’t do that – we backed into blockchain. I was rolling off of the last company I had co-founded and I was thinking about some of the problems that I saw in the years of building out a company. We started working out this one problem that started with this Series D funding round. These investors are about to sign a $25 million check and they ask for a list of everybody who had worked at the company and every document they had signed. I had cleared six diligences before this, but we almost blew up a round because we couldn’t tell a VC what documents our employees had signed. We had to repaper the entire company, it ended up costing us $1 million in dilution and it almost blew the round. So we got together and built a platform to create a ledger for companies and their associates to share and document all of this, that’s how we got to blockchain – we wanted ‘truth’ and decentralized ownership.
Dave Hendricks, Founder and CEO of SeriesX
Blockchain is pretty intricate, how complicated was it to get the business going?
In order to create a blockchain company you have to become an expert in securities law. It’s not as simple as saying: ‘Oh this is an amazing idea let’s do that on blockchain.’ Because as soon as you introduce the token, you immediately have to make considerations that you wouldn’t have to make if you were just starting a mobile-app company. The operating team required to issue a security token requires a completely different set of skills and you certainly can’t do it without a securities lawyer on staff. Luckily, one of my co-founders is a former SEC attorney and he worked with our lawyers, and one of our another advisers is an expert in patent and tax law. We spent the last six months figuring out a way for our users to actually use the product and be in compliance with securities law. So not only did we have to come up with an amazing idea for applying blockchain for normal people, we had to structure it a certain way so that users can actually use it. So we skinnied our platform down to what would work on the blockchain and ultimately created a network based on truth of work history and association.
Courtesy of SeriesX.com
Where are we in the lifespan of blockchain?
Some people think we are in 1993 in internet terms. I think we’re 2008 and Twitter or Facebook. I think that we’re not at the genesis, but we’re in the second inning. The only reason we’re not in the first inning is regulators know about this technology and took action. Your grandmother has heard of it so it’s got mainstream acceptance and awareness, with likely adoption over the next two years, but there’s still a lot of work to be done.
Your past headaches as an entrepreneur led you to your latest venture, what advice do you have for entrepreneurs given your experience?
I would say it’s never too early to think about due diligence – full stop. As a business leader, you are only as good as the people you work and associate with. If you don’t start early, you’re never going to catch up. You’re going to get so busy, especially if you’re successful, that if you don’t have your human-data hat on, whether it’s HR or investment, you’re not prepared for the luck of somebody saying they want to invest. You’re going to miss that opportunity. So it’s critically important for entrepreneurs to get their house in order, you have to have your documents straight. I think it’s also an excellent indicator when you accept $10 million bucks from somebody when you’ve shown them you know how to run a business, that’s the start of a great relationship.
Your company is focused on changing how people work, what does the future of work look like to you?
Well, our platform – called Vertalo – is allowing us to combine the qualities of a cap table with the features of a social network – it’s a certified investor relations network. Our platform uses two-sided attestation to certify the real-world work or education history of a startup or project team members so that investors, hiring managers and other parties can properly diligence the investment. It leverages the ‘trustless’ elements of the blockchain to help people work together and solve the problem of association – to help investors assess a team. It can not only prove that somebody worked for a company, but prove what the shared knowledge or shared expectation was in whatever role they had, whether it was as an advisor, investor, temp or full-time employee. As we move from the ICO era to the security token era, it will be critical to understand who is working and investing in a project. But it goes beyond that – as the world shrinks, and the concepts of the gig economy takes hold, payment and investment based on tokenization will also take hold. I think everybody in the tech investment community will be paying their associates partly in crypto by 2020. It won’t be weird, it will just be another thing that changes the way money changes hands, like Venmo.
“As a business leader, you are only as good as the people you work and associate with.”
About Dave
Dave Hendricks is a career entrepreneur and technologist at the intersection of identity and marketing. In 2016, SeriesX was founded to solve problems related to HR and Finance data. Named one of NY’s top technology innovators by Business Insider, Dave worked with his SeriesX/Vertalo cofounding partner William Baxter in 2000 at ExperianCheetahMail. Prior to founding SeriesX and Vertalo, Dave was the cofounding CFO/COO of LiveIntent, one of the top ad technology platforms in the world and the inventor of programmatic advertising in email.
Dave Hendricks
About Vertalo
Vertalo is the first networked platform that helps crypto investors, entrepreneurs and their associates to manage their ‘stakeholder communities.’ Based on an attestation framework, Vertalo helps people prove themselves by smart contracts that establish agreements related to time-bound accomplishments such as investor status, employment, investment and education history. Projects that use Vertalo can certify, communicate with, and distribute documents and tokens to community members.
