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FINTECH FRIDAY$ (EP.19-Nov 23): Future of Business Tokenization – How Blockchain Challenges Concept of Money with Alan Wunsche, Founder and CEO, Token Funder

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NCFA Canada | Nov 23, 2018

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Ep19-Nov 23:  Future of Business Tokenization - How Blockchain Challenges Concept of Money

About this episode:   On this episode, NCFA Fintech Friday's host Manseeb Khan sits down with Alan Wunsche the CEO of TokenFunder. They chat about ICO's funding startups, tokenization of businesses and buying real estate through tokens. Enjoy!

  • The future of business tokenization
  • How tokenization is going to disrupt real estate and auto industry
  • How blockchain challenges the concept of money

Host: Manseeb Khan, NCFA, Fintech Fridays show host

Guest:  ALAN WUNSCHE, Founder and CEO, TokenFunder (view Linkedin)

Bio:  Alan Wunsche is CEO & Chief Token Officer of TokenFunder, a regulatory-compliant blockchain venture funding platform with Ontario's first regulated Initial Token Offering. He is also Chair & Co-Founder of Blockchain Canada, a Canadian federal not-for-profit corporation with a mission to connect Canadian Blockchain Innovators and to help Canada be a leader in blockchain technology. Alan is a finance technologist focused on new blockchain business models and the disruptive impacts of blockchain on global wealth distribution. He brings hands-on technology experience as a finance and risk transformation executive at a global bank (Scotiabank), management consulting (Deloitte, PwC), and startups.

Alan is a leading blockchain / fintech expert. Alan has hands-on finance and technology executive with deep governance, strategic planning, process reengineering, big data analytics, risk management and information management transformation consulting experience. Alan is elected Canadian Chair of Canada’s ISO/TC307 Blockchain Standards Committee. Alan is a blockchain startup CEO, conference speaker, blockchain community organizer. Throughout his 25 year career, Alan has been a trusted business partner to CIO’s, CFO’s CRO’s, CMO’s and CHRO’s, leading business performance improvement programs by transforming finance, customer and risk IT systems, processes, and organizational structures.

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Transcription of Interview

Intro: Welcome fintech Friday's a weekly podcast brought to you by the National Crowdfunding and Fintech Association of Canada and partners.Covering all things fintech block chain be AI and alternative finance.

Manseeb Khan: Hey Everybody. Hopefully you're having a fantastic day. Manseeb Khan and you were tuning into Fintech Fridays is brought to you by the National Fintech and Crowdfunding Association also known as the NCFA.  Today I have the absolute pleasure of having Alan Wunsche the CEO of Token Funder. Alan thank you so much for sitting down.

Alan Wunsche: It's a pleasure to be here. Thank you.

Manseeb Khan: No absolutely. I'd love to. Just for a second ,for I guess some of the audience members that may not know who you are and what your company is. Could you just for a minute tell us who you are and what Token Funder is?

Alan Wunsche: Sure thing. So, my name is Alan Wunsche and I am the CEO of Token Funder. Who I am. So, I started in blockchain four years ago having left the traditional banking space. So, I worked at it as an executive in a fairly large bank. But I left and who I am really is a leader of a company that is on the leading edge of a lot of this new era of funding and alternatives to what is currently our financial infrastructure and banking system. So Token Funder and we can talk about anything you want to in terms of your questions. So, I'm sure you'll have lots of them, but I'll just say Token Funder as a company. We started on this journey of two years ago. To build a platform for companies to use in a legal regulatory compliant way such that they could use the latest in blockchain technology and bring their company to the market and use it as a funding vehicle so that these companies that would go under the platform can raise funds and do that in a way that helps really drive a democratization of ownership. So, what drove Token Funder is not that we could just do something that was happening already, and you know crowdfunding existed for sure but that was a real eye opener that we could also do crowdfunding. But in really interesting ways on through blockchain. So, we took the approach that we were going to take a company keep it in Canada, build it in Canada use it initially as a service for Canadian companies and then go global. So, in a nutshell Token Funder is  building really an alternative funding mechanism and some additional services that now make us look like a funding and growth company for startup companies and scale ups. So, we're getting interest from not just your super early startups but also companies that are in market as well.

Manseeb Khan: That's very exciting. I can't wait to, I don't know if you can talk about that but maybe next time when you come on the show would love to dive a little bit deeper on like the growth stuff that you guys are interested in.

Alan Wunsche: Sure, we can talk, or we could talk a little bit about that today.

Manseeb Khan: Ok. Also, you mentioned you guys are actually going to help companies when it came to regulation. Could you talk a little bit more about that because when you think of raising tokens and raising Regulations definitely have been something that people have been concerned of. If not, there's been a lot of ambiguity when it came to regulations. When you talk about regulations what does that mean to you. And what is that coming from your end?

Alan Wunsche: Sure, we do have a fairly well-established securities regulations in Canada, the US, UK, Australia, and other places right. So, these regulations that we're referring to include securities regulations that also includes anti-money laundering regulations that the government is obviously concerned about. So, when you think about looking at the kind of journey we had. So when I talk about the regulatory route that we had, we started working with the Ontario Securities Commission launch pad when they first came out and we looked and said okay we looked around and there were some early indications that that at least one company essentially had to leave or decided to leave didn't have to but decided to leave and incorporate in another jurisdiction. And it could have been you know Barbados or Switzerland or one of these others. And the reason for that being that the regulators didn't have as much certainty for them or that very likely their particular business was going to result in the securities offering. So, these companies said to themselves well will establish ourselves in another authority. So that essentially, we don't have to worry about the regulatory concerns or restrictions that may be placed on the company here in Canada. And that actually worked really well in 2017 and into the mid part of 2018. So, they raised a lot of cash. Now where the story is important for your audience if you're going to go down this road. So those companies that raised on cash outside did not include a process that's referred to as KYC. And sometimes some little misunderstood. But I'm sure you've talked about that with the previous podcasts. I'll just repeat it. KYC meaning know your customer or your client and in the given the traditional kind of initial coin offering process that you could have undertaken outside of Canada, Us and as I said Australia or the UK you could go out and you can anonymously raise funds from pretty much anyone in the world because blockchain allows for that to happen fairly anonymously. So not purely anonymously but we will get into the technology around that. So, company could go to Switzerland, Barbados or the Caymans and these other jurisdictions say OK set up shop we've got a new business and you can invest in us quote unquote right. But we're not going to worry about who you are, we're not going to really worry about those things. Well if you're going to do that in Canada if you're going to do that as a Canadian company in Canada there's very clear guidance and regulations that you really have to understand who that person is that's investing. And the reason for that is because you have to also understand their risk profile. So, know your customer just doesn't mean you actually know what they're you know what their name is and where they live. But for the sake of investor protection and this is throughout Canada throughout the U.S. for the sake of investor protection you really have to understand the risk profile of the investor and whether your particular investment is a good suitable investment for your business or for them into your business. I should say so. So, I'm just and drawing some contrasts for you and any audience at this point because you know what's happened is that we've gone through kind of a two-year process here working with the regulators and we added KYC. So, I'll talk about maybe our token offering we added KYC is a process in terms of our Canadian offering. And that's in contrast to a company that didn't do that well. Now the OSC and the S.E.C. are coming back around to these do these coin offerings that happen over 2017 and 18 and saying well you were actually selling an unregistered security. And if you've not protected yourself and it was impossible to do so you've allowed Canadian residents to invest in your business.  Then we have a problem with that. So, when we did our token offering this the process we went through last year. So, we started last over the winter into the early part of 2018 and through the whole hype cycle of all these ICOs and here we are in Canada doing a token offering that has KYC understands the risk suitability of these potential investors. And we turned a lot of people away that we're interested in investing because we determined that it wasn't just suitable investment for some of them. So, it's essentially an online process that we installed, and  we know who the investor is, we white list them in a smart contract and then we also token it. We also issued a token which would probably end up being our token and that token also had some rights. So, we're going to continue a little bit more along the contrasting because many of those new projects that went out in 2017 and 2018 outside of our jurisdiction would have terms essentially that that included something like you're contributing to this particular project but frankly you have no rights whatsoever. And just hope and pray that our new protocol token will be appreciating in value and oh by the way you can go and trade it and pump and dump it on one of these new digital exchanges. Well that's what our regulators here refer to as the Wild West. We contrasted that with OK. So if you're going to invest to get a Canadian startup such as ours you're going to have to have some patient money and we won't issue our token on a digital exchange that you can go pump and dump in because if we just don't believe it's appropriate next to other regulators by the way in the Canadian context and as long as you have some patient capital and you're willing to consider at risk capital and then we think it's appropriate for a part of your portfolio. So just like any other kind of proper investment process we implemented  that kind of steps and we had an offering memorandum and we had an annual report attached to the offering memorandum I should say and audited financial report. And that's the kind of disclosure that investors expect. Now I'll just stop there because I'm sure you've heard of the whole speculation craze that happened with initial coin offerings and now it's kind of fallen apart and for good reason now that they are in  the broad world.

Manseeb Khan: You did mention a really good point of talking about how KYC it goes a little bit further than just other than the baseline surface level like first name, last name and where you're really from. I'm glad that you guys actually took a little bit more of initiative of understanding. Not only is it important to understand who you are but would this be a good enough investment for you. Right. Not even like oh hey yeah this is  money we're taking it. Its you guys have a more of a screening process, more a vetting process which hopefully more companies like yourself in the space to start to adopt and actually have these like set requirements that people have to kind of meet to either throw their money in like you mentioned patient money. People  don't think of patient money when you talk about blockchain or crypto because they think again, they think pump and dump  which makes sense because a lot of the news and a lot of the media out there is very much of oh look at this coin. It went from zero to 100 million and then the founders just disappeared, or they just shut everything down right.

Alan Wunsche: Yeah. I mean this is really important, and I hate the term pump and dump  but unfortunately, it's out there.

Manseeb Khan: Yeah, I'm not a fan of either.

Alan Wunsche: You know And I'll also. We didn't invent this. These are best practices that are already baked into our securities legislation. Not everyone appreciates this. So, when we started working with the launch pad you know it was it was a learning experience on both sides. So, we shared everything we knew about blockchain we came in and said this is how it all works. We're going to tokenize these businesses. Oh well what does that mean. And we can talk a little bit about that subsequently but ok sounds interesting sounds like something really novel. Now we'll also make sure that you're aware of how we expect companies to behave like good corporate citizens in the Canadian space. And you know it is very clear if you choose to look for it that it says when you accept investment into your business you need to understand a person's risk profile. In fact, that's what goes on in the online trading world today. And you know there are existing rules that say essentially, you're supposed to look at them every time anyone makes a trade and that it's a risk suitable trade for them. And there's other kinds of you know online verification that people have to do. So very similar. Just because we are in a new space doesn't mean that we have to create everything from scratch. And I want to make that point because we took the time to really understand what the big boys and let's call it, we're doing and then apply it to our particular case. So, you know we scaled it down to make it appropriate for us and we got some particular exemptions for our token offering such as being able to raise funds from our own platform which is something that traditionally you're not allowed to do. So, there were certain things that we essentially were allowed to experiment with. And this is part of trying to frankly do the right thing work with it, work with our regulators and use the latest innovative technology. Now for your benefit and others let's be clear that's a long process. So, it would have been and trust me in terms of temptation it would have been a one-month process for us to go to Barbados or Caymans or Switzerland or another place like that raised 20 million dollars. We ended up doing about a nine-month process. So not for the faint of heart to just stay here. There's a lot of regulatory discussions that ended up happening just to be super clear about that. But you know what. At the end of the day I think we're proving out that doing it for the right reasons and doing the right thing. Actually, let you sleep at night and hopefully let your kind of do right by everyone in the space. And I mean you know I've been in this space now for four years. When Ethereum  kind of hit the world. I saw it launch with a small group of folks here in Toronto and I was disappointed Ethereum had to leave the country for Switzerland. I understood how it was kind of regulatory uncertainty and other reasons that that drove that decision. But you know still you want to. You want to do it. You want to build a business for the right reasons and act accordingly. My background I didn't mention this as a CA now we're part of the new CPA organization. And you know there's ethics and guidelines and all of that good stuff that frankly went out the window in the ICO craze and it was disappointing to see all those ICOs that kind of tarnish the image of the blockchain industry. So yeah. Yes. So, I mean moving forward we're living in an environment now. I'll just add that you know while we're using the blockchain technology we're also that kind of company although we're called Token Funder, we're not saying to people you know we're somehow blockchain or bitcoin evangelists or ether evangelists if it makes sense for your business. We're going to we're going to help you out.

Manseeb Khan: Yeah like you've mentioned a couple of things. There's always going to be bad actors that make sense and I guess any new emerging industry just do again like you've said. Doing the right thing is always the right thing and helps to sleep at night right. It would have been a lot easier for. You're seeing a lot of these crypto companies going to the Cayman Islands or going to Switzerland or what have you and not really knowing that like okay cool like this. Okay. Awesome. The Cayman Islands is very right now. They're very willing to work with crypto companies and everything but this goes back down to KYC of knowing your customer and knowing. Okay cool. But What about everybody else. What about people in the rest of the world. What about Canada in the US and all the other markets that are very apprehensive when it comes to this new market. You can't really tackle them, and you can't really maximize or just sorry. If not anything you can capitalize on because they're restricted to the rules and regulations just because you're not. It's not as an even playing field as you might really think it's a temporary fix if anything.

Manseeb Khan: Yeah, it's really complex because as I said the temptation was there and the temptation was strong enough for a lot of companies to go and do it frankly. And you know just say well we're going to do this in another jurisdiction and will eventually come home and try to. Well let's just park that because there's tax reasons also that people make tax, or you know businesses tax decisions to go to these kind of tax havens and we get all that. Now ultimately, you're going to have to come back here. Ultimately if you're businesses here and you're interested in living and working in this great country then you have to come back around to our environment. Now so all of that going to make it clear that it's a process that I believe in and yet we're trying to make change within the regulatory regime. There are outdated regulations there and there's no question about it. There are regulations today that benefit the big players and the incumbents. So, you know a startup getting into this space for alternative funding and a startup like ours that is looking to do have a marketplace for these future tokens. That's great. Trust me that kind of system that's in place today makes it difficult. So, we're trying our level best to  get change and to get exemptions to make some of these existing regulations work for startups that want to innovate in the space.

Manseeb Khan: Which I mean it makes sense because like we talked in the past I mean if anything last episode we talked about how we had Charlene from Coinsquare. I like Charlene, she’s great. She is really! she mentioned she's like hey look people have to understand that the banks had 20 years at this and they're still I mean to this day they're still trying to figure out regulations and everything. So, it’s kind of make sense that especially in the startup community in Canada it's been very new, it's very new around the world. Entrepreneurship is finally getting the warm embrace that it's longing  for so many years now. And it makes sense that I guess for the time being that it is an uphill battle and hopefully within due time with  amazing players like you want amazing players like Her the regulators be the government or be it any other bodies understand where you guys are kind of coming from an understand that hey like having regulations that are not as rigid, a little bit more fluid it only benefits everybody in the long run.

Alan Wunsche: Yeah. I just add also to this point there are a lot of restrictions about  what investors can do. And you know there's a lot of good reasons historically for that. Now we're moving into a world where the millennial generation wants to manage their own portfolios. They want the kind of freedom that a decentralized place can offer them. They look around and you know we talk to many that you know they're in their 20s 30s and you know they're saying why. Why are these startups and innovative companies’ kind of limited to the accredited investors that are the really wealthy ones? So why did the really wealthy people get to continue to get first dibs if you will  on the really great next investment. And  that was really one of those kind of if you will big why's or big reasons for us pushing for the democratization we're where we said we could have easily have cut short our timeline for  our own token timeline and said yes are legal and others said this is easy just let accredited investors in and shut out all the retail investors and we said no we really believe deeply that this is a space now that let's say a startup is getting some traction it can go to the marketplace and wants to have you know a broad ownership pool of up its platform let's say. Like let's just say there's you know that the future Airbnb and wants a broad level of ownership through this new mechanism well you know is it limited to just accredited investors. We don't believe it necessarily needs to be. As long as again the retail investors aren't spending you know investing everything they know into a super high risk or everything they have into a super high-risk investment that kind of throws caution to the wind. But it's I want to get the point across here that we have the ability to make it easy for someone to go directly to a company and invest almost directly without traditional kind of financial intermediaries that that are the big names that you might see today and you won't describe them but  you can apply new technology in a way that that really reduces the friction between the investor and the company and want to open that up to the retail investor. And if you think it's like crowdfunding Well it's like crowdfunding on a new level. Yes, it's Yeah. Oh, for sure. And then and then we're looking at you know traditionally when you invest in a private company there are pretty strict rules for traditional reasons that are that are still good reasons about the liquidity and you know they were there so many of these ICOs that said you would get immediate liquidity and  then you can go. You know you don't have to believe in the company you can go get an immediate liquidity on you know X,Y or Z digital exchange. And that's great. Do whatever you want on the other end of the spectrum. We've traditionally been very restrictive about or quite restrictive about what the retail liquidity to look like in a private company and we believe that there's no changes that should happen. So, it's a bridge, right? We in effect to we as a company here are looking to  and have been you know I describe ourselves as kind of a bridge between the traditional way things for working and in the existing regulatory environment. But I mean we've got very clear regulations Yeah. we can change them.

Manseeb Khan: It is very important to again have companies like you, have amazing people like you in the space to make not only I guess the old traditional world but also the new world understand like millennials like me. I'm like Yeah. No why can't I invest in the next and Airbnb and become an accredited investor. But I'd love to. I'll be amazing.

Alan Wunsche: Today you wouldn't be able to.

Manseeb Khan: Exactly because there's so many rights now to become accredited investor. There’re so much more criteria you have to meet. And like you said for private companies it's even more so. Right there there's even more rules and even more red tape for just a 23-year-old college student like me to like to invest in next Airbnb like we're not there yet. But it's very exciting that it could be on track and that there is stuff put in place to make sure that one day everybody can potentially invest in the next Airbnb.

Alan Wunsche: That's the exciting part about this. And you know I talked to so many people. You know I  still feel young but I'm not as young as you are. No. You see you know 20 20 and 30-year old. I mean in terms of age but in terms of you know that the mindset is why can't we do this mindset right. Let me just be clear. There are very good reasons  why there's certain regulations in place essentially to prevent the scamming that happened all around the world in the ICO craze. OK. So, putting that aside if we can do this very in a safe manner it still looks after the investor protections then why can't a retail investor get in on the next really cool startup. Why does it have to be kind of limited or why should a retail investor be limited to you know twenty-five hundred dollars or something like that. You know when an accredited investor by the way who is typically very wealthy you know they have much higher limits but they're not always frankly more intelligent or aware of what this new technology is. So, we get a lot of people saying well I really understand this technology why I am limited. You know a small tiny little investment. What's the art of the possible and how can we get it. How can we get a safe environment? And it's not in or position and opened the door to a broad kind of democratization of investing opportunities.

Manseeb Khan: This bridge is very much it can be built like again all regulations are not there to like they're not out to get us right. Like the man isn't like putting us down or anything. Like you mentioned what we've pretty much started the show off with like Hey these rules and regulations are put in place so that we don't get any more scam. There's no pump and dumps and this whole potential market gets kind of blown to bits because there's no rules in place as the Wild, Wild West and everyone kind of gets screwed over which is terrible. Since you are working with startups and I'm myself in the startup world do you see ICOs taking over IPO's  in the future and I guess what the future of ICOs is look like to you given that your opinion is a little bit biased but still.

Alan Wunsche: Yeah, I mean for sure I'm biased in looking at what the art of the possible is. So, what is possible, and I don't  you know for the last couple of years since we started Token Funder,  I didn't use the word ICO whenever I talk to anyone in this space. I mean of course the ICO term was taken off, but I more can keep them in this initial token offerings and the token being the more generic form because not everything you put out there is a coin or a crypto currency. So that's kind of like where do you see the future right. I do think that token offerings and this democratization of investing opportunities  into innovation puts us into innovative startups will be very real and it's a very real outside alternative funding mechanism for companies. Now what that means is that. There's that there's going to be a transition period. So, it's yeah. Let's say and we all know what's going on with the broader crypto currency in quotes. Marketplace today. Right. So, the value of its down and it would seem that even know  some people that have lost some amount of value added and all that. But let's just in one sense if we put that aside it's quite efficient to move anything of value whether it be a share in a company or you can say I'll take this business and I'll put 10 percent of this business on to go into a token that people could buy into. And then there's a marketplace for it. It's very efficient and you don't need a large infrastructure when you already have a public blockchain. You don't need to use a traditional funding vehicle. So, people have also asked me if I could address this in other in other conference panels and whatnot. Whether this is the venture capital and ultimately the answer is not necessarily because some companies may want just one or two people investing in them and some companies might want thousands of people investing in for different reasons for different business reasons. So they'll be a hybrid but there's no question that the token offering model is a very efficient one and you can just imagine you know in the future you're going to have your wallet there and you're going to have a wallet that shows some Canadian cash or some other kind of currencies and then you'll have you know a share of. So, what your startup called? It's called Curexe. Ok. So Curexe. So, I'll have a share of Curexe alongside a share of Apple alongside you know some crypto in a wallet. And  if I want to sell that share of Curexe. So, you know I'll be able to do so with whatever is appropriate you can be in the marketplace. And this will be the new way of our next generation of investing. And it's going to be powered by public blockchains I believe.

Manseeb Khan: I'm very excited for it to be one of those many thousands of investors if anything this is just another leg that's going to be attached to the  be it VC's, be it any other investment funds out there right. Because it's just in a sense they're just diversifying. And if anything, it just can be a supplement. Right. Like it is an alternative way of funding. It's going to be a shift. Your absolutely right.

Alan Wunsche: So yeah. Where did and where do you want to take the conversation.

Manseeb Khan: Yeah. So, you did mention a little bit more of tokenization of businesses. Could you talk a little bit more of that? What is a tokenized  business? What does it mean? How do I get my start up to become a tokenized business?

Alan Wunsche: I won't give you the  fully comprehensive answer to it but just think about think about some example’s tokenization is this mechanism of enabling fractional ownership and then the fairly easy transferability of that fractional ownership. That's from person to person in a blockchain right through the blockchain. There's very recently an example where a company tokenized in an entire building. So, imagine an entire building. Thought of as you know a particular token. And then imagine being you know on one side of the country and you just want to invest in a you know in a fraction of a building that happens to be on the other side of the country. No problem. And then you know your circumstances change and you'd like to liquidate that and or the value of that building goes up. You can. You can basically sell your interests. This this is technically so easy to do on the blockchain now. Now we've just got to kind of connect with the real world. And the real-world documentation that says by the way this building is represented on a blockchain officially at this location. And now go now it's available for people to buy into and transfer. That's  really interesting. So, I took great interest in that. There’re other examples of. There's an example that I think is  intriguing and I'd be interested in your take on this. There's this company called rally road. So, they've now said we'll go out and on behalf of people will go out and buy this this antique car and this antique car is X and it's a named vehicle it's a real vehicle. Happens to have no value X today and we believe that if we hold onto it it'll have value Y tomorrow. So, we convert that into a token and allow for fractional ownership of that particular antique car. And it's called rally road. So, they're embarking on a tokenizing that kind of asset. And then at some point you know on a fairly regular basis the company will presumably say OK, so this asset is now worth X, worth Y and if you've got enough appreciation out of it you can now sell your interest.

Manseeb Khan: That sounds amazing. I'd love to own a piece of it like a 1969 Mustang or something like. that Ford Mustang would be. It would be exactly the kind of example that that I heard talked about it so. Oh wow.  All kinds of really interesting cars that they happen to be focused on so that's just that's just one model. So now cars, real estate, business, business shares you name it any essentially any assets. Just kind of marry up to the legality of it  and people are considering you know that the home or the condo that you own. You know if you want some help in owning that you have that house or condo down the road. I'm sure it will be quite possible that you'll say great I've got this this residence that is known in the world in you know as registered by the government and under this lot. And you know identity and oh by the way I'm willing to legally sell a fraction of it. Which is going to be pretty easy for you for that residence to be the tokenized.

Manseeb Khan: Yeah. No, I love it. I'm waiting for the day for a company to say like hey you want it we tokenize it.

Alan Wunsche: So, this is it so Token Funders vision here is to start with companies and you know doing it in a manner that allows them just to say let's call it equity, let's call it debt let's call it something like that and we'll do that right. But we have got a lot of other interesting thoughts around how we can take the token model and not just be about capital raise. Yeah. And so, some of those ideas I've just kind of touched on here. So you have the hope that these  other spaces certainly interest me  and then we become  so the other thing I mentioned at the top of this chat with you is we've said that and we're going to also build a network around these companies that we're currently helping and that's what I call this not just funding but actually involved in the growth of the company so identifying advisors and resources from wherever they might be and providing them with an incentive of a token. say to help that particular startup. So that you're not just then a startup that's only getting you know help and  guidance from those immediately around you but that that can come from anywhere in the world if you incentivize it through a token structure.

Manseeb Khan: Yeah. No that's wow I can't wait for that.  Yeah. No, I'm working on it. No that's wow. No that's  incredible. I can't wait for that. So, like I'd like a nice network or even. You can probably call a community of just advisors and just people like be it from actual customers that are willing to use it or be from actual like V.C.s that are willing to like oh yeah no I can totally see that like the actual implementation of this XYZ  product or service like you might have right.

Alan Wunsche: I'm just going to I'm just going to add a little reality to this right now. So, I just recently came from the global Ethereum developers conference called Dev Con in Europe it was  in Prague and there were thousands of developers and continue to work on the next big thing. And also, creative people. So, the UX is really important. The important thing that folks listening to this will probably want to understand this is that we're not quite there in this new infrastructure called you know in this case the Ethereum that it's scalable worldwide as we might want it to be. So, we expected that there was there was going to be some changes this year. And so there was a lot of kind of pent up hope and all the anticipation for upgrades to the public blockchain for scalability. And now it's being pushed into 2019 but it's not that far off. So while it's not a platform that's fully scalable such that you know you can put every single asset in the entire world on a public blockchain and know we can run a piece of network on the public blockchain those are still very visionary but 2019 is now the year that we can anticipate some upgrades to scalability and speed throughput on these blockchains. So that's kind of a dose of reality.

Manseeb Khan: I love it. I can't wait, so yeah everybody you heard it here first. Make sure 2019 you guys start earmarking for getting a piece of that Ford Mustang that I so badly want. There you go. I can't wait. I can't wait. So, can anything else that really excites you that's going on in the space other than owning a piece of a building and owning a piece of my dream car.

Alan Wunsche: I think it's generally really exciting that this is going to be a technology that will bring and has really kind of awakened. I'd say a vast number of people in the population around asking real big questions around Where's the power in today's society? Who's running our big financial systems? Are they running it the right way? Should we be decentralizing some of this power? I mean these are really big questions. I don't have all the answers to them, but I think it's been real. The technology itself has been a really good catalyst to asking these questions and to ask questions of governments that they currently manage are central banks and central currencies. When and if let's say in the coming years they'll start to suggest that we're going to have central bank digital currencies as they are looking at today. It will be really interesting and it's exciting to think about these things, but it also be interesting to think and important for people to think about you know Are they getting the privacy they need going forward? Are they getting investment opportunities? Is this technology decentralizing our power structures? What will happen if we have no central bank digital currency? I think it's actually opening up exciting conversations for  a lot more people to understand how money moves. Who manages. Are our societies. Who governs our societies and how money flows and those are so those are some really big socio-economic questions in in the context of you know things to think about. This is not just a blockchain, but this is a technological shift that we're going through with the impact on a lot of jobs too. Oh absolutely. So, what do I think. I think that you know opening up this dialogue about what is money? Is Bitcoin money? Is ether money? Should it be, or should it be something else? This is an exciting time to be challenging the status quo and in doing it and always doing it for the right reasons right. Yeah absolutely. But for decades had infrastructure that's been very centralized. And now people have the opportunity to rethink some of that with decentralizing technology. Rethink the fact that you know one or two or three very large companies own our social identity if you allow them to do so and we may have you know the decentralized version of Facebook that gives you your identity back. That's exciting.

Manseeb Khan: It really is because it's this is the first-time in. I kind of want to say first time in a long time where power is really going back to the people and the people actually have the power to fight back. And every everybody's kind of looking at the current way the world works. How do how money flows. Who actually runs and operates the money. Who and why they get to operate the money everyone is kind of looking at it as more. they're looking at it more skeptically if anything right and their take their second guessing it. And there's  again the technology is emerging where maybe not only fight back but maybe create a world where it's a little bit more of an even playing field and where everybody and anybody can hopefully one day participate, own a building, buy my dream car. You know and take it from there.

Alan Wunsche: You said it even playing field and that's the whole discussion around decentralization and is there. What playing fields are we evening. I think it'll be a bigger wake up call. Should there be a nobody wants this frankly, but should there be another recession. Because you know in 2008, 2009  we all lived through it. We kind of woke up and realized hey call your financial infrastructures really entangled in you know something that happened and see in Greece or in Italy or in you know or in the U.S. or somewhere reek contagion on the broader world and you know we had a liquidity crisis. That got people concerned that they understood where and how our financial world was managed and so nobody wants it. But you know think about the fact that this is a disintermediating excuse me technology. It's potentially decentralizing existing power structures. It's a could level the playing field, it could bring new opportunities for people to decentralized large. I can call them kind of large centralized web properties that exist today. There's that there's a there's a book that's out you know after Google may or may not have the title exactly right. But you know it's a discussion. It's a  book about how the blockchain will in fact decentralize what Google looks like today. And this is a new time. I mean it opens up a lot of new questions and maybe I'll just leave it there because you know I don't have all the answers.

Manseeb Khan: No, I just think it's early but it's an exciting time. Yeah. No, I think it's a great way to really end it like this is. I'm excited. I mean I get own my dream car a lot faster than I thought I could. Oh, I got to get to a real estate a lot faster. I'm very, I'm very fired.

Alan Wunsche: Maybe a thousandth of that dream car.

Manseeb Khan: I mean hey  I rather own a piece of it and none of it.

Alan Wunsche: Very good.

Manseeb Khan: All right. So, Alan thank you so much for again coming on the show. I can't wait to have you on again. And thanks for refiring the dream.

Alan Wunsche: I'm excited for you and it's a pleasure to be here with you today.

Manseeb Khan: Absolutely. All right Alan. So, thank you again. So, on behalf of the National Fintech and crowdfunding association I wish you an amazing Fintech Friday and weekend.

Outro : you've been listening to fintech Fridays brought to you by NCFA and partners. Tune in weekly for the latest fintech Friday podcast by subscribing to this channel. The National crowdfunding and FinTech Association of Canada is a non-profit actively engaged with social and investment fintech sectors around the globe and provide education research industry stewardship services and networking opportunities to thousands of members and subscribers. For more information please visit and see if a Canada dot org. Oh yea.

 

End of Podcast

 

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THANKS FOR #VF2018 VANCOUVER!
CHECK OUT THE PICS and SIZZLE REEL!


Day 1 Photos: Leadership & Meeting Exchange
Day 2 Photos: VanFUNDING 2018 Converge conference


Globe and Mail | Sean Silcoff | Dec 18, 2018 Dragons' Den star Michele Romanow and her partner Andrew D’Souza have secured another US$50-million to grow their latest startup, Clearbanc, just weeks after announcing they had raised US$70-million to bankroll the financing provider for e-commerce firms. Now, they are looking to secure hundreds of millions of dollars more to meet a surge in demand from online sellers looking for cheap alternatives to finance their growth. “We see this as a pretty exciting next step,” said Ms. Romanow, president and co-founder of Clear Finance Technology Corp., which operates as Clearbanc. “I don’t think we expected this to come this quickly.” Clearbanc fronts e-commerce entrepreneurs with money to pay for their online advertising in exchange for a small percentage of revenues that spending generates, until they repay the amount in full, plus a 6-per-cent premium. Customers do not have to provide personal guarantees, give up equity or submit to credit checks. Instead, they provide Clearbanc with access to business data from their online payment processors, their online advertising accounts and bank accounts. Clearbanc’s software then crunches the data and assesses their unit economics in minutes, spitting out an automated financing offer based ...
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Not yet a done deal

 

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FINTECH FRIDAY$ (EP.18-Nov 16): Bridging the AML/ATF Gap with Financial Institutions and the New Economy with Charlene Cieslik, Chief AML Officer, Coinsquare

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NCFA Canada | Nov 16, 2018

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Ep18-Nov 16:  Bridging the AML/ATF Gap with Financial Institutions and the New Economy

About this episode:   On this episode, NCFA Fintech Fridays host Manseeb Khan sits down with Charlene Cieslik the Chief Anti-Money Laundering Officer at Coinsquare. They talk about not everyone using crypto is a terrorist, regulatory uncertainty, cape shopping and guidance in the crypto space. Enjoy!

Host: Manseeb Khan, NCFA, Fintech Fridays show host

Guest:  CHARLENE CIESLIK, Chief AML Officer, Coinsquare (view Linkedin)

Bio:  Charlene Cieslik is the Chief Anti Money Laundering Officer of Coinsquare, Canada's most secure digital asset exchange for buying bitcoin, ethereum, and other digital currencies.  During her 20-year career, Charlene has held roles as the Chief Compliance Officer, Chief Anti-Money Laundering Officer, Chief Anti-Bribery Officer, and Chief Privacy Officer at several Canadian and Foreign scheduled banks, where she was responsible for the development, remediation, and execution of AML/ATF, anti-bribery, regulatory, and privacy programs.  Charlene has worked with several “Big 4” accounting firms and a Canadian fintech company, where she has assisted global financial institutions with AML/ATF program development, particularly with post-regulatory exam remediation and AML/ATF investigations. Charlene holds a Master’s degree in Criminology from the University of Toronto, is a Certified Anti-Money Laundering Specialist, and was an original founder of the Toronto ACAMS Chapter.  She has lectured as a Professor at Seneca College and currently teaches in the Global Leadership Development Program at the University of Toronto on the subject of anti-money laundering and sanction compliance.

 

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Transcription of Interview

Intro: Welcome fintech Friday's a weekly podcast brought to you by the National Crowdfunding and Fintech Association of Canada and partners.Covering all things fintech block chain be AI and alternative finance.

Manseeb Khan : Hey everybody Manseeb Khan here and you are tuning into Fintech Friday's brought to you by the NCFA Canada's leading national fintech crowdfunding association. Today I have Charlene from Coinsquare. Charlene thank you so much for sitting down with me today.

Charlene Cieslik: Sure, no problem.

Manseeb Khan : So, I guess just for the audience were the five or six people may not know who you are or essentially what your company could just give us a little bit of a rundown.

Charlene Cieslik: Sure, we'd like to refer to coin square as Canada's leading crypto currency trading platform where we have an offering of about seven or eight coins, I believe it is now, we’re adding more every day. We like to also think that we're Canada's safest platform with access to Fiat on ramps and off ramps - and we haven't lost a coin yet from our platform.

Manseeb Khan : Since you are the chief anti money laundering officer and chief privacy officer, I'd just like to get a little bit more in the nitty gritty of just regulation right regulatory uncertainty. Could you talk a little bit more of the uncertainty that's currently going on and much why it is there and what can companies like you or be it the government or people like me do to help clean up the uncertainty and just help better define when it comes to regulation?

Charlene Cieslik: Sure, not a problem. I think it's a big task that’s for sure. I mean I come from a long background of working with banking and typical financial institution, anti-money laundering regulations. And I think even in those environments there was still quite a bit of uncertainty as we go through every iteration of the changes in law. And it took a lot of years for Canada to even get on board with anti-money laundering regulation. They just released the Proceeds of Crime Act approximately less than 20 years ago. Oh, I hate saying that because I worked with a regulator up about that time when the new laws came into effect. Quite a growth period for Canadian financial institutions to really get into being able to comply or even start to begin to try to comply with anti-money laundering requirements. And I would argue that there are still a lot of struggle going on in traditional fields. So, I think that's just exacerbated by the fact that that crypto currency is so new, and that the concepts and the methods in which traditional finance are offered to people are, I would say, a little bit historical, a little bit stuck in the past. The laws were written basically from a - you have a relationship with your banker and maybe you see his kids play baseball on Sunday and he knows who you are, and you go into a branch to execute your transactions and that sort of physical relationship, face to face relationship building. And it was only later on in the regulations for, again, for traditional entities that the idea that finance could take place in a known face to face environment was added to the law because it wasn't something that was contemplated early on by the by the ACT and the regulations. So, when you add into the mix something, like this, where it's a little bit threatening a little bit uncertain and has a little bit of a negative history. Growth, history and trajectory behind it and it makes a lot of people nervous and uncomfortable because maybe they can't understand it, or they don't want to understand it. And then you try to apply some traditional concepts to it in a way that again traditional companies struggle with applying still to this day. And then you try to put it into this. It is truly a square peg in a round hole. You know we've all been kind of waiting for a while now for some clarity. But I always warn people that don't expect too much clarity. It's not really the job of the law or regulations to be wholyprescriptive about what needs to be done. Now if we want to be clear about what the Proceeds of Crime Act in various anti money laundering laws are trying to do, I think it really boils down to about three things.

  1. Know who you're dealing with whether it's humans I call it people or businesses. Like prove that they actually exist and that they're doing what they say they're doing, and they are who they say they are.
  2. That you’re monitoring activities to do your part for me or trade, your financial institution, or whatever you are, safe from exploitive criminal actors.
  3. You keep certain records and periodically you have to report specific things to the government.

And again, I'll just say that it's a lot of work and a lot of effort. Some people make the joke that banks nowadays are compliance departments with banks attached to them. And we don't want that happening in the crypto space, but we've got to find the right balance that strikes between keeping customers safe, keeping their money safe, knowing who you're dealing with in a digital environment, in a global environment, and that hasn't really been tackled so well, I think again, in the traditional space.

Manseeb Khan : So, I guess it's just like, it really is knowing your customer. It's a very KYC driven.

Charlene Cieslik: It is. And I mean I struggled to think, “I'm not that old” and  I don't recall there was ever a time that you could just walk into a bank and not tell them anything about you and they would give you access to financial services. So, if crypto currencies, again, whether it's trading on a platform like Coinsquare, certain digital assets, or even if it's a token offering or a sale, an STO, that you would get into a financial relationship with someone without some basic safeguards in place. So, you know it's funny that if you talk, to older people, there was a time when a handshake and a hello was good enough to secure yourself a few thousand dollars’ worth of loans. But I think you know the world has certainly evolved since then. The risks have gotten greater, and the banks, in the bigger financial institutions, have seen some negative impacts of not doing some of these things properly. So, there was a lot of lessons learned in that environment about it which drove some of these decisions to try to put some safety and security in the financial world.

Manseeb Khan : That totally makes sense right being a just such a up and coming and emerging market. And now that it's so hot and hyper right now it makes sense that like having some kind of clarity just like protecting investors it makes sense that the banks will be a little bit more hesitant. People are being a little bit more hesitant. And like where  you've mentioned the past and you mentioned some of the past episodes. Education is very much the key right. Understanding what a cryptocurrency, how does blockchain work and how do all these things fundamentally work. And how can you be a part of it, how can you help it.

Charlene Cieslik: Yeah. I mean don't get me wrong I don't want toever be seen to be advocating that cryptocurrency should behave exactly like a traditional financial institution. I think part of the beauty of this space is that it is a greater risk-taking kind of space. But I think with risk comes reward and responsibility you know there is a history of crypto where people -  even our founders met in a coffee shop to trade digital currency.  - oming from a background I come from,t's a little bit shocking to me, but even for me it's been quite a good education working in a space like this the last eight or nine months and just seeing that there is an alternative. There are differences and there's room in the world for this alternative finance sector to really take off, but it can't be stifled by continually trying to “stuff a square peg into a round hole”. I think there's safety and security measures that can be put in place, some basic things that nobody should really be arguing with and then the rest of it falls into business decision making and where banks and financial institutions have different requirements, that cryptocurrency can take a few more risks, and that's up to them to make that decision.

Manseeb Khan : I guess it's a balance between regulation and innovation right like that beam it's very hard to teeter because it's like we don't want to overregulate. Right. Yeah exactly like I mean  You know better than anybody.

Charlene Cieslik: Oh, I do. I do. I wish I didn't somedays, you know and the whole thing is, Regulations are regional,nd finance is global, so that things do not mesh well together. I mean even in Canada we have all the provincial securities regulators separately, battling it out as to what to do about this. We do have a federal anti-money laundering regulator but money, and especially cryptocurrency moves quite freely across borders. Maybe not so free anymore with traditional finance and I think that's probably helped for some of the breeding ground, for something like cryptocurrency to pop up, is the speed and the efficiency in which money can move across borders. Not all of it is terrorist financing or money laundering and painted all with that brush under the guise of “we have to stop it, make it safer” because it's all being used for negative, I think is a terribly unfair assessment of the industry.

Manseeb Khan : No I absolutely agree with you but again it's players like you and like just amazing stuff that you guys were doing to kind of show that like hey again it's not everything that we do is not funding terrorist or just like anarchy like this is actually no like we're helping actually build businesses, build ecosystems that are put in place to make the world better.

Charlene Cieslik: Yeah, I mean I don't think anybody who deals in cryptocurrency really wants to be involved in this kind of thing. But I think unwittingly, just like financial institutions ar, you can be a victim of this and it's their willingness for anybody purposefully trying to attack platforms. Don't get me wrong, I'm sure there's some bad actors out there that are happy about it. But you know I think that's what one thing where Coinsquare tries to set itself apart, really, is to try to play by a set of rules that takes the better practices for insisting safety and security measures but works them in a way that allows for a risky business model to flourish.

Manseeb Khan : So, I guess could you talk a little bit more of the regulatory arbitrage then?

Charlene Cieslik: Well I think it's just it's just a matter of the fact that you know we hear a lot about places like Malta  as“crypto island”, and Zug Switzerland there and places that are embracing crypto and it's all it's really great to hear, like it's really everyone's really happy about it. In the crypto space and so Coinsquare e too. But it's just y, it doesn't mean that you go there and it's free of obligation or it's free of requirements. But what it does mean, is that some jurisdictions have taken it upon themselves to put signs that they’re “out for business” saying hey we're into this, we want to work with you and support you. And if you have another authority that saying  it’s not like this, we don't trust it, e're just going to put a ban on it, or we're not going to allow it to happen or make it really hard on you. People are going to want to get up and move to those jurisdictions that make themselves friendly but simply relocating a business address to a different authority doesn't mean that you're free of regulation because it's not only physically where you are located where your operations are. It's also based on where your customers are that you're serving. So even if you do set up in a place that's friendly to crypto, you've got to really think long and hard about where you're targeting customers and what Regulation, what legal obligations come along with the jurisdictions in which they live. And I do love to hear about places that are open to this, but I think people maybe sometimes mistake it for a Holy Grail or a promised land where it's all free and easy. And it's not because those places also still have concerns about things like safety and security. They also have concerns about things like bringing jobs and  bringing money into their economy. And they can't do that while putting themselves at risk to become a haven for money laundering and terrorism by doing no due diligence or requiring you know no rules be followed. So, I think it's just a little bit of a misnomer to say oh we're just going to go set up in Malta and that's going to alleviate you from any regulatory obligation. But what I do like is that it that the government is open to the discussion and the governmenthas reached out and told people like “hey we're new at this too and we're trying to figure out what works best for us” and there is a process and we're walking through it. We'll hold your hand. Not all jurisdictions are like that. So, it does end up being sort of an arbitrage of those who have an open environment are going to benefit. Sure, they're going to take on some of the risk but they're also going to reap the rewards and those that don't are going to be the ones that are left behind. And I think this kind of thing happens traditionally as well too. It's just now we're seeing it (in crypto). I think a little bit on speed almost in the crypto space (has forced it to happen sooner).

Manseeb Khan : Traditionally Canada's been very conservative, and they haven't been first movers in many aspects. So, it’s kind of makes sense why you are seeing a lot of these smaller crypto islands pop up we're not seeing. And you’re not seeing bigger countries actually fully adopt it yet.

Charlene Cieslik: Yeah. And I think that all sort of remains to be seen. I think what a lot of people forget too is just how new this is. Like even though there was a lot of early adopters before any of us, probably, particularity people in my position, historically that heard of Bitcoin there were people already operating with it, enjoying it. Like it was an underground sort of cool thing that “the man” wasn't involved in, and that to get that sort of wider adoption and to get that the all the use cases that sounds so promising and into reality and into practice. You know that does come with some tradeoffs with that and some risks, right? So yeah, I think we got to remember that it's still in its infancy for that, and there's growing pains along the way and believe me - this  means some growing pains when it comes to this kind of thing. Yes. It's hard to identify someone they don't know and face to face environment in a regular bank let alone in a crypto trading company right.

Manseeb Khan : Yeah no absolutely. Because it's like it's tens of thousands of interactions within seconds. So, it's kind of hard. It's a lot harder to like shake everybody's hand and meet them and make sure your kid plays baseball together.

Charlene Cieslik: Exactly. And I think the good news of that is that also the traditional markets are having to play catch up with this digital world in a way that they didn't previously. And when you look at the surveys and things that come out of governments, we'll use millennials. Millennials and those after millennials. Nobody wants to go into a bank, and nobody even wants to answer a phone call anymore, let alone go into a bank and make an appointment to do something. The world is like this, and the slow will be left behind. And then you'll be like my mother when she got her first bank card and like needed to be walked to the machine, like, “what does it do and how does this work.” There's a little bit of an accelerated speed to technology, and involvement with technology, that wasn’t seen in the previous 20 years. So, laws have never been able to keep up. I don't expect them to start suddenly now keeping pace with the change of technology when it is moving so fast.

Manseeb Khan : Yeah no I absolutely agree with you. I mean the whole physically walking into a bank  that you said and then I got a little bit of anxiety over it.

Charlene Cieslik: I've got to renew my mortgage this month and I'm like - “you call me and have all the paperwork emailed over.” There there's no need for me to book an afternoon off work to go talk to someone, who is going to try to upset me on a million other products that I don't need. Just, like, redo what I already had down. Sadly, the higher rate it's coming, but I think it's a little bit of a struggle for those markets and I think that's part of where the fear and the demonization of cryptocurrency comes from -  it’s  like “don't look over here (at banking) look over there (at crypto)”. That's where all this scariness is, and I've done a lot of research since I've joined Coinsquare when we're looking at our risk assessments and things like that. And the  grand fear that all the bad stuff is happening here isn't hasn't really played out for me in the available research. So, it took a little while for me to come around to that myself. But now that I'm here I'm like,those who live in glass houses shouldn't throw stones.

Manseeb Khan : No but you're absolutely right that's where open banking gets really exciting because it's the access of just like again you are going to be able to. You can do that on your lunch break or coffee, but you can just quickly. I just renewed my mortgage same terms same everything maybe means I'm a better rate because I've switched to XYZ.

Charlene Cieslik: So yeah. Yeah, I don't want to discount the people that are involved. I mean there's always going to need to be humans. Nothing's going to be able to be entirely digitized when it comes to this, and there's always going to be something you're going to need to go into a bank for. But I think that's where some of the promise to blockchain comes in as well. Like outside of just pure cryptocurrency, smart contracts, and things like that trying to get rid of some of this the onerous steps in the paperwork. I could see that can, I can see that can be seen as a threat to some industries.

Manseeb Khan : Yeah no absolutely because it's the more frictionless that more or less human interaction that I guess millennials like me just would be lost.  And less Human error. Well yeah exactly right like it just like hey like I don't need the small talk I just want to deposit this money  like I got all the stuff to the right, like I got a podcast. I mean like I'm doing a thousand other things.

Charlene Cieslik:  I've got to get on Instagram and get my followers!

Manseeb Khan : Well  I mean I get a pretty good Instagram wise so I'm not really worried. Good stuff. So, could you talk a little bit more of I guess there's a clear lack of guidance when it comes to just the interpretations of the rules and regulations right. Again, you know you know this better than anybody. Coinsquare being one of leading companies. What does guidance in Coinsquare look like. What is some of the be it the holes that you're seeing when it comes to interpretation. And could you just talk a little bit more about that.

Charlene Cieslik: I mean the basics are pretty simple and straightforward and maybe that's only cuz I've been in this field so long is that things like KYC are pretty straightforward to me. e have to be able to prove that you are who you say you are whether you're human or business. Those are things that don’t have  much interpretation involved in them. I think where the challenge comes in is the what is considered acceptable in a non-face to face environment. We know of her challenges especially in Canada but not only in Canada around the world. Let’s not will talk about “humans” for a minute we'll talk about businesses. There's a big transparency international report that came out a couple years ago in Canada and one of the holes in the Canadian regulatory environment, has nothing  specifically to do with the proceeds of crime act or KYC or AML. But what it has to do with specifically is how to set  up a company, it basically takes you about less than 30 minutes. You pay a small fee and boom you've got an incorporated company, numbered company no name, no numbers, or people behind it. Essentially just a shell on paper that may or may not do anything. The anti-money laundering laws are asking you to prove that something exists. But the very thing that you are required by law to reference, to make that assertion, is itself not reliable, not monitored. Then it makes it very difficult to make a case . I did what I could, to find out when I could, short of driving over and seen the physical location with my own eyes. So, whether your traditional finance or you’re in cryptocurrency you're trying hard to follow some basic KYC laws.

You're at a little bit at a loss as to what you can do.  I can refer you to where under the definition of what a money service businesses is, which to me is traditionally that guy on young street that will change dollar bills for you, or the the ethnic-based money transfer business that has a good remittance corridor back to the countries that a lot of big immigrant populations in Canada that do send money back home to. They've sort of thrown cryptocurrency dealing in cryptocurrency under that definition, and I'm not certain that's the most helpful definition of what cryptocurrency is, but it is a little bit. There's a precedent set for it. And even within Canada, we’re not really sure what the interplay is between say the financial regulator, k FINTRAC, as a regulator, calling us money services businesses from “dealing in cryptocurrency”. They're still not really being monitored  by the government and we are kind of. I would argue again that's really no different than any other entity that's listed in section 5 of the Proceeds of Crime Act because,even this morning I was looking at the definition of “what is a Casino” under the Actwho qualifies as a casino under the Proceeds of Crime Act, and it has sort of a three bulleted definition. Then  you think “Well, what about a certain kind of business makes it  fit into the definition of casino?” It’s the same thing that's going to happen with cryptocurrency, under the proposed definition of“dealing in” cryptocurrency - what does that mean? I know we sent back a very lengthy 10-page commentary to the draft regulations asking for some clarity, but understanding again that you know they are they'll never be fully prescriptive, and I think that's where the industry has to take the lead. I think having talks like this, and the industry taking a leading role in holding the government accountable for interpretation, actually providing guidance that addresses these, very confusing sometimes, interpretations. If I argue with you that you are regulated but you argue with me that you're not because it's not clear and that leaves us in a bit of a precarious position.

Manseeb Khan : I mean like crypto casinos that's will be a pretty interesting, seeing that in a couple of years. But no, you're right it's it goes out the whole vagueness and we talk. like how we even started with this conversation with a lot on certainty. There's a lot of grey area when it comes to the space and it's like OK, we want government regulation to come in. OK. If we get government regulation and then we get OK, then we got the old system, but we don't really want the old system coming in.  It gets very just missed construed.

Charlene Cieslik: You know you have to do something like that exactly. You don't want the old system! Like I if I wanted to work at a bank, I'd still be working at a bank, right? But, we still do need a bank. Coinsquare does have the added bonus of being one of Canada's strongest fiat on ramp and off ramp/crypto trading platforms, and maintaining a bank relationship is as important for your business as selling crypto because, until crypto has an entire use case outside of Fiat (which we all pray for that day), we still need a bank. But this kind of back and forth and uncertainty…  the government,I think, has tried to capture it all by just putting “and cryptocurrency” into the draft law It's funny, if you read it all at once it's over a thousand pages so I recommend if you can't sleep at night have a look at the draft regulations and the edits they've made to it, because they've just they've captured “dealing in crypto”underneath the definition of a money service business. But back to my casino example they've also added that too, if you're any other kind of entity - so if you're a bank, if you're a credit union, if you're a casino, if you're a securities dealer, the list goes on, accountants, lawyers like there's a whole list in Section 5 that tells you who has to comply. And it's like they just added the words “dealing in cryptocurrency” next to any kind of transaction-based requirement under the law. So, it's really is trying to capture it anywhere it can. So, if you are an accountant that decides to take cryptocurrency as payment for your services you now are subject to coming next year in the year to implement the Proceeds of Crime Act requirements for cryptocurrency. It's very interesting to watch how and to see how this is going to play out. Just remember the banks have had 20 years at this and they still struggle with it. The biggest banks with the largest compliance departments with the biggest budgets and the most people have a hard time with this.

Manseeb Khan : Yeah, Good luck to the 30 crypto guys trying to figure out what to do with all the like new regulations, the new laws that like. They have lawyers and accountants.

Charlene Cieslik: And ignoring it isn't going to help you, and if for no other reason that then you won't be able to get a bank account for your business. Now I hate to use that as the  a sort of threat. I don't really mean to use it as a threat,but like sometimes you need to pay money for things - you need to pay rent in fiat. You need to maybe pay some hydro bills in fiat. n Toronto we have this like we have a City Councilor Norm Kelly (Scarborough—Agincourt). I don't even know if he's still a city councilor, going to have to find out and edit it back into this podcast (NOTE: HE IS) Well he  has kind of been advocating in Toronto to be able to pay for parking tickets and your property taxes in cryptocurrency! Small situations like that and advocates like that I think bring it more into the mainstream and show you that we could get there someday.

Manseeb Khan : You mentioned that some foreign exchange places here and that are accepting crypto and they're just trying to like slam it together sees what works and what doesn't work. Yeah. You've been seeing like cute little convenience stores that accept Bitcoin and either have Bitcoin ATM or just accept cryptocurrencies which is the small steps.

Charlene Cieslik: It's amazing to see, right?. I was in Hong Kong last year. Oh god maybe two years ago. And you know you can't pay cash for anything there. And even up and down King Street,which is a little bit like our little fintech alley over here in Toronto,there is a lot of stores here like just food shops that also don't take cash. Now I don't know they're quite at the point of taking cryptocurrency yet. But you'll see things like WeChat payaccepted and I can't remember what the other (Alipay).  Alipay and like those are starting to get like you know it's not quite crypto but it's a payment adoption form that you never would have seen even a year or two ago here in Toronto. It's all kind of paves the way I think for just a new mindset.

Manseeb Khan : I mean absolutely agree with you like think about like the amount of people that are adopting Apple Pay and  Samsung Pay right like sooner or later. It's just again like you said we're on definitely the right track just doing it payments through crypto.

Charlene Cieslik: Sometimes I leave the house without my purse  and  without my wallet. But I never leave it without my phone. Like I don't think I go to the bathroom without my phone and I think most people are like that nowadays so if you can have it all sort of at your fingertips that way it makes it easier.

Manseeb Khan : Me and my buddies that we joked about like yeah if we ever get robbed,  I'm like hey dude take my wallet, take my cards. You can have it, don't take my phone though. Like I got a meeting next weekend like you know all that.

Charlene Cieslik: Did I back up? When was the last time I backed up?  Oh, I haven’t backed up in months. And I did I put on2FA does my two 2FA just go to my phone? And then he gets my phone, and that won't help me. We joke about it but it's you know like reality.

Manseeb Khan : You know it really the stark reality, right? The phones are going to become the one stop shop when it comes to anything and everything. And it slowly is. For sure.

Charlene Cieslik: And I think that's like a great fit for cryptocurrency right. I mean it's so high tech it's so hard for me to even explain to my parents what I do for a living at Coinsquare. The concepts are similar though and I think that sometimes when I'm able to sort of win back people into understanding what Coinsquare’s trying to do is that. Whether we're selling dogecoin or nickels you know there's safety and security and safeguards that we want in place and we want our customers to feel like they can come to us and not have to worry about losing their money or you know be able to freely access what they want to with a little bit less maybe intervention than a traditional financial institution. I think one of the bigger problems that a lot of people have are not just based in crypto is that financial institutions have become almost like a defacto police force. Enforcing rules not only of regulators on to businesses but of criminal code violations onto a customer's. Now I  always joke and I'm sure if anyone's heard me talked before you may have heard me say, so I apologize for repeating my shtick, but like I don't have a gun or a badge. I don't have access to police record databases. I don't know any more than you know if somebody is committing a crime. And I don't really think that it's fair on bankers or on cryptocurrency companies to say that we're expected to know every second that something is possibly breaking the law. If I had that power, I think I would go like be a superhero or something. You know wear a cape. Help people in trouble.

Manseeb Khan : Heck I would too.

Charlene Cieslik: I mean that sounds like It's way funner than sitting in a meeting saying I don't think we can take this because their risk is too high, and you try to quantify the risk. Or we could just go cape shopping?

Charlene Cieslik: Exactly. Exactly. Let's go  cape shopping.

Manseeb Khan : I'm super down to go cape shopping.

Charlene Cieslik: And I think that's where it goes to it - just try to get a decent sense of who you're dealing with. And like most people's activity is fairly normal like let's be honest here - I think there's a lot of people in the AML space and I think they do a disservice to compliance people overall when they try to put themselves out there like super-cops or something. I think, and I'm a pessimist by nature, but I do tend to believe the best in people. The whole idea of risk management is that you let people go about their daily business fairly unscathed and fairly untouched and you spend your time and resources on things that are truly significant and truly questionable. Like the cream that rises to the top maybe the rotten cream rises to the top. But  you're not questioning someone on every little dollar movement  they're doing, because not everything is a criminal hiding in the shadows. And if you operate from that mindset, I think a lot of regulators and a lot of banks operate from that mindset that everything,everything is bad. And I can see how you can get into that,being in the field as long as I have. I can't say I haven't been victim to behaving that way periodically in my lifetime, but I think being in this space and it does allow me the time to step back a little bit and be like OK what are we really looking at here, and where we can have a touch point with a customer that we're being respectful, and doing the “right thing” and  we do spend our time appropriately. Don't get me wrong - there's things to be found. But if everything is high risk then nothing is high risk.

Manseeb Khan : You're exactly right. If everything's high risk, then nothing is high risk and  it's again like it's understanding. Like everything we talked about, today right? It's KYC know your customer. Everything's not funding terrorist. Not everybody's a bad guy. Not everybody a criminal. I'm just trying to pay my phone bill.

Charlene Cieslik: I know, and you know what the thing is - we don't even actually know about terrorist financing until after it happens and then it's in the news and then maybe you can look back and be like “oh OK” but like nobody walks into a financial institution of any kind it announces themselves as a terrorist. Nobody on a sanction list opens an account in their own name anymore. They're even smart enough not to open shell companies to which they can be traced back in the beneficial ownership anymore. Like the cloak has been revealed (should have said LIFTED) but the criminals who have the time and energy know what it is that governments want us  to look for now, and they're finding new ways we haven't even figured out yet. And the pressure on someone in my position to try to be that “super cop” that can sense something before it occurs. I do find very unfair and I don't like to play into that kind of mindset. But I do like the idea of having a truly risk based compliance program that allows you some time and energy to focus on,w again, the real risks not the made-up ones. Not the ghosts that people think are in the machine. But I think the challenge being is that banks just have a lot more years of data to kind of look back on and go “oh we should have seen that.” Where as in crypto we're just we are still building it and there's a lot of good players in the industry working on software to help. Help, not solve, but help in for lack of a better word, “decrypt” the block chain and see sort of the flow of funds and where things are going.

Manseeb Khan : You've definitely coined the term of the old wine in new bottles. Right.

Charlene Cieslik: So, it's I can't take full credit for it. I know I learned this and when I was doing my Master's in Criminology and never have I used it more than working in this field. At the time it rang a bit hollow, I was young and ignorant probably arrogant too. Now that I'm a bit older and in a bit more humble, I'm like I really, really see what this expression means. And there's going to be, by the time I get older, and there's going to be something new and while the government is trying to regulate what is currently the cryptocurrency space right now, it's taken them about four years to get to a draft. It's taking another year to get it out in publication. They're going to give another year for implementation which is something they normally don't do. You know we're still so new and I hope that my work with Coinsquare can allow me to contribute to this conversation, not hinder it. I hope that none of the work I'm doing is ever something that's seen as a hindrance to business. AndI really don't want to ever be part of a grand money laundering case that was so obvious it should have smacked me in the face. And I think that's what I bring from working in theformer traditional spaces is that something should jump out at you whether it's crypto or Fiat other things. It's a lot of gray areas so determining where you're comfortable.

Manseeb Khan : I think the work that you guys are doing it's incredible. The work that you're doing personally just like advocating, speaking out on this and just  like shedding a little bit more light to this ride because like we need people like you in industry that have trained eyes no more or less what to look for in this new space and kind of like you can kind of call bullshit on a lot of things. Or not. Right.

Charlene Cieslik: I've had a humbling learning here too. I will never ever put myself up on a panel and call myself a cryptocurrency expert,I wouldn't even call myself an AML expert. I just happen to have a lot of years at it, and I every day I'm still surprised there's something new and I think just having that training and having that background if you apply it right and apply it for good. And I don't think I'm the kind of compliance officer, and I think some people here Coinsquare would agree - I don't try to run away from a challenge. Although some people require that we run away from a challenge in order to maintain our good name and standing. But you know let's dig into it if we have one. If we let the people do their regular transactions relatively unscathed and relatively untouched then it does give us the time to dig into some of the more challenging things and say “Is this something that should be reported to the government?”. I know not everybody is a fan of regulation in this space and some of the purists might not agree with it, but I'll say the same party line that a lot of other people in this space in my position might say is that  - there's got to be a bit of a tradeoff if we want mass adoption, if we want these use cases to come true. If we want to have those positive relationships with banks, we want to raise money in a in a somewhat hybrid type security-regulated-almost area that we have to do some of the things and some of them I think are good things to do.

Manseeb Khan : To wrap this up. I'm sure what will be some of the takeaways that you'd like to drive home because I know we definitely we talked about a lot today, so feel free to list them all.

Charlene Cieslik: Sure. I think one of the things I'd love for the listeners to hear is that when you're talking about KYC and AML there really are two different things entirely. And the onus remains on you to be sure that the KYC that you're doing, and then your overall AML program and the obligations of that program, are truly in as close compliance to the law, the existing law, the proposed law wherever you fall in that spectrum as is possible, that works for your business. You have to be able to clearly articulate that, if you've hired someone else to do this for you, there's lots of vendors that do these kinds of things that sell them out as vendor as “We can do this for you.” You still have to know exactly what they're doing and what you're getting from them. It is something I see a lot working at Coinsquare and even just at conferences I speak at when I talk to a lot of startups like they want to hire a third party to do something like that. Great. There's a lot of great third parties out there. But make sure that they're doing the right thing for you and you're holding them accountable and you're getting your value for money because you can pay someone to do something for you and then find out when you get audited that they didn't actually do everything that they promised. I hate to see someone fall into that kind of trap.

Secondly, I guess is just defining yourself as to what you are. Even if you don't have a lawyer, although, I do always recommend getting a lawyer. I know it's not always feasible for some startups to spend at he rates that are required, but there are some very affordable and reputable good guys working in crypto as lawyers doing advisory in some sandbox type of things with law firms. But  that are able to  articulate for yourself. On paper yes, the old-fashioned paper. You don't have to print it out, but put it down on some form of written format and define what you are and say “look, we since we do this (describe what  you do), we think that we are this” and have an articulated way to defend yourself around that definition. You don't want someone else coming in and telling you “you're this and you didn't think about that.” And I mean people, other financial institutions you might want to deal with. Even investors that might want to look into your business like they might not want to get caught up in something that is uncertain or unclear. You can call yourself a utility token, but you better have a good rationale for determining yourself to be that. We are a trading platform here at Coinsquare we have a very long and articulated backing to say how we are what we say we are. We are registered with several regulators here in Canada, and where we launched in Europe today it's a very exciting day here at Coinsquare as we launched our Europe offering n in the European Union. If have any listeners in that space, we'd be happy to have you!! Andif you know what you are, and you know what people are doing for you... I just want everybody to have the same opportunity to understand what we're doing here and how Coinsquare can maybe help them too. I love it. I love it. I love this support. Thank you so much.

Manseeb Khan : Absolutely. So, Charlene thank you so much for sitting down me today. This was an amazing whirlwind of information. I've learned a lot more of just regulatory arbitrage, and just  uncertainty and now I have more or less more fear but also a lot of optimism when it comes to a space that I don't even know of.

Charlene Cieslik: Awesome. You know what. I'll help you quell that fear. Oh, I can only bring my best.

Manseeb Khan :  I can't wait. So, Charlene thank you so much for sitting down today. I can't wait to have you on the show again.

Charlene Cieslik: Ok awesome. Thanks again.

Manseeb Khan :  No problem. All right. So, on the behalf of NCFA Canada's leading fintech and crowdfunding association. I wish you an amazing Fintech Friday.

Outro : you've been listening to fintech Fridays brought to you by NCFA and partners. Tune in weekly for the latest fintech Friday podcast by subscribing to this channel. The National crowdfunding and FinTech Association of Canada is a non-profit actively engaged with social and investment fintech sectors around the globe and provide education research industry stewardship services and networking opportunities to thousands of members and subscribers. For more information please visit and see if a Canada dot org. Oh yea.

 

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Globe and Mail | Sean Silcoff | Dec 18, 2018 Dragons' Den star Michele Romanow and her partner Andrew D’Souza have secured another US$50-million to grow their latest startup, Clearbanc, just weeks after announcing they had raised US$70-million to bankroll the financing provider for e-commerce firms. Now, they are looking to secure hundreds of millions of dollars more to meet a surge in demand from online sellers looking for cheap alternatives to finance their growth. “We see this as a pretty exciting next step,” said Ms. Romanow, president and co-founder of Clear Finance Technology Corp., which operates as Clearbanc. “I don’t think we expected this to come this quickly.” Clearbanc fronts e-commerce entrepreneurs with money to pay for their online advertising in exchange for a small percentage of revenues that spending generates, until they repay the amount in full, plus a 6-per-cent premium. Customers do not have to provide personal guarantees, give up equity or submit to credit checks. Instead, they provide Clearbanc with access to business data from their online payment processors, their online advertising accounts and bank accounts. Clearbanc’s software then crunches the data and assesses their unit economics in minutes, spitting out an automated financing offer based ...
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FINTECH FRIDAY$ (EP.17-Nov 9): How Artificial Intelligence is Optimizing Sales and the Future of Business AI with Asad Naeem, Co-founder and President, Fortuna.ai

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NCFA Canada | Nov 9, 2018

JOIN US ON A STORYTELLING JOURNEY EVERY FRIDAY.

Ep17-Nov 9:   How Artificial Intelligence is Optimizing Sales and the Future of Business AI

About this episode: On this episode NCFA Fintech Friday's our host Manseeb Khan sits down with the co-founder and president of Fortuna Asad Naeem. They chat about how AI can supplement salespeople, the excitement behind computer vision and the future of business AI. Enjoy!(see Transcript)

Host: Manseeb Khan, NCFA, Fintech Fridays show host

Guest:  ASAD NAEEM, Co-founder and President, Fortuna.ai (view Linkedin)

Bio: Asad is the Co-Founder of Fortuna.ai, a top of the funnel sales automation company. Prior to co-founding Fortuna, Asad spent time with a big 3 bank in Canada, first on the sales team covering the largest financial territory in Canada, and after, with the Data Analysis and Strategic Initiatives Team, providing insight and consulting on sales campaigns. A life long entrepreneur, Asad has consistently been feeding his entrepreneurial spirit ever since starting his first business in Grade 9 and starting and running a couple of start-ups throughout his university days. Having spent over 10 years in and around sales, he is intimately familiar with the problems being faced by sales professionals today and along with his Co-Founder Omer is positioning Fortuna to solve these problems utilizing Machine Learning and NLP.

 

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Transcription of Interview

Intro: Welcome fintech Friday's a weekly podcast brought to you by the National Crowdfunding and Fintech Association of Canada and partners.Covering all things fintech block chain be AI and alternative finance.

In this episode we cover how AI can supplement salespeople,  the excitement behind computer vision and the future of business AI.

Manseeb Khan: Hey everybody how is you doing today? Manseeb Khan here and you are tuning in to Fintech Friday. Today I have an absolutely incredible guest. Assad. OK from a Fortuna.ai Thanks so much for being here today. I mean this means the absolute world to me.

Asad Naeem: Yeah thank you so much for having me. It's an honor.

Manseeb Khan: So, could you just for a second. Give us a little bit more of what Fortuna is and a little bit more about you and your background.

Asad Naeem: Yeah absolutely. So, I'll start with me with my background so basically, I've done sales all my life I started out in the in the trenches at the future shop and some of the guys have done sales and you know they've gone through that process. They know exactly how that is. So, after that I went to school obviously once you know University  of Toronto for bio and then attended Carlton university for political science. There started my career in the bank. So, I've been all over the place. But with the bank basically stuck around started you know at the lowest level kind of rose through the ranks eventually ended up at CIBC Asset Management. Where I was doing third party broker dealer sales. I did that for about a couple of years and kind of had the genesis of the idea for Fortuna while I was there. Move over to Fortuna. Basically, what Fortuna does is it's top of the funnel sales process automation which is your client discovery and client qualification. So, the entire ethos behind our product and our company is that you know salespeople today are spending but 80 percent of their time doing mundane admin tasks we're using AI to automate that portion, so they can spend more time and you know more focus on higher value consultative of selling processes.

Manseeb Khan: Yeah no I mean I can definitely relate on the sales angle because my first job as a door salesman. So, its sales are brutal 100 percent. So, could you talk a little bit more on the AI the process of it. Do you map it a little bit towards the more to the salesperson like does the AI kind of work like okay  I'm Manseeb and this in my sales style? And I guess my chat bots or whatever we may have you might be tailored towards that. Or is it just more of a generic AI.

Asad Naeem: The way it works is we're employing AI in two spots right now and the first one is a little bit sandbox experimental the second one is actually we're using right now the client discovery portion is basically we're using to figure out exactly who is it that you should be going after. Now this happens by taking a look at your transactional. Let's say you’re a client of ours. We look at take a look at your transactional record, take a look at your sales campaign see where you are having the most amount of success. And then just building models based off of that to see exactly you should be going. Who you should be going after,  the second place where it's really my interest and where I'm paying more attention to is the NLP component of it. The natural language processing where we started the conversation with what your prospects are leads that are coming in. And then we basically lead them down the qualification funnel. we'll and find out you know the three things that you need for any sale to occur is hey is there any interest here. You know do they have the authority to make this decision and then the third one is do they have the budget to make that happen of course. So, we use a conversation and general AI chat bot to figure out those three things based on your own sales playbook for your company. And once we have that component done, we kind of handed off to a real-life human sales agent which will be your sales rep. So, we don't sit in a space where we go you know we're going to use AI to get rid of all sales people, but we actually say that no you know there is a space for AI, there is a space for real sales people. There's a because sales are a very high touch in a lot of industries very high touch. Oh absolutely. You know process, so we want to argument  that process and we want to help the sales people be more productive and more efficient.

Manseeb Khan: Right. So, I mean you guys are pretty much helping a lot of slack time when it comes to just like building a list prospecting, calling and everything you guys are just literally helping streamline that a little bit more.

Asad Naeem: Absolutely, absolutely. All the mundane admin tasks basically the salespeople and they just absolutely hate. Exactly. And that's not their forte. No not at all. Right now, I'm here to sell, I'm not here to put everything in my CRM and make double check and make sure what stage of the sales cycle their on. oh man.

Asad Naeem: At the end of the day if you look at it some sales people are especially high value industries like finance and you know even car sales. Yeah you know there are six figure employees. Absolutely. And then if you're expecting as a company that you're a six-figure employee to be doing admin tasks scraping LinkedIn and all that other stuff their value is really in being able to do that consultation process not do data mining right. But then what happens is companies started to realize this. So now they have you know SDR, as they have L.D. which is lead development reps and now you're paying these people 30 40 thousand dollars a year just to sit there and scraping lists, you know emailing back and forth to figure out if there's interest. Yeah this can be automated. And that's where we come from. And that's our perspective that you know hey let's get your people to do more high valued asked leave the mundane admin tasks to machines essential.

Manseeb Khan: So, I guess what's how do you see the trajectory from here?

Asad Naeem: So right now, you know where we're focused on finance, we're focused on some of the other high value nurses as well. We recently started expanding out. we're doing you know car dealership, we're doing you know automotive companies were doing, you know merchant accounts like alternative to finance things like that but eventually all of us you know like were our aim is to see how this solution fits in organically into other industries and slowly get there. But right now, we're very niche we're very focused because as you can imagine in a building any natural language understanding models you know industries being industry specific helps us because I come from finance, Omar my business partner comes from finance as well. So, we understand the language that's being spoken. Of course, you can train our models based on that as well.

Manseeb Khan: So, I guess how easily you integrate with the current CRM system like the HubSpot’s and the Salesforce is out there because you are seeing, out there that they are slowly trying to build their own model similar to you. How do you how you either integrating with them and how do you see yourself competing with them?

Asad Naeem: So right now, I wouldn't say we are competitors, so CRM I say you know we a more of an asset. Exactly it is more of an asset we hook in. If you look at any CRM system even if you look at HubSpot like HubSpot started out it was very pure it was very minimalist right I mean and you look at it today it's got all these different angles it's got a chat bot it's got a meeting scheduling thing just becoming very big and they're doing a lot of things. So, I haven't seen a direct focus for any of the CRM you know manufacturers right now that are going strictly down the path of just automating conversations using you know natural language understanding and processing. So, we're basically a perfect shoe in and we are  compliment to that strategy. We're not looking to replace a CRM we're looking to enrich the data that's already in there and basically anything else that you put in you know the qualification portion of it we want to handle it.

Manseeb Khan: No, I love that that's very comforting for a lot of the business owners out there knowing that. So, I mean given being AI it's an it's a brand new, it's a very disruptive industry and it's a brand new disruptive potential market. Just saying that you guys are just going to supplement everything else such as a breath of fresh air.

Asad Naeem: Oh absolutely. Absolutely we're not we're not of the mindset you know we're going to replace humans or we're going to you know destroy industries or whatever the case is you know we look at AI as something that can be used for good and you know it can be used to make people's lives easier as technology is supposed to do. Technically you know, and this is where our mindset comes from that we want to use AI and machine learning to help people be more efficient more productive and also just to help companies be more efficient more productive as well.

Manseeb Khan: Right. Right. I mean I can even see that the case of like just having thousands of data sets of sales like you guys could even like potentially pivotal actual sales learning platform. Absolutely right. Just like Hey these are the car dealerships these are everything. like these are the case studies, there are of all the potential objections that you are going to have, this is how you handle them all that kind of stuff, so the potential is there. It's definitely incredible.

Asad Naeem: Yeah absolutely. Building sales playbooks. That's a separate industry. Oh yeah no I mean there's organizations out there you can hire right now that look at your product, who you're selling to your target market. Build sales playbooks for you right. Yeah. So yeah hopefully. I mean that's our primary focus for sure is focused on what we're doing. But you never know what the future holds.

Manseeb Khan: No absolutely agree with you. I'm going to pass this off to you, so I guess you're in the space right. What about AI truly excites you?

Asad Naeem: Oh, the possibilities, the possibilities. Right. I mean we look at we look at natural language processing and  that's the least that I'm really interested in right. It's the we have the understanding component down packed like we can understand intent. we can extract you know what is it that somebody sort of say what is the intention behind it and we can't even go as far down as you know looking at what are the emotional cues, and somebody is writing. okay. You have a great company here in the DMZ shoot out to Trualt. You know they do they do emotional analysis on text. So, you know things like that but where we haven't been able to make a big breakthrough is the generation component. So right now, and you know like if somebody is going you know we use to generate e-mails, or we use to do generate text. Yes and no at the same time it's very vague and it's also a lot of it is template based. Yeah right. It's decision trees they're going OK if somebody says this. This is the intent, you know be extracted out you know use this template to reply back whereas organic language generation. It's still very nascent it's still in the labs, is very academic in its pursuit. So, we're not there yet. I want to see the possibilities of when that occurs where machines are able to communicate back you know organically without using any templates or you know any pre-determined schema in terms of how and what to say. That would be very interesting. I mean aside from that I'm a big fan of computer vision. I think there's tons of possibilities out there. There's a lot of great stuff happening right now. For example, you know crop analysis that's going on there's a new just we're just reading up on it recently as well. There's a company there's a new start up that basically  that that's building computer vision AI to help when people get lost in the woods to help you know like firefighters and forest rangers and things like that to be able to locate people so there's a lot of interesting stuff happening. I mean this is just the tip of the iceberg there's this stuff happening in mining there's stuff happening, and you know like pollution prevention you know doing surveying all sorts of different things. So, computer vision is also very, very interesting.

Manseeb Khan: So, I guess how you see. I mean or just AI sales in general how fundamental do you think it is when it comes to AI business?

Asad Naeem: The thing is deploying AI is becoming kind of a priority for a lot of big enterprises and big businesses. And you know I think sales is an untapped market when it comes to machine learning and being able to learn from historical transactions, online, retail sales you know sales campaigns, marketing campaigns. So slowly we're going to see a lot of activity in this space. Marketing is already kind of seeing it. You know there's a lot of great companies out there that are basically deploying AI to fine tune and help you really personalize the marketing that you're doing. But slowly you're going to see it happening in sales, direct sales as well and whether it's inbound , outbound or whatever it is you need to find people for your business to sell too. Of course. You need to qualify them right. Right now, that is a very human, very labor-intensive job. So eventually I see it being a space where machines excel. where they help you find the people, qualify them and then you know once the actual sales process kicks off a human agent takes on and is able to basically close that process. So, the end result here is that you're going to compress your sales cycles. You're going to make sales more efficient and you know you're going to make your entire organization more efficient because of that.

Manseeb Khan: Yeah and you're going to have a lot of more harder numbers to work off of.  because that's a very tricky thing about sales because since it is so labor intensive and since it's the human error when it comes to sales it's so astronomically high. And it's also laziness, too right? I mean yeah no absolutely, no I absolutely agree with you there just like again like we talked about just manually inputting everything into the CRM it's like OK I emailed them back, it's third touch booking a call-in next Thursday at 4 and let's  see how it goes. And then we just wait.

Asad Naeem: Absolutely dude there's a lot of research out there that says you've got to reach out to your potential prospect like five to seven times, like five to seven touch points and I'm a salesperson. Yeah so have you. I mean how many times can you honestly say that you did seven touch points. It's a lot of work. It's a huge emotional toll too because you're if your hearing no's all day. oh, my goodness. Yeah. The twenty or the twenty fifth or the fiftieth. No, it's like you cringe a little bit. Yes.

Manseeb Khan: So, I mean especially during the day. Right. Depends like you mentioned car dealerships. Right. Like cold calling 150 people if not more. And it just here. No, no ,no, no, no. It's definitely gets to like cleaning that out. cleaning process out definitely it's going to make it a lot streamline a lot more  easier. I mean you guys are not even like what a year and a half year old. Yeah. Yeah. So, I mean what is the next five years a Fortuna to look like for you and the company?

Asad Naeem: Yeah absolutely. So, like you said you know we're still a very young company so we're in the throes of you know full blown product development now. we had our version one you which the market was  really receptive to. You know we've had the fortune  of being you know revenue positive since day one, since we launched you know where we're making money as well. So  it's a very exciting time to be because we're really taking the feedback that we're getting from our initial batch of clients and fine tuning the product making sure we're you know adding features that there's an actual market demand for and just basically making sure that it's a seamless experience for the sales teams that were getting on boarded and even the individual sales people that we have right now you know they just having a good experience. So right now, we're fully focused on building a product that our customers love and that our customers and our clients are recommending to their friends and they're the people that they have in their network. So that is the short-term goal right now. The next five years honestly it can go a lot of different ways but what  we're aiming at is we're growing our team really rapidly you know 11 people right now the company. But a we're probably going to double by mid-2019. So, you know we're full blown aiming at making sure that we're doing all the right things for our customers making sure that you know our product is on point. And then also just making sure that we're helping as many sales professionals and sales teams as possible you know reduce the workload become more efficient become more productive and hopefully in the next five years you know you can you can hear us as a household name helping sales out everywhere and you know cutting down on the manual boring admin stuff that a lot of sales guys have to do.

Manseeb Khan: I'm very excited of like just more of a personal stand point like from a salesman to a salesman like I'm very excited to like oh thank god like. hey me too you. You're saving I mean the countless number of hours of just you're going to be saving it's just again it's astronomical. Absolutely. Really is it just like it just going to make sales so much more. Salesperson you really use this term lightly because much easier. Oh yeah for sure. And it just a lot more stress-less and just like streamlined right.

Asad Naeem: I mean as long as sales is it going to be hard. even once you qualify somebody there's a lot of you know nuances that go into actually closing the sale. So, it's always going to be hard but as long as we can make the the front-end grunt work a little bit easier and you know at least taken us somewhat off the shoulders of the actual sales people. It gives them the flexibility to be able to focus more on the actual sales process and then being able to you know really being consultative and helping rather than you know just rushing through everything and trying to get to the next guy right. So, the aim really here is that we want to make sure that sales is as it stays as human as it possibly can. But at the same time, you know removing everything that is mundane and basically admin work that that can be automated.

Manseeb Khan: This is probably more of a nitty gritty question but like when it comes to qualifications and just building your models. What is your data sets look like, like where are you really pulling it from and ideally where do you want to start pulling from to get even more tactical data to work with?

Asad Naeem: Yeah absolutely. So right now, presently we're building all our data sets our self because I mean we started out by running the entire sales process for us manually. You know this is this is before we had a product, we were basically kept a record of every communication we've sent out. All emails all, the you know like social media messages whatever it is the response is we've had we've had them tagged internally because we have, we've been lucky enough to work with a with a very brilliant data scientist as well. And she's helped us. You know tag this data, clean this data, and built our models on top of it. So, you know right now we're generating our own data sets and also our clients for the first batch that signed up with us and even the second batch sent out with us. They're helping us build some of these models on as well because you know they've given us permission to use some of the data anonymized obviously to see what the sales process looks like what types of objections you get. What does a rejection look like? What does an ambiguous response look like. So, figuring out are all of these things where we would hope we could get more data is basically you know doing a partnership with a larger organization that has a very heavy focus on sales which I would think it would be every organization. Yeah no. I mean ideally every business should be focusing on sales. Exactly. And then being able to see some of the sales campaigns they have run, and you know using that transactional data essentially to be able to better our models because the more data we can feed into our model they just make the model so much about exact. Yeah exactly. It's a data play

Manseeb Khan: 100 percent is a data plan that's I'm glad you guys realize that. I mean it's a sales thing right. Exactly. It's a numbers game. All it is a numbers game. Law of Averages really. So, Assad. So just to quickly wrap this up would be the best way for people to either contact you Fortuna. Do we e-mail you? Do we tweet you? Do I send you a snapchat? What would be the best way to contact you?

Asad Naeem: Yeah absolutely. If anybody wants to get a hold get in touch with us. Just go to Fortuna.ai. So that's www.fortuna.ai, I just contact us there or you can just directly email me, my e-mail is asad@fortuna.ai.

Manseeb Khan:  Asad thank you so much for again sitting down with me today. I mean this is this has been a very fun conversation  I mean salesmen on other salesmen. And again, I'm very excited for your trajectory you guys are definitely inbounds of doing really incredible things.

Asad Naeem: Thanks so much. Appreciate it. Thanks for your time.

Manseeb Khan: Absolutely man cheers. So, on the behalf of Canada's leading international fintech and crowdfunding association. I wish you an amazing fintech Friday and weekend.

Outro : you've been listening to fintech Fridays brought to you by NCFA and partners. Tune in weekly for the latest fintech Friday podcast by subscribing to this channel. The National crowdfunding and FinTech Association of Canada is a non-profit actively engaged with social and investment fintech sectors around the globe and provide education research industry stewardship services and networking opportunities to thousands of members and subscribers. For more information please visit and see if a Canada dot org. Oh yea.

 

End of Podcast

 

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THANKS FOR #VF2018 VANCOUVER!
CHECK OUT THE PICS and SIZZLE REEL!


Day 1 Photos: Leadership & Meeting Exchange
Day 2 Photos: VanFUNDING 2018 Converge conference


Globe and Mail | Sean Silcoff | Dec 18, 2018 Dragons' Den star Michele Romanow and her partner Andrew D’Souza have secured another US$50-million to grow their latest startup, Clearbanc, just weeks after announcing they had raised US$70-million to bankroll the financing provider for e-commerce firms. Now, they are looking to secure hundreds of millions of dollars more to meet a surge in demand from online sellers looking for cheap alternatives to finance their growth. “We see this as a pretty exciting next step,” said Ms. Romanow, president and co-founder of Clear Finance Technology Corp., which operates as Clearbanc. “I don’t think we expected this to come this quickly.” Clearbanc fronts e-commerce entrepreneurs with money to pay for their online advertising in exchange for a small percentage of revenues that spending generates, until they repay the amount in full, plus a 6-per-cent premium. Customers do not have to provide personal guarantees, give up equity or submit to credit checks. Instead, they provide Clearbanc with access to business data from their online payment processors, their online advertising accounts and bank accounts. Clearbanc’s software then crunches the data and assesses their unit economics in minutes, spitting out an automated financing offer based ...
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Dragons' Den star’s startup secures another US$50-million in financing
Million Mile Secrets | August 21, 2018 When most people think of buying tickets for a flight, or making other travel-related purchases, they might reach into their wallet for their credit card. But did you know you might be able to pay with a form of digital cryptocurrency, like Bitcoin? Bitcoin is a type of digital cryptocurrency that serves the same function as traditional currency, like US dollars. The main difference is that Bitcoin is not tied to any central bank, and is not regulated by a government body, thus offering a degree of anonymity to users. The process for paying with Bitcoin is very similar to paying with a credit or debit card. If you’re purchasing online, you’ll simply select Bitcoin as your method of payment. You’ll then be redirected to a site like Coinbase, where you’ll follow the instructions to complete payment. We’ll go through which travel sites accept Bitcoin, best practices when dealing with cryptocurrency, and some pros and cons of using digital currency to help you decide if it’s the right method of payment for you! Where Can You Use Bitcoin for Travel Purchases? Although Bitcoin has not yet gone back to its 2017 levels (at ...
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Can You Use Bitcoin to Pay for Travel?
Coindesk | Santiago Siri | Dec 18, 2018 As governance becomes more and more prevalent in discussions around consensus protocols, it is clear that Satoshi Nakamoto’s original vision of “one-CPU-one-vote” shaped the entire crypto industry into thinking governance centered around machines, not people. But if artificial intelligence (AI) is indeed a threat to humanity as Elon Musk and Sam Altman frequently warn, why are we risking giving AI the political power of distributed networks? Guaranteeing a fundamental right to privacy bent early blockchain design toward anonymity. While that approach helps fight financial corruption (political corruption is exploiting the internet in ways that can also be fought back with decentralized computation), the menace of AI is less abstract than it seems. The fact that social algorithms thrive on memes helps explain today’s political reality. See:  Lifehacks for When a Robot Wants Your Job However, AI is leading us to even deeper questions and challenges. The most salient fact from contemporaneous politics is the growing shadow of doubt cast over the democratic process in the U.S.: did foreign influence win the most expensive election on the planet? Since the Peace of Westphalia in the 17th Century, nation-states have been a political construction ...
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Humans on the Blockchain: Why Crypto Is the Best Defense Against AI Overlords
CNBC | Kate Rooney | Dec 17, 2018 Robinhood's attempt to launch a disruptive, first-of-its-kind product offers some lessons for fintech companies trying to break the mold in a highly regulated industry. The start-up announced it would launch checking and savings accounts with an eye-popping, industry leading interest rate. Just a day later, they said they were re-naming and re-launching after regulators and Wall Street sounded the alarm. Robinhood did not contact a key industry watchdog ahead of its launch, a move that wasn’t legally required but could have saved them from "an epic fail" and “getting egg on their face,” according to UBS analyst Brennan Hawken. “Next time they’ll aim before they shoot,” SIPC president Stephen Harbeck said. On Thursday, the popular stock-trading start-up rolled out what executives said was the biggest announcement in the company's history: Checking and savings products with a 3 percent interest rate, and zero fees. But just a day later, the start-up un-winded its ambitious plan. There were a number of questions about the product — but mostly on the regulatory side. The accounts being offered by Robinhood were insured by the Securities Investor Protection Corporation, or SIPC. Those protections are a far cry ...
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What fintech can learn from Robinhood's 'epic fail' of launching checking accounts
Forbes | Gerald Fenech | Dec 12, 2018 The crypto space, though promising in a myriad of different ways still has many obstacles to overcome. Bad actors are slowly being weeded out but at an excruciating pace. Ideally, the crypto space would have so much competition, innovation and use cases that the best ideas and best innovators would naturally stand tall. Though 2018 has been a trying year for everyone in the space, 2019 is looking positive as many promising projects are rearing to go. These neophytes, though not experienced are seeking to close the gaps within the crypto space that have lingered since the beginning, namely; security, accountability and transparency and above all, practical implications for the technology. Countries like Gibraltar, Malta, and Switzerland seeking to build legislative frameworks for these new businesses to operate and thrive in, and give them a home. However, it is a difficult balance; on the one hand to regulate, securitize and make everything compliant, whilst also not stifling budding, inherent innovation. Although everyone recognizes that DLT has huge potential, the time has now come for the space to mature, become regulated and for things be done right. Now is the time to forget the ...
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The Security Token Field - The Next Step After the ICO Annihilation?
Bloomberg | Julie Verhage and Jennifer Surane | Dec 10, 2018 In 2018, a number of financial technology startups came into their own. Free trading platform Robinhood Markets Inc., for example, added new services and billions to its valuation. And Stripe Inc. was valued by investors at a price higher than the market caps of 249 of the companies on the S&P 500 Index. But the industry is also maturing and consolidating, and larger industry players, hoping not to be left behind by the new era of digital finance, are stepping up their hunt for acquisitions. What should we be on the lookout for in 2019? According to the fintech pros surveyed by Bloomberg—more deals, swirling IPO rumors and a continued steady stream of checks from venture capitalists. Here’s a wrap from industry experts. (Quotes have been lightly edited for clarity and length.) See:  OSC Seeks Applications for Fintech Advisory Committee IPOs looming Up to this point, financial technology startups have been hesitant to enter the public markets. And who can blame them? Most fintech companies that have gone public in recent years have seen their share prices tumble, and ample venture capital funding has buffered balance sheets. Still, a major IPO ...
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Experts predict the five big fintech trends of 2019
Coinsquare release | Dec 6, 2018 The acquisition was closed for $12 million CAD and brings the leading cryptocurrency wallet on the Stellar platform into the Coinsquare ecosystem TORONTO, Dec. 6, 2018 /CNW/ - Today Coinsquare, Canada's premier cryptocurrency trading platform for trading Bitcoin, Ethereum, and other cryptocurrencies, announced it has acquired BlockEQ, the leading cryptocurrency wallet on the Stellar network. Coinsquare purchased BlockEQ for $12 million CAD and will leverage BlockEQ's technology to help Coinsquare and its users connect further with the world of cryptocurrencies. See:  House Finance Committee Urges Canadian Government to Regulate Cryptocurrencies "We have enormous respect for what the BlockEQ team brings to Coinsquare," said Cole Diamond, CEO of Coinsquare. "They are one of Canada's best tech teams, and the product they've built is immensely valuable. That combination in partnership with Coinsquare's technology and team means that we have the opportunity to build amazing things for the cryptocurrency community in Canada and far beyond." BlockEQ, which was co-founded by Jonathan Lister, Megha Bambra and Satraj Bambra, is a cryptocurrency wallet that empowers users to buy, trade, and hold cryptocurrencies in a secure manner. It allows for the tokenization of crypto assets in order to allow them ...
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Coinsquare acquires BlockEQ to expand its cryptocurrency offerings
OSC Release | Dec 6, 2018 TORONTO – The Ontario Securities Commission (OSC) is seeking applications for membership on its Fintech Advisory Committee (FAC). The FAC advises OSC LaunchPad staff on developments in the fintech space and the challenges faced by start-ups in the securities industry.  OSC LaunchPad is a dedicated team that engages with fintech businesses, provides guidance and flexibility in navigating securities regulatory requirements, and works to keep regulation in step with digital innovation. The FAC will meet quarterly, with additional meetings as required. The FAC is chaired by Pat Chaukos, Deputy Director, OSC LaunchPad, and will consist of up to 15 members. Membership terms will be for one year.  Members will be selected based on whether they have direct experience in one or more of the following: Digital platforms (e.g., crowdfunding portals, crypto-asset trading platforms, online advisers); Crypto-assets or distributed ledger technologies (e.g., blockchain); Data science or artificial intelligence (AI); Venture capital, financial services, securities, legal or accounting experience with a focus on the fintech or technology sector; Fintech or technology entrepreneurship; Compliance or regulatory technology (RegTech) solutions; or Cryptography or cybersecurity. See:  OSC outlines key areas of focus for 2018-2019 Interested parties should submit a résumé indicating their ...
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OSC Seeks Applications for Fintech Advisory Committee
Coindesk | Nikhilesh De | Nov 30, 2018 Members of VanEck, SolidX and the Cboe BZX Exchange met with U.S. Securities and Exchange Commission (SEC) staff earlier this week to present a new argument on why the bitcoin market is ready for an exchange-traded fund (ETF). In the latest push to convince the regulator to approve a rule change which would open the door for the country’s first bitcoin ETF, the three firms met with the SEC’s Division of Corporation Finance, Division of Trading and Markets, Division of Economic and Risk Analysis and Office of General Counsel. Notably, Monday’s effort differed from previous presentations, which took more of a regulatory focus. See:  OSC approves Canada’s first blockchain ETF Instead, the proponents’ argument centered around the idea that the bitcoin market is mature enough to support an ETF, and at present looks similar to markets for other assets which already have such products. The presentation gave several examples of assets that already have ETFs, including crude oil, silver and gold. The presentation specifically tied the idea of futures markets with spot markets, noting that for money substitutes such as gold and silver, this connection between the two can be proven with empirical ...
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Bitcoin ETF Seekers Met With SEC Monday In Latest Pitch for Approval
Investment Executive | By James Langton | Nov 23, 2018 Many hurdles remain for the CMRA before it becomes a reality Canada’s regulatory landscape faces a transformation as politics, shifting priorities and new legal realities push the investment industry’s overseers in new directions. Most obviously, the prospect of a fundamental reshaping of the regulatory framework in Canada now is, at least, a possibility – given the Supreme Court of Canada’s (SCC) long-awaited decision on Nov. 9, which reversed a lower court’s ruling in Quebec, that declared that a proposed federal/provincial model for a co-operative capital markets regulator is constitutional. But while this decision knocks down a basic legal obstacle for the new model for overseeing the securities industry, that doesn’t mean that the adoption of a co-operative regulator is imminent – or even inevitable. Indeed, the SCC’s decision hints at the significance of the hurdles that still must be cleared before the proposed Capital Markets Regulatory Authority (CMRA) can become a reality in Canada. Although the SCC has found that the proposed CMRA model is constitutional, that doesn’t necessarily mean it is a good idea. “It’s up to the provinces to determine whether participation is in their best interests,” the ...
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Not yet a done deal

 

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FINTECH FRIDAY$ (EP.16-Nov 2): Envisioning the Future of Open Banking for Consumers and Businesses with Cato Pastoll, Co-founder and CEO, Lending Loop

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NCFA Canada | Nov 2, 2018

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Ep16-Nov 2:  Envisioning the Future of Open Banking for Consumers and Businesses

About this episode:   On this episode NCFA Fintech Friday's host Manseeb Khan sits down with the CEO of Lending Loop Cato Pastoll. They chat about what opening banking is, how it might look like an app store, and how it gives power back to consumers. Enjoy! (see Transcript)

Host: Manseeb Khan, NCFA, Fintech Fridays show host

Guest:  CATO PASTOLL, Co-founder and CEO, Lending Loop (view Linkedin)

Bio:  Cato Pastoll is the CEO and Co-Founder of Lending Loop, Canada's first peer-to-peer lending marketplace for business lending. Prior to starting Lending Loop, Cato served as the Executive Vice President of a medium sized software consulting business. In addition to holding a senior management position, he attained experience building and managing robust commercial applications. Cato also brings relevant industry experience from his time developing a loan evaluation and management solution for a private mortgage lender.

 

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Transcription of Interview

Intro: Welcome fintech Friday's a weekly podcast brought to you by the National crowdfunding and FinTech Association of Canada and partners.Covering all things fintech block chain be AI and alternative finance.

Manseeb Khan: Today I have an incredible guest today. OK. If you heard of the company Lending Loop I have the CEO today. I got Cato.  Cato thank you so much for sitting down today. I mean I'm very excited to just get the show on the road. I mean we have a very interesting topic and I'm very excited to share with people.

Cato Pastoll: Yeah, I'm excited as well. Thanks for having me on.

Manseeb Khan: So, I guess for just a minute could you just give us a little bit of your background and essentially what Lending Loop is?

Cato Pastoll: Yeah Lending Loop Canada's first marketplace for small businesses to be able to access affordable financing. And then investors people like yourself and myself who want to lend money directly to businesses. So essentially what we're doing is cutting out the traditional intermediaries who will be lending and rather allowing businesses to be able to access financing from regular Canadians who want to lend money to them.

Manseeb Khan: I'm glad that I can be my own little investor and help as many small businesses that I can. So, I mean the topic that I really want to discuss with you today is a topic that many of us probably seen in the media it from blog posts or even from videos would be open banking. So, could you guess a little bit. Tell us what open banking is and I guess how integral and what this means to the bank space?

Cato Pastoll: Yeah. Open Banking can generally cover a lot of different areas or mean a lot of different things. But a high level generally kind of what people are referring to is the ability for people to be able to access banking data or other companies to be able to access your banking data. So, it's likely that you and I and probably the people who are listening to this have a bank account with maybe one of the big five Canadian banks or perhaps the smaller bank and they have a lot of data on transactional history around us. Who we are, our address all types of personal information as well as transactional bank information. Now that information is incredibly valuable and really the theory is that that information should belong to you not actually to the bank and we're open banking is really kind of contemplating is sharing that information or at least giving you the ability to access and share that information that your will. So, if what you say you want to give Lending Loop access to that information. Very seamlessly that you would authorize the banks to give us that information we'd be able to access that in order to provide better products. Products and experiences

Manseeb Khan: Ha. Okay. So, this kind of this really ties into I guess having a digital identity and having a sovereign identity right of we're seeing a lot of people pushing it from individual CEOs like yourself or just other institutions or other I guess organizations pushing for this identity and that having a digital identity would just be one more step closer. Open banking would be one more step closer of having digital identities and having companies in the future actually recognize your digital passport. In a sense, right?

Cato Pastoll: Yeah absolutely. I mean like it or not and, in a capitalist, driven society. Finance and financials are really a core to who you are from an identity perspective not just from a verification or an identification perspective but more importantly kind of makeup. A lot of the pieces of information and how many who someone is. And so, when we think about kind of open banking exactly what you just referenced is true. Now we're talking about layering on financial type information on somebody's personal profile if you want to call it that. So absolutely this is really something that that is. Kind of critical. When it comes to determining what that future of identification and Id profile look like.

Manseeb Khan: I like the aspect of it. You get to pick and choose who you share information and it's a lot like I guess if you have an android phone you can actually go within the apps and then you can kind of like pick and choose what the app can get access to it's kind of interesting of like it's the very similar concept but look more like a broader perspective. Yeah. Lending Loop can have this, this, this, and this but RBC or TD can't have  access to that, So I like that.

Cato Pastoll: That's a really good analogy and yeah, I think one that a lot of people identify with you know even with Facebook being in the news a lot lately. A lot of it is around that and like who get see your information and you get to share that information. You know open banking is basically extending that to the financial realm like who gets to access and see financial data because up until this point it's really only been banks that have been able or allowed to see that. And maybe that is actually to your benefit to be able to share that information with either you know people that you know or other companies that you want to do business

Manseeb Khan: Wouldn't an open banking be a threat to the current banking system now because now what open banking is or what I'm understanding is it's opened up a broader marketplace for people. For customers to just be able to pick and choose and to switch between banks with a couple of clicks right? Like I could switch my mortgage plan if I currently have it with CIBC I can switch it to TD because I've got these better rates, or I want to switch my savings plan from RBC back to TD or whatever so. I guess. Why would banks themselves even. Put their hat in the ring for this and. Why would banks even consider this at all?

Cato Pastoll: Yeah and I don't think that it's voluntary. I think I can do more. More part of a general pressure to provide better experiences to consumers. Banks are an oligopoly in their highly regulated and they're essentially protected by governments in every authority including Canada. Right. So, the banks are incredibly hard to create. They're also an incredibly hard to break down and that's when we think about like why this might happen. Really, it's too people you know to the benefit of the people who use banks so just the regular people. The customers and the businesses that leverage banking services. No, it's in our interest to. Be allowed to access that data. And I think kind of philosophically a lot of people believe that data actually belongs to you not the bank. You know the bank is kind of providing us with that service but at the end of the day. The data that they are leveraging, with the data that we're providing to them you know a lot people can have the sentiment that that belongs to us. Now what that actually means that from imprecations perspective is. You know people who are looking to build better products or better experiences for customers can now do that by kind of treating banks as kind of like your back in infrastructure right. Traditionally you think about banks as you were just describing and as you know that the end to end delivery of a product or service very like the know that they're giving you credit cards they give you mortgages. Well you know the bank doesn't have to not exist if somebody else to provide a credit card or mortgage they can rather just kind of be the backend service provider. where they allow other people, you know other companies to basically be more of that front-end customer facing solution that leverages their infrastructure their data maybe even the technology to be able to deliver some of those solutions. So, you know the reason that we're moving in this direction is because at the end of the day it's of benefit to the customer benefit not just from an experience perspective but also financially you know on average Canadian banks are generating. That to 2x the average ROE of U.S. banks and 3x the average ROE of UK banks. So, when you think about that you know people like yourself and me are actually paying for that and you know it's not surprising to think that policymakers and politicians want to kind of shake that up and actually. Give some value back to customers who are actually using it, the Canadian banks.

Manseeb Khan: Going back to the cell phone analogy it more of a market like it actually a true and true marketplace where we will have like the TD version of an app store and you'll have like financial tech companies like ourselves coming in and just providing all these services right.

Cato Pastoll: In a way I mean many different ways, there are many different ways that it could play out in practicality that that's for sure. One of the ways you know what a bank becomes I think is an interesting question and probably one that we could we could spend a whole hour talking about like what a bank might look like in the future as a result of it. But I think that the underlying thing is that they need to share or open data to people who want access.

Manseeb Khan: And it just makes I mean again I’m probably thinking of this more of a from a fintech standpoint because I'm so much  for team David here. It just makes banks even more like customer centric right.

Cato Pastoll: Yeah, I mean you know. Going on that point about being customer centric or delivering product experiences that are better or cheaper for customers if fintech or financial technology companies are able to do that much better than banks are. And so, as a customer I'm going to win by being allowed or being able to access those services seamlessly you know going back to your point maybe not directly in the interest of the banks but in the long run it's kind of in the overall interest of Canadians.

Manseeb Khan: So how do you see open banking impact. Companies like yourself like being in the loan service industry and giving more customers to get from around?

Cato Pastoll: Yeah. I mean for us you know we're as you mentioned we're in the lending industry if you want to call it about you know we're in the business of kind of connecting investors with small businesses. When you think about what we do at a higher level and really what we're trying to create is a better way for small businesses to access financial services. And the reason is that that that that that particular segment of customers that have been under serviced by traditional financial institutions or traditional lenders. So, you know when we think about what this means for a company like ourselves it's not just about how it applies to you or your lending product or how maybe it makes a loan application was seamless. It also opens up doors of possibilities for us to be able to deliver other products and experiences to those customers who may not have had access to those products or services before.

Manseeb Khan: So, it gives you an opportunity to be more or less a little bit more of a diverse company than just being centric on one part of the banking industry, right?

Cato Pastoll: Yeah. I mean can I just keep harping on that point. You know you want to be customer centric. It allows you to be more customer centric because you're able to access more of the relevant information to your customers and providing them with better access to products and services.

Manseeb Khan: Yeah no absolutely and especially if you have the data to back that up. so, then you can make it very tailored and very niche so that's very incredible. So, I guess since open banking is a very brand-new concept and you're seeing regulations being a little bit more tailored to the country I mean you're seeing places in the EU like they just adopted their second payment services directive. Right. The P2D2 which forces banks to open up the data and regulate the new market right. So, they're making more of a push to the financial tech companies that are allowed to have access to your data has to be actually regulated. have to go have to meet these guidelines, have to jump through these hoops. So, based off just stuff that's is happening in the EU, in Australia recently, you've been seeing in Japan they're slowly getting started. What does open banking regulations look like in Canada and I guess how you would want them to either be similar or different tailored to the Canadian market.

Cato Pastoll: It's a fair question. I think if you look at the progress here generally we're about five to 10 years behind any other authority when it comes to financial regulation. Generally speaking we're in our industry for example were significantly behind new jurisdictions like the UK, Australia, and New Zealand. So, I you know I don't think you're seeing the same level of progress here in Canada as you're seeing in other jurisdictions. I think we're going to be much slower to adopt these things. There can sometimes be an advantage to being second or not being first and that advantage can be seeing what goes well and what doesn't go in other jurisdictions. I think like you know thinking about what this might look like. I think. Really you got to go back to who is this benefiting at the end of the day this is about driving value back to consumers. driving  back to people who use banking. Driving value back to small businesses. So, when we think about kind of what that might look like and what regulators need to consider when they're kind of creating new legislation on new frameworks for these businesses to exist or are these policies to exist really, I think the most important thing. To consider in that regard is how is it like who is going to benefit and how is it going to benefit them. I think something that kind of is light touch in terms of what it actually means for  fintech companies what it means to consumers what it means for banks. what one end up being that effective. And we'll probably see a little minor adoption I think I'd rather see us spend some time and create a robust strategy and policy around how we can create really rapid innovation in our banking sector. And I'll kind of give you the flip side of that coin if we don't do that and we don't do a great job of it. International companies that do benefit from open banking do benefit from fintech advancement and changes are likely to come to Canada at some point and kind of dominate the market here. So, you know the incentive is there because I think we've a great opportunity but there's also a massive kind of warning that we're given at risk which is if we're not fast enough to kind of jump into the race and we're going to get beaten by our international counterparts. So, you know that that's something that I really kind of. Think about from a regulatory perspective which is you want to get it right, but you don't want to spend too much time that you end up getting left behind.

Manseeb Khan: Yeah no. I mean traditionally Canadians are very much by the book and they like to stay within the lines. So, it makes sense that Canada I guess like you to mentioned right either becomes second or third or fourth when it comes to fully adopted open banking and just later on hopefully dominate the open banking. We should probably like take our time understand fully and actually. The more information we have the more again data we've collected we can actually move accordingly towards that. I mean and again it's evolved or parish right. If we don't figure out fast enough we're just going to die out and nobody wants that.

Cato Pastoll: Yeah, I mean you look at kind of like what's happening with Netflix. you know Netflix is I think inevitably going to destroy the media industry here in Canada. You know when we think Rogers and Bell, Cogeco you know those companies have been protected by our government for so long. And regulation has been so slow to change, and people have heralded that.  You know on the flip side of that we're now seeing companies like Netflix, US companies that really have no attachment or need to this in Canada. From a from a domestic point of view you know they are solely headquartered in the U.S. Their assets are in the U.S. capital is flowing into the U.S. when we pay on that Netflix bills every month. You know they slowly but surely taking over that industry that was once Canadian. And I think that there's a stark warning that to think about there is a real possibility that that happens in banking or in the financial sector here in Canada. So, I think you know we do need to move pretty quickly because I think if we give the same attitude that we do in the telco industry or in the media industry that's definitely not a good sign. So, while being thoughtful is important taking too long is perhaps even more dangerous.

Manseeb Khan: But on that note it would be kind of funny to us to when we have kids of just of like yeah you know like before all you have to get is a Bell and Rogers and actually have cable. Now  the big three are the big four are like Netflix, Amazon Video and Hulu so that be really funny.

Cato Pastoll: Yeah but the problem is. The problem is those companies are Canadian right now. That's like the fundamental challenge that you know people don't talk about that often but that's a lot of capital and a lot of profit that's being sucked out of Canada. I like that really scares me when I think about the future of the Canadian economy. Like I don't think we should put that as lightly as you know as we do great for me at the consumer I'm paying one tenth of what I did on my Rogers Bill. On my Netflix subscription. But at the end of the day like I think we're all kind of losing a little bit as Canadians. And I think that's something that like you know regulators and policy makers really need to pay attention to.

Manseeb Khan: No absolutely because it's I mean doing the show. I got to sit down with amazing CEOs like yourself and just understand the Canadian fintech marketplace a little bit better and it would really suck to see and like the Canadian fintech space just kind of slowly start diminishing because there's so much potential to so much promise and so many companies in the space itself are doing such amazing things. It really sucked to have I guess either American company or an Asian company to come in and just undercut everybody because we don't have the  regulations in place we have the right rules in place because again we took too long to figure it out.

Cato Pastoll: Yeah, you're absolutely right. Like you said there's so much potential here. I think we need to really pay attention to that. Look at the positives like I don't like kind of always being  negative and saying what if you know what if this happens or what if a U.S. company comes to dominate. I think there's so much potential in so many positives here that so much of the right infrastructure. But sometimes I think the speed with the urgency doesn't exist. And I think like that that's the one thing that I think all of us as a community. Both you know the people that use our services as well as other companies in the space I think we could all do a better job of stressing that urgency to push things forward faster and innovate faster. Just kind of for our own benefits as well

Manseeb Khan: I guess. Do you see open banking being a little bit more global? Because I mean the reason I'm asking is because we're going to we're going to hopefully have regulations here in Canada when it comes open bank and you're already seeing this in the EU and you start to see this in Asia, Australia, and New Zealand like you've mentioned. Do you see  a global open banking regulation put in place with a I guess be it a Frankenstein version of some rules and regulations from Canada or some rules and regulations from the EU like do you see a global open banking regulation put in place later on? Once we fully adopted this concept.

Cato Pastoll: It's a good question. It's also a really difficult question. It's kind of one of those things like what comes first that you know the chicken or the egg  that type of thing. And what I mean by that is I think what's going to happen is that there will be no global banking existing and global financial technology services existing before regulation for it actually. Oh, I believe I'll be able to have  a you know quote unquote like the ability to move money seamlessly. Anywhere in the world sooner than I think regulation around how that's going to happen. And I think you can kind of apply that if you look at like Uber and Airbnb and then those types companies that have kind of come before a regulation caught up to them. I think you're going to see the same thing in open banking I don't think that. Companies are going to wait for regulators to create new rules or policies. I think that the innovation is actually going to come out and I think like some of those products services that probably fall on that you know on the edges of the of the categories of banking will probably force the issues for that to happen And that's just kind of my theory on it is I think you know the regulation will tend to lag the innovation. And I think you'll see that in the open banking space as well.

Manseeb Khan: Usually when you think regulation you don't really think innovation. So that's just a very hard balance to how right you because you want to protect investors you want to protect consumers at the same time you don't want to be in last place. So, it's a very hard beam to really balance on.

Cato Pastoll: You end up shooting if you over protect you end up shooting yourself in the right. Like I think the notion there's sometimes a flawed notion that no industry is better than a bad industry and that's very rarely the case. You know like at least having the possibility of making mistakes and learning from those mistakes gives you a better foot hold then simply not doing something because you're scared to try. And I'm sure you know if you see anyone in the startup space or are worked in an overseas company you know they'll give you a similar message which is not trying is definitely much worse than trying and failing. I think you know that's a really difficult message to share with a regulator or a policymaker like that. That's a really scary thing to say to somebody like that but it's definitely true because there's other people in the world who are thinking like that and I think like that that's something that I think we as Canadians have a big thing to overcome going back to what you said about conservatism. You know we are inherently more conservative. And so, getting over that barrier is definitely something that. We have to kind of actively think about.

Manseeb Khan: We definitely have to bite the bullet and understand that like we're really going to have to test and learn especially when it comes to policies and regulations because Open banking is such a new concept. and it's such like you said even when I even mention the whole oh I guess would be like an app store. It might not right because open banking such like a I guess of fluid into a lucid concept that it's going to have to be as fast as I guess changes in a startup like that's  the mentality we are going to have to have. When it comes to open banking because that's how fast and fast paced it's going to become.

Cato Pastoll: Yeah, I mean there's lots of there's lots of variables or unknowns as you said. So, it's not it's not a simple or straightforward answer to this. You know there could be an app store. It could be that a fundamentally changes the way the bank clerk it could even be that banks don't exist at all. You know I wouldn't rule out any possibility. So, you know when we think about what it means for the future of the financial sector or the future of banking I think we have to be open to all possibilities in terms of. What might things look like in 5 10 or 15 years.

Manseeb Khan: So, when you think of open banking one of the first concerns to mind would be the cyber risk and the security risk right because since we want to open up the data and make it accessible for quote unquote all there definitely will be privacy concerns. Could you talk a little bit more on the privacy concerns when it comes to open banking  or why or why not. It might be there, and I guess go  a bit more detail about that?

Cato Pastoll: Yeah. You know if anything I kind of you are the as I least of it's done right. I view it as better for the customer when it comes to things like privacy. Like what it really is you know when you think about it giving people access and the ability to control their own data and whether data goes in it get shared with. Like right now you have very little control over it you know where your data is, how it gets stored, who it gets shared with. Like really, you’re just trusting whoever you're storing that data with. I think we're starting to see that change. You know I think especially Facebook is probably the biggest example of that obviously it's been in the news a lot over the last year. You know they've been under an incredible amount of pressure. To get better and exactly what I just described which is. You know giving people oversight over whether that is how it's managed how it's stored and who gets to access that information. I think there's a similar opportunity here with. Finance and with banking. Where you're giving the customer control over their own data. And for me there's no better way of doing it than giving your, putting the control in the hands of the customer. You know if they choose to give somebody access to that data that's their choice, but they should be fully aware of the choice and fully aware of the consequences of doing that. Right. So, when I think about this I think there's a tremendous opportunity because you know we're really opening up a world that is significantly more transparent than the world that exists today when it comes to data and privacy.

Manseeb Khan: Do you see open banking. I mean again we  did talk about being open and open minded. But do you see open banking going into blockchain and becoming a little bit more decentral, so the security risk gets greatly mitigated?

Cato Pastoll: Yeah, I mean I think that's definitely a case of blockchain now. Do I see that actually happening in the short term? I would say probably not just based on the amount of change that would be required to enter that infrastructure, but I think it does make a case for that type of technology. I think you were talking about the same thing at the end of day which is. Giving that access control privacy back to the individual. And really. Like. Technology is like blockchain technology are really about doing exactly that. So, I can't predict whether or not that you know that's going to happen or whether it's going to happen in the short- medium term but I would say it's definitely something that could play a role in mitigating some of those risks. I also think that you know one thing that is important is. Regulation and policy have a really important role to play there as well. Like in terms of who is allowed to play who go out and access that data. That's really where regulators need to step in and be focused on which is kind of keeping the bad actors out and keeping the good actors. And., I think that that would kind of be like the high-level answer I give to that which is I think there's some opportunity for it, but I think it's going to take time to fully flush out and really for us to determine how it's going to work.

Manseeb Khan: Yeah no I agree with the whole keep the bad actors out and keep the good actors in because that's something that we've been many guest have actually touched on that in the previous episodes because the bad acting like it's as much as it very much sucks you're seeing a lot of bad actors get a lot more notoriety and if not more media exposure when it comes to like spaces like fintech, spaces like crypto and blockchain because it's so new it's revolutionary It's very easy to just really  shit on them because they're just like no like look at all that look all the bad use cases. What about all the great use cases so it goes back to like having policymakers and regulators having a little bit more of a startup mindset just like being a little bit more open of OK like learn how to vet the good actors and how do we keep them how do we make sure that they're being regulated. Also innovative at the same time. so, it's oh boy it's definitely, they are definitely juggling like 15 balls the same time but. But in due time it's very possible.

Cato Pastoll: Yeah there's a lot of balls to juggle like all of the things are double edged swords  right because you know when you're too strict your kind of disincentivized to get active and you end up with only bad actors who are trying to take advantage of gaps in the system. Right.  There’re so many times where you need, you know you can't be too light, and you can't be too heavy. If you are too heavy like I just described, you know you end up with a system whereby only the only people who aren't that to the play are bad actors who will take advantage of gaps or holes. And if you're too light it's kind of like the inverse of as well. Right away you let everybody in. But you really open up the floodgates or you know anyone whether they're good or bad to participate. So, you kind of have to find a balance between being too light and too hard. And that definitely you know it sounds a lot easier than it is in reality it's not an easy challenge for anybody to overcome.

Manseeb Khan: So, I mean I guess I'll throw this to you   I  do you have anything that we didn't cover comes open banking that's either been on top of mind or be it's something that's been keeping you up at night?

Cato Pastoll: No, I think like I mean it's been really interesting conversation, so you appreciate you kind of taking the time and having me on. I think when we look at the future and what this actually means. I think one of the you know one of the things that I always try to remind people is you know reflecting back on how it is actually going to impact me. You know you hear a lot of buzz was thrown out there on a regular basis on AI, blockchain, opened banking, fintech.  But like really like what it means for you as a customer or as a consumer is you end up getting more choice. You end up paying less money. And you end up with better products and services that you can use in your everyday life. That's why that's why fundamentally it's important. So, I think kind of going into the why. like why I should actually care about this. It's probably a conversation that we don't have enough. I think it's easy to kind of get carried away with some of these concepts at a high level but at the end of the day we also should be thinking about who is actually going to be benefiting and why is it important for us. As a society to adopt new ideas or new technologies. And. It's really got to go back to it's got to benefit the people that are using that are the end users of financial or financial sector and not just people like you and me.

Manseeb Khan: More or less believe the hype. It's like the hype real, believe the hype.

Cato Pastoll: Yes. But also understand it.

Manseeb Khan: Yeah OK. Fair enough.

Manseeb Khan: So, what I guess what excites you the most about open banking? We've talked the talk a little bit about. What are you most excited about. Be it if it directly impacts your business or even if it directly impacts you. What are you most excited about when it comes up that open banking?

Cato Pastoll: Yeah, it's giving people choice here. For me I get really frustrated by lack of choice I get you know get frustrated if I can only choose between Rogers and Bell. You know I get frustrated but if I can only choose between one or two banks I think for me the ability to be free and have choice and have lots of different people who are aggressively trying to compete for my business is really great because at the end of the day I win when that happened so I think you know when I think about this I think it's just the possibilities in terms of the different products and services that people will be able to create by getting access to a system that they didn't previously have access to. And being able to play a role in the banking sector where really, they were only you know. Five to 10 real players in Canada that that really were playing any meaningful part and how it took shape.

Manseeb Khan: Cato. So, what would be the best way for people to contact you if they want to pick your brain more when it comes to open banking . Maybe they'll learn a little bit more of Leading Loop what will be the best way to contact you. Do we snapchat, you do we tweet, you can we do we contact you via smoke signals like will be the best way to contact you ?

Cato Pastoll: Yes, smokes signal is probably number one but if you can't reach me by smoke signal then I am on Twitter. so, you can find me on there and also check out. I definitely encourage everyone to check out Lending Loop. It's a really awesome way to kind of use your money to invest in Canadian small businesses. Web sites just lending loop.ca. So, if you haven't checked it out already. I would encourage anyone who is listening to check that out. And yeah, I guess that I appreciate you kind of taking the time. Tweet at me or smokescreen me. If you're looking for me.

Manseeb Khan: Smokescreen would be difficult but whoever you are whoever out there like finds find you through via smokescreen that's  a very special individual for sure. So,  Cato thank you so much for sitting down today. I had. I mean I've learned a lot more open banking then I thought I did. So, this is this has been incredible and I'm very excited to have you on the show again.

Cato Pastoll: So yeah. Great, chatting with you.

Manseeb Khan: Yeah, no worries so on the behalf of the NCFA Canada's leading national and fintech crowdfunding association. I wish you an amazing fintech Friday and weekend.

Outro : you've been listening to fintech Fridays brought to you by NCFA and partners. Tune in weekly for the latest fintech Friday podcast by subscribing to this channel. The National crowdfunding and FinTech Association of Canada is a non-profit actively engaged with social and investment fintech sectors around the globe and provide education research industry stewardship services and networking opportunities to thousands of members and subscribers. For more information please visit and see if a Canada dot org. Oh yea.

 

End of Podcast

 

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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org


THANKS FOR #VF2018 VANCOUVER!
CHECK OUT THE PICS and SIZZLE REEL!


Day 1 Photos: Leadership & Meeting Exchange
Day 2 Photos: VanFUNDING 2018 Converge conference


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Not yet a done deal

 

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FINTECH FRIDAY$ (EP.15-Oct 26): Gearing up Hyperion Exchange, Hybrid Models and Security Tokens with Michael Zavet, CEO and Founder, Hyperion Technologies

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NCFA Canada | Oct 26, 2018

Ep15-Oct 26:  Gearing up with Hyperion Exchange, Hybrid Models and Security Tokens

About this episode:   On this episode, our NCFA Fintech Fridays host Manseeb Khan sit's down with Michael Zavet the CEO of Hyperion Exchange a crypto securities exchange. They talked about the importance of security token offerings( STO), how to regulate STOs, and the potential marriage of cannabis and crypto. Enjoy! (see Transcript)

Host: Manseeb Khan, NCFA, Fintech Fridays show host

Guest:  MICHAEL ZAVET, Founder and CEO, Hyperion Technologies Inc. (LinkedIn)

Bio:  Michael Zavet is a serial entrepreneur with a track record of success. Coming from the lucrative but challenging real estate development industry, Michael executed over $1,000,000,000 worth of real estate projects and in the process was groomed to think critically and be an aggressive negotiator. He went on to co-found one of Canada's most successful publicly traded Cannabis companies Emblem Corp (EMC.V) and several successful fintech startups. Michael was an early adopter of Cryptocurrencies and found success in the space having invested and advised in a number of high profile projects including Ethereum, HIVE, Polymath, Paycase, Global Blockchain and Shyft. He leveraged his success, vision, and unique relationships to assemble Hyperion – the future of Crypto and Securities trading.

 

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Transcription of Interview

Intro: Welcome fintech Friday's a weekly podcast brought to you by the National crowdfunding and FinTech Association of Canada and partners.Covering all things fintech block chain be AI and alternative finance.

Manseeb Khan: Hey everybody. How are you doing today. Manseeb Khan here and you are tuning in to Fintech  Fridays brought to you by Canada's National Fintech and Crowdfunding Association also known as the NCFA. Today I have an absolutely incredible guest if you guys are very versed in the industry might know who he is. We've got Michael Zavet from Hyperion Exchange. Michael thank you so much for sitting down with me today.

Michael Zavet: Thank you for having me.

Manseeb Khan: Yeah no absolutely. So just for the audience for I guess the three or four people that don't know who you are essentially what a company does. Could you just give us a little rundown of who you are and what Hyperion Exchange is ?

Michael Zavet:  I've been in the crypto space for about two years now I entered the space through sort of the lens of traditional finance. So, think all the issues that are kind of now becoming the focus of regulators and things like that I decided to look for certain solutions that involve sort of you know compliance first kind of model and that will lead me to establishing Hyperion as sort of a compliance first exchange. And what Hyperion is or aims be is a Crypto Securities Exchange. so, an exchange that offers STO's which would be similar to an IPO in essence.

Manseeb Khan: You guys like to call yourself a hybrid exchange right. Like you just mentioned  you want to focus a little bit more on security tokens and stable tokens could you talk a little bit more of what a hybrid exchange looks like to you guys and where you kind of see. Do you see this becoming more of a trend you see more companies going into what could you just talk a little bit more about that?

Michael Zavet: So as a hybrid exchange we're initially launching with you know sort of the traditional tokens that exist right now the Bitcoins and the Ethereum and other what are called utility tokens and the reason being that you know that that's where the market is today. But what we feel is going to happen is there is going to be this evolution of asset backed and tokenized securities and a lot of the ICOs that exist today. I mean in reality they actually are securities and took advantage of this time and framework that was very new, and regulators didn't understand in order to raise funds but we're seeing that is no longer than a fly and a lot of these projects are now being scrutinized. So, what we're seeing is that companies now  are being compliant offerings for what would be an STO. So, while we're launching with sort of the utility tokens that slipped by under the old framework we're aiming to start listing these new vehicles which would be STO.

Manseeb Khan:  Awesome so I guess this is more of a temporary shift and that hopefully like I mean everybody else in the space it just goes full exchange mode right. like it's not this Frankenstein kind of exchange.

Michael Zavet: I wouldn't say temporary. You know there's a huge appetite for the top market tokens and the reality of the space. So, we're going to take advantage of that and get investors they want. But I think that as the shift starts happening it will be very interesting to see the new products that that will arise.

Manseeb Khan: I've definitely covered some of the past episodes of essentially stable coins are secured coins are, but we've actually never really gotten depth for a second. Could you just give a little bit more of understanding why people in the industry it be  investors be it actually crypt verse people are kind of pushing for stable coins to security  coins compared to like this the quote unquote traditional ICOs.

Michael Zavet: Yes. So what stable coins I think well the main thing is when you're investing on an exchange you need something to sort of you know secure your investment so when you exit say and you take your gains from a bitcoin or any other token for example you a park them somewhere temporarily unless you're withdrawing them from the exchange which takes time right. And that's why there's this push stable coins because essentially you know the dollar value will be at par with currency that is stable coin represent so there's huge appetite for. And the other thing is that the first stable coin let's say Tether probably the first one or at least the most popular one that came out has now caught a lot of slack and is under scrutiny. So, this created opportunities for companies to produce their own stable coins and some have very creative methods. You know Tether was tied to USD. Even now we're seeing stable coins that are tied to gold and other products and there's a huge appetite. With regards to STO's what's happening with STO's essentially very similar to traditional security offerings in the United States. A lot of Reg-D offerings coming out as STOs as Reg CS possibly down the road Reg A plus and in Canada there will be an OSC compliant offering. So, what we're seeing is essentially a very similar path to raising equity for a traditional company except through tokenized vehicles . And the reason people do this is because they're opening up to the crypto investors and looking for other liquidity methods.

Manseeb Khan: Yeah no that beautifully goes into I guess the next question I was going to ask of you are actually seeing I mean being part of the startup space you're seeing a lot of startups actually consider instead of just going through the traditional either VC or angel investor route out there actually thinking of launching an ICO and just seeing how it goes there. Do you think. Do you see any stability when it comes to a company you see like a more of a permanent future of companies actually launching ICO's or do you think this is just a hype? Because Crypto and Blockchain and just everything has been very much hyped up for the past 18, 24 months. So, do you see this actually having a legit runway and companies are actually going to just go "nope we are just going to raise completely from ICO's".

Michael Zavet: I think that we're at a very critical kind of phase right now. The market's been bearish over the last while so their confidence has come down. I think that there's going to be an evolution definitely we're seeing a lot of projects now sail doing the ICO route. And that being that there were a lot of I would say non-legitimate companies or bad actors who took advantage of the hype and raised money and had to deliver no product. So, there is definitely a lot of investors that were left holding the bag so to speak. And that kind of painted a negative picture of the ICO in general. So, I think that it's be up to sort of the good actors as well as the regulators to produce good products that return value to investors in order to validate the method and the space in general. This sort of the critical time and that's yet to happen. I'm confident that it will but I think only time will tell. And you know on that note there have been a lot of amazing projects that have done ICOs successfully and have created a lot of value.

Manseeb Khan: It is again like  you have mentioned it's just a matter of time and like hopefully regulators either be the government, or I guess other third-party validators to hopefully see that "ok like there's actually some kind of validity to this". Do you see ICOs suppose replace IPOs in the future. If so what would be the benefits of it?

Michael Zavet: I think that could happen. What I see more likely is sort of a merger if the technology is adopted by major exchanges like Nasdaq in the world then I think that it would make sense to do sort of tokenized offerings. I mean even now you see the blockchain is used in a lot of ways that aren't necessarily user facing for example in the background. And the technology behind ICO or tokenized offering is that it makes sense over paper securities, traditional way right because it's a programmable unit which can be modified on the fly and it's a lot more adaptable. It's a lot more adaptable and it's essentially taking what we do now and stepping into the next level because paper securities  have not changed in hundred years. So, it's very possible that in the future every exchange will adopt the technology. But again, hard to say.

Manseeb Khan: Yes, because it's a very  I mean we've mentioned a couple times in the show that it's very much it's a grand experimentation and we're just kind of seeing what sticks or what doesn't stick, and it falls into like  what regulations looks like. Is crypto a  security, is it a commodity like what are we kind of classified as like what do whatever define it as we move forward to.

Michael Zavet:  That's exactly it and on that note a lot of the bigger institutional players are taking note. I mean we had a meeting with S&P recently and they have actually use CITS. So essentially, they're giving us the validation that we're looking for in other institutions turn off and then know it's stuff like this  builds good self-confidence for the space.

Manseeb Khan: I know we had  we mentioned like Galaxy digital a couple of times in the show. Like how you're having all these like big players like institutions just kind of slowly come into the market. And I guess that's going to help even more with validity and just a lot more it's going to be a hybrid of the old world meets New World and kind of seeing that it's the middle now.

Michael Zavet: Absolutely. I mean even just two weeks ago Fidelity announced that they were going to start offering custodies solutions. So, you know as more of these players kind of pop and then I think that that will definitely help push us towards where we want to go.

Manseeb Khan: Yeah no absolutely. So, let me speak of regulations you guys are a regulated with the SEC and you guys were with the OSC right. Because I remember that there was a 100 day. There's 100 a limit or 100-day countdown. I don't know if you guys cleared it doesn't really seem much on us yet.

Michael Zavet: So, in Canada we are dealing OSC right now. we are we're actually in the process of applying for an MSB. Which hopefully we will have in the next few weeks after which we're going to seek to acquire and an APS license either through application or acquisition in the U.S. we acquired and ATS and  broker dealer, so we're regulated by FINRA and the FCC.

Manseeb Khan: So, I mean dealing with regulations and just dealing with the government in general because you guys are since you guys are going a little bit more the securities route. you guys are tied down geographically. How do you see government regulations put in place? What regulations are you hoping that either the Canadian government or the U.S. government are going to put in place to make it a fair game for everybody but still be innovative?

Michael Zavet: Yes. So, we're hoping that there will be some kind of framework laid out within the next year or so. You know it's taken a while some of these bodies to respond because you know they're collecting their information and doing their diligence and you know given how large these institutions are how much is resting on their decisions. I think that it will not happen overnight. We are hoping that in the next few months we'll see more light shed on how they watch the STOs offered  and the system will change just currently for example Reg-D offerings we can only offer them to  credited investors. And that's mostly what we're seeing through STOs currently. But that leaves that a lot of the retail investors should be able to get involved and benefit from early stage investments. So, we're hoping that these kinds of regulations would change will change over time and be more inclusive.

Manseeb Khan: I guess would governments in general adopting these emerging technologies Would that be a factor like is that an also hope that you guys are. I mean you like other companies in the space are hoping I mean the best way to understand something is to be in it right.

Michael Zavet: Absolutely and I think that there's no doubt that they're looking into it as we speak and there is a lot of test projects and adoption happening. It's just the pace of it is quite slow and you know for good reason  they're also trying to protect investors.

Manseeb Khan: Yeah because he was the one to do the due diligence behind it right and you don't want to just me again. You want to with the hype and then realize like this this whole short term burst  just ruining the  long-term plan when it comes to just fully adopting

Michael Zavet: That's absolutely right. I mean if something catastrophic  crash happens. Now it would be hard to recovery. There's a lot of value that will be lost in the market. It's over 200 billion dollars. And you know there's a lot of value to erase so fingers crossed.

Manseeb Khan: So, to go a little bit more nitty gritty what regulations are hoping that can make Canada a little bit more competitive because you know compared to the Asian markets and maybe in the U.S. market themselves we are falling behind. Would it be regulations that are going to help us stay competitive or is it a mindset thing like what in your in your eyes what do you think can help Canadians become a lot more competitive in the space?

Michael Zavet: It's a combination of adoption and of course regulation. I don't think like the OSC is too bad with regulating the space compared to some of the other institutions SEC for example. And a lot harsher on the crypto space in general. So, I think Canada actually does maintain a fairly good competitive edge and there's a lot of amazing projects that have come out of Canada and continue to come out of Canada. So, I think that Canada will be a big player in the blockchain space in the future. And as long as we know strives to regulate and moderate the space it will continue to grow.

Manseeb Khan: Yeah, I believe  it just a matter of time situation for I guess the Canadian space because it's Canadian themselves  in general like to play by the rules and stay within the lines. So, it makes sense that they get it right. Right. It makes sense with the kind of wait it out a little bit and see where it leads right.

Michael Zavet: Absolutely and traditionally the OSC does kind of look to the SEC to see how they respond and react to things so naturally I think that's going to happen in this situation too. But that being said up till  now the OSC has been fairly welcome to crypto and innovation in general and I think that's a really great competitive edge for Canadian companies.

Manseeb Khan: I mean I guess the fear would be that you have the old institutional world would be a little bit more maybe to be kind of like touching us with a 10-foot pole. When it comes like this new innovative technology so it's kind of comforting to hear that like no they're actually willing to work with us. They are willing to like to go through the regulations and actually like fully to adopt this and see. See what the hype is really about.

Michael Zavet: Yes, I'm confident that that Canada will be the hub for blockchain and it already is that will continue to be so.

Manseeb Khan: I'm excited because Canada is already slowly becoming a hub for AI technologies, so it should be more exciting like it's also has the potential of becoming a blockchain hub as well. The other industry that gets very much slammed together with crypto and blockchain would be the cannabis space which is something that are actually well versed and right you've recently ran a publicly owned company. How do you see the cannabis space and the crypto space I guess working together? Call it a marriage. And what does that marriage look like.

Michael Zavet: Yeah, I think that you know cannabis and  crypto are often kind of lumped together because they're both such nascent industries. That said there's a lot of perils and there's a lot of differences. They're not the same. by any means there are a lot of projects that do kind of intermingle with the two. I think that there have been a lot of challenges when it comes to creating products in the space through crypto. It seems like people were kind of targeting the low hanging fruit that didn't have too much value. But that being said I think that I mean already I know that some cannabis companies are utilizing crypto or things like supply chain management and more back end uses and that's sort of how I see it going forward. And possibly also from an STO perspective. We know that a lot of US cannabis companies for example they can go public in the US because federally they're still considered illegal and due to that they have no means of accessing liquidity in a very challenging time acquiring capital. And so, I think that is actually a very interesting marriage between crypto and cannabis being a vehicle for cannabis companies to be able to fundraise and access liquidity.

Manseeb Khan: Yeah and should be interesting to see cannabis and like and other emerging startups too later adopt like when like us when it when it becomes federally legal if it becomes federally legal in the states. of just being like a supplementary fund. We're going to launch a kief tokens and it's going to help us blow or whatever it.

Manseeb Khan: Totally and the other thing is that they can issues some unique  you know financial products that are hard to access right now. For example, they can offer instead of just traditional equity, revenue streams things like that. So, it gives investors sort of you know different products to play with.

Manseeb Khan: How do you see that shift happening because it's quite a shift of like and sort of offering equity offering revenue stream streams instead. I guess what that conversation looks like.

Michael Zavet: Yeah, I think these products already exist. I mean you know there's other things similar to bonds and things like that and it's really just about tokenizing them and you know making them accessible to retail investors. I think that's really kind of the main thing that retail investors currently. Though many don't know how to access products. I mean you know opening brokerage accounts is simple enough. Sure. But getting into some of the more complex vehicles is not so much. Buying equities is pretty straightforward but I don't think that your average retail investor necessarily understands that. You know access some other products that don't rely on equities.

Manseeb Khan: I've definitely dinged on this a couple of times, but I think it's an education thing right like we have amazing companies like. As long as you guys are educating and  like you guys out of other exchanges you guys are making security tokens a focus. And you hear about here  and there  you'll see a blog post you will see an article of why security tokens would be important but by having companies like having sole focuses on certain areas and like educating on certain areas retail investors and just like us traditional investors in general are going to have better understanding of what they want to put their money in and not put their money in.

Michael Zavet: Yeah and I think that there's going to be a kind of massive curve that has to happen. You know people need to be made aware of these products and understand them. And really also not fear them because you talk to probably your average person that's heard of crypto. Odds are they've heard negative things they don't understand. There's definitely been you know some negative press surrounding space in general . So, there's a lot of education that has happened has to be up to the companies to do that.  For adoptions happen people need to be made aware properly.

Manseeb Khan: Hey I mean I try to use. I run a financial tech podcast and I'm and I mostly have crypto guys as an icebreaker on dates and that's oh boy, like that gets a little tricky. like wait don't  criminals use bitcoin. I'm like well they do but you can also use it too.

Michael Zavet: The amount of times that you know explain that Silk Road is just that company a few years ago that is no longer around and it’s not the only use case for crypto.

Manseeb Khan: So, I mean what are you most excited about in the blockchain. And I'll even extend it out even in the cannabis space now that I recently got legal right. I mean being a being a former cannabis guy and now being a crypto guy. So, what are you most excited about in these two spaces?

Michael Zavet: Yes. So, for cannabis I'm most excited about you know the prohibition ending in Canada which is you know phenomenal and a huge landmark. and then hopefully the same happened in the U.S..I think the federal government will definitely address the issue sooner than later. So that's sounds exciting in the cannabis space and it’s definitely going to be a  huge proliferation the U.S. Canada continues to evolve in the market's maturing. You've seen new products and new businesses just great for everyone, the economy, and  creating jobs while creating a lot of value for shareholders. On the crypto side naturally, I'm very excited about the proliferation of tokenized securities and of course some bias there but.

Manseeb Khan:  Totally fine , totally fine I was like of course you are going answer like that. No worries

Michael Zavet: Yeah. I mean honestly, I think that this new market is really exciting and being able to sort of educate people and eventually bring them new products and instruments is really exciting.

Manseeb Khan: I can't wait for more of a focus on I guess just securities in general just like understanding that like okay now that everybody is going to go more crypto and go more digital. Security aspects can be a huge factor in understanding how to be safe, how to protect your assets, how to protect investments and just moving forward from that right?

Michael Zavet: Absolutely.

Manseeb Khan: Any anything else that you. Something that you curious on something that been like that you've been trying to like rattling your brain on that you want to share. Other than the core stuff that we that we discussed today?

Michael Zavet: Bear markets  keep me up at night

Manseeb Khan: Really bear markets interesting. Tell to me more.

Michael Zavet: Well I mean in the crypto the market has experienced the a massive a price squeeze  and you know the values receded quite a bit in the last few months. I think that it could be a healthy correction and we haven't seen it move very much one way or another which tells me that investors are scared is probably holding on because they've experienced pretty big losses and I'm hoping that this will you know pass.

Manseeb Khan: It just that specific sect? .

Michael Zavet: A lot of investors now become I think more bearish and then before. You are not seeing much good news coming out or not seeing much movement. It's funny because cannabis is such a big focus. You know two three years ago and then crypto came out and really took the spotlight for a while as you saw the massive price increases. And then now that the crypto prices have come down and stayed relatively stagnant. Cannabis is sort of back in the spotlight.

Yeah, I mean I think it's a little bit more of like we talked about it's like it's the bad actors that have been in the space right. In the past two three four or five years and just running massive pump and dumps. Of like water bottle coin just raise the 100 mil and disappear it it's just like OK. You hear those stories, so it makes sense like why investors would be fearful but again it ropes back what we just talked about like education is the key.

Manseeb Khan: Absolutely. I mean like there was an iced tea company you know just to curb down their name and raise a small fortune just based on that. Right. It's like a joke. And obviously I'm happy that investors are wising up but at the same time it's unfortunate some of the good actors are being dragged out with them. As traditional investors have a better understanding of what it is and like its sort of like companies just throwing AI and blockchain and ICO on the pitch deck. and actually, ok we'll like how you're actually going to utilize it ? Like investors are starting ask smarter questions those B CD players are just going to pander out and the cream of the crop could raise interest again just as a matter of type.

Michael Zavet:  Oh, totally it's a market evolution and not to mention that there are a number of sorts of pump and dumps and things like that definitely left a sour taste investor mouth. You know companies that are ARTO to venture change had blockchain in their description and raised a whole bunch capital  and you know pretty much disappeared.

Manseeb Khan: Yeah, I mean again it's thanks to you guys doing your due diligence actually showing that like hey like is actually a good actor. There's actually good in this industry and we're going to show you how.

Michael Zavet: Yeah absolutely.

Manseeb Khan: Well the best way for people who have any questions they want to get to know Hyperion a little bit more. What would  be the best way to either contact  you or just contact Hyperion. Would it be do we Snapchat you .Do we e-mail you would be the best way to contact you?

Michael Zavet: Yes, we're in the process of setting up sort of our social media and actually we're doing some you know very public facing marketing in the next little bit. We've engaged a really cool branding and ad firm to do that with us. In the meantime, our Web site is livehyperion.xyz or Hyperion. Exchange. And through that you can go to our info link and send us an email.

Manseeb Khan: Ok awesome. Thanks so much for sitting down with us today. And I mean I've  learned a lot more about security tokens than I ever thought I would.

Michael Zavet: Thank you very much for having me. Very engaging.

Outro : ou've been listening to fintech Fridays brought to you by NCFA and partners. Tune in weekly for the latest fintech Friday podcast by subscribing to this channel. The National crowdfunding and FinTech Association of Canada is a non-profit actively engaged with social and investment fintech sectors around the globe and provide education research industry stewardship services and networking opportunities to thousands of members and subscribers. For more information please visit and see if a Canada dot org.  Oh yea.

 

 

 

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THANKS FOR #VF2018 VANCOUVER!
CHECK OUT THE PICS and SIZZLE REEL!


Day 1 Photos: Leadership & Meeting Exchange
Day 2 Photos: VanFUNDING 2018 Converge conference


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FINTECH FRIDAY$ (EP.14-Oct 19): The Convergence of Data Intelligence and Money Algorithms with Ali Pourdad, Founder and CEO Senso.ai

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NCFA Canada | Oct 19, 2018

Ep14-Oct 19:  The Convergence of Data Intelligence and Money Algorithms

About this episode: On this episode, NCFA Fintech Friday's host Manseeb Khan sits down Saroop Bharwani. Founder of Senso, a data intelligence platform for the financial services industry. They chat about regulations in the AI space, fears of AI taking over the world and how screens and machines are as important as the birds and the bees. Enjoy!

Host: Manseeb Khan, NCFA, Fintech Fridays show host

Guest: SAROOP BHARWANI, Co-founder and CEO, Senso.ai (LinkedIn)

Bio:  Saroop is the Founder of Senso, a data intelligence platform for the financial services industry. Curious about intelligent machines from an early age, Saroop pursued degrees in both Computer Engineering and Neuropsychology to explore the intersection between machines and the human brain. Saroop then spent over a decade building technology teams for global Fortune 100 companies with a focus on leveraging predictive modelling to automate consumer engagement. Having supported Toronto's startup ecosystem since the early 2000's, Saroop was well positioned to start Senso to solve an industry-wide problem which he identified through the use of advanced forms of artificial intelligence.

 

 

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Transcription of Interview

Manseeb Khan: Today I have an absolutely incredible guest. I got Saroop Bharwani from Senso.ai. Saroop Thank you so much for sitting in today.

Saroop Bharwani: Yeah pleasure to be here. Thanks for having me onboard.

Manseeb Khan: No absolutely. So, for the audience for a minute could you just tell us a little bit about yourself and the inside track of Senso.ai.

Saroop Bharwani: Sounds good. We're dated intelligence platform for the retail banking industry. Essentially what we've done is we've aggregated market wide data such as credit data, real estate data location and geospatial data. And we basically predict When every Canadian consumer is about to switch a credit product such as a mortgage or a credit card from one financial institution to another this really helps sales and marketing teams at retail banks get in front of their customers sooner to be to be able to provide better offers better experiences helping them save money while keeping their wallet share increasing over time and outside their book as well. And we've been successful today to networking with a number of financial institutions in the Canadian market and not only helping them identify sales. Internal sales opportunities within their portfolios but also help consumers save money while increasing their bottom line at the same time. It's been super exciting for us the Toronto startup ecosystem has been tremendously helpful in launching and getting to the stage that we're at. And now we are planning a U.S. expansion

Manseeb Khan: That's also incredible can't wait for the U.S. expansion. So, your story is a little bit more unique than any of the other startup founders out there. You actually turned your former employer to your customer. Could you share a little bit more of that story because I think that story is super fascinating on what you did there.

Saroop Bharwani: You know it feels like a long time ago. My first customer. One of the big prime banks in Canada. I actually used to contract for about three years ago and I've been around the block. And usually when I get into a situation where I work for a financial institution whether it be a full time, or a contract position I have built relationships all throughout the organization. But I also I've always stayed in touch with the Toronto startup ecosystem. I've witnessed the Toronto startup system grow to where it is right now since the early 2000s back in the day when it was just a few people in a room demoing our products to all of these crazy hype events today and all the great hype around tech. I've always managed to stay close to the great people and startup community. One thing I realized when I was at the tail end of my contract at this particular financial institution was I wanted to get back into the startup game and I had a particular idea of what space I wanted to play in, but I just needed to hone in a bit. And so, on my lunches and after work was the last six months that I was on that particular project. I met with anyone and everyone I could on that knew something about the space that I wanted to launch a startup in. And you know 10 meetings turned to 50 and that turned to 100. And by that time, I had sort of honed down on a very particular insight that I'm not about a lot of other people have been thinking about at the time and that's when I knew I was ready to jump ship. I had met my co-founder through those 100 meetings and I called many of my team members that I've worked with over the years in the retail banking space and that's literally how Senso I was born I jumped ship and we got started to building and that because I maintained great relationships at all the financial institutions I worked with I essentially went back to the one that I previously left and pitched them the idea and they loved it. And essentially the rest is history. They took us on board and instead of being a contractor/ full time employee I ended up being a vendor.

Manseeb Khan: That's also incredible. The whole within 50 meetings or so you find your co-founder at 75. I might be messing up the numbers, but I wasn't 75. You actually meet your mentor which was when you broke it down that way. I was like wow that makes a lot of sense. That makes total sense of like 75 meetings and you feel good. You know exactly what you want to do, you know exactly what you what your vision is, and you can definitely find a mentor to help guide that.

Saroop Bharwani: Yeah. And the other side of it is just managing risk. You know people just want to kind of jump into the startup world really not knowing that. It is not as glamorous as you see in the media. Right. You got to go through you know a couple of years of, you know painful sort of figuring out what you're doing and that's just the beginning. So that uncertainty only realized after jumping ship and I was very thoughtful of the fact that in order to mitigate that risk I needed to build a certain amount of runway to survive for a set period of time in my case was 18 months and get my family on board. You know my wife ticklers has been a great supporter along the way.  It's important to have that co-founder of life as some I call it, I might be the only one in that sense. So, to jump right into this AI is an absolute behemoth of a topic right. When you think of AI conjure up images between IBM the big blue player and the I guess its kind of like the world's biggest chess game right. You have like players like IBM of Amazon Facebook have all these big guys coming into it right. So, I guess for the purpose of the show what it means to you. What are the key problems the AI will solve in FinTech over the next few years. And what does this mean for incumbents, businesses, And  just a general.

So look put it this way. Mean having come from a banking background. Where me and my team and built these types of predictive models for a number of years. these types of models the machine money models in particular have been around for a long period of time. In the past five years, we've really hit a tipping point and this convergence of bigger data sets more sophisticated algorithms and more computational power which have enabled this new wave of technology that's really created this hype and a lot of it is hype. But the concepts of these algorithms have been around for like 40, 50 years. We just haven't been able to make use of them until very recently due to the convergence that I just spoke about. Now when I think about AI in general is I do think that the most difficult part for me and many people that I see especially wanting to get into AI is just seen through the noise of who's actually simply doing what was always done in the past versus cutting edge actual AI. I would say right. when it comes to any of this to break it down what all of this is just lines through a bunch of dots and simply put it is just using statistics and a lot of great data and computation power to come up with these results that get better over time. You know we've hit that tipping point where a lot of this stuff is useful for enabling computer vision and these other sensory tasks that we see all this magic happening. For me it's exciting to see that we've hit that tipping point. But it's no different from the path that people who have worked with machine learning for many years. It's that same path we're going down and is getting more exciting because new doors are opening up through the convergence of many of these many of these things that I've spoken about. But to me I always question who's actually doing this stuff versus all the hype out there. And from a marketing perspective and it's hard to differentiate that. And while I would say it's super exciting and breakthrough it's also hard to understand you know what is going on the market from who is actually doing cutting edge stuff it was not.

Manseeb Khan: It is all hype right. This whole fintech space this whole boom is all hype. So, it should be interesting to see who panders out and who actually sticks through it and who the real players are in the next 10,15,25 years. Running an AI focused company. What does it mean to you? From all the mentors and all the meetings, you've had. How did that change from day one of starting an AI focused company to know that you've actually been through the next 36, ran through TechStars and just had so much more acceleration.

Saroop Bharwani: Yeah. So, I mean whether it was using machine learning and AI to solve the problem or not. One thing we knew from the very beginning is. We knew intimately what the problem was that we wanted to solve. And that's what we really focused on. It just so happened that we got access to it very early on a dataset that enabled us to prove this worked in a very controlled environment. I think that the support of the AI community in Toronto was perfectly timed for us in that the doors that were open for us in terms of resources in terms of getting data sets in terms of accessibility to customers who were open to testing this out. So, all happened at a perfect time for us. But when it comes to being an AI company I would say it all comes down to the data set you're working with. And if that data set is pure enough to produce the outcomes that you're looking for or that provide business value to solve that problem or it achieve that task you're in a good spot. But I would say that my recommendation to anyone wanting to start an AI company is if you want to start in an AI first company understand what data you have access to because if you don't have access to data you're not going to be able to do much at the get go. And that's where I would really think about approach and what type of business you want to become. Because you don't want to get into an AI business because of the hype of AI and putting that in a flashy deck. You want to get into it to solve real problems and achieve real tasks that drive business value. And then if AI happens to be a mechanism to enable that that's great and that's what we realized very early on and we were just supported by the right advisers and people to be able to bring it to fruition and get to where we are today.

Manseeb Khan: I mean you want to make sure that your models make sense and you have enough data to back it up right because the main reason big business are going into AI it's because I have so much data to pull from and that's why Facebook and Amazon are going. And even IBM are going into the because years and years of data pools they can just are pulling from and to start testing and learning and building models.

Saroop Bharwani: Yeah, I mean that both those companies have been data driven from the ground up. So, they have an inherent advantage in taking advantage of the most cutting-edge technology. I would say the many of the enterprise firms out there haven't invested the dollars into really streamlining their data to be able to enable a lot of these things and a lot of the things we do on a daily basis is ensuring that data purify to be able to enable the outcomes that we want to achieve. And look some of the customers that we have and partners that we have invested very early on into their data and they're in a position similar to you know the big four you know Amazon, Google, Facebook, Amazon to be able to really deliver value outside of this. And I see this on a day to day basis kind of companies that are doing this well and companies that are not. And that is very interesting to see my insight is the reason why this taken so long for many of these enterprises to do this is for the very reason that the data is really all over the place and it needs to be brought together and streamlined into sort of an automated process to enable the models to learn vs decay.

Manseeb Khan: So, I guess what are the immediate and future opportunities when it comes to AI and as a community what does the foundation of AI look like?

Saroop Bharwani: Yeah. So, the immediate opportunities I think are. The cutting-edge opportunities I think are happening in things like computer vision, language processing. Even the some of the things we do with more sophisticated and algorithms in financial services are proving to deliver better results than some of the models that we built from within financial institutions. I think what I'm excited about is once you purified the data and aggregated the data in a way where you can produce better results using these new algorithms. it's far more  accurate than if you just kind of threw a bunch of sparse data into an old school decision tree and that's been going on for a while. So, I think we hit that tipping point to me the  enablement about actually doing that is the most difficult thing. And again, like a model may work really well. you know the first couple of times but if you don't have that automation and that sort of pipeline. I think that your models are ultimately going to decay and they're not going to be able to keep up with many of the changes that occur in the market whether they be economic or behavioral or whatever the case may be. We see that on a day to day basis when we test some of the more sophisticated models and pipelines we are with some of the other ones that we B test against which are currently being used by many of these companies out there to enable their predictive analytics engines. So, I think that's immediate future. I think that if it comes down to the mediums we're going to be interacting with today we interact with our mobile phones. But I think tomorrow they could be completely different devices Thalmic labs is launching their new smart glasses and I think that you know once the development community starts building on top of those platforms. It's going to start opening up opportunities for entrepreneurs to build new experiences using AI, using computer vision and all these great things. And I think that's scary because a lot of the stuff you see going on here in terms of research the exciting research that's happening is also the scariest in the sense that you know being able to mimic someone doing something that isn't actually them. I think that opens up a lot of privacy questions that we're going to have to face in this in this century. And I think that privacy the way it is today ultimately isn't the way it's going to be in the next century. And I think it's going to open up some really interesting debate. some sort of solution is going to be necessary in order to resolve the privacy concerns. And that's a whole different discussion that I'm happy to get into in more detail if you'd like.

Manseeb Khan: Yeah no absolutely so I guess it's a we've talked in a couple past episodes of the whole digital identity thing right and how companies are pushing people are pushing for this whole digital identity that you deserve to own your identity and use like your digital identity right. You decide to share and not share whatever information businesses might need. And now that now let's head out guys can kind of mimic that. That puts that whole sovereign identity thing into question because that gets a little scary.

Saroop Bharwani: Yeah. Absolutely and I think that that's when people hear you know Elon Musk and Stephen Hawking talk about A.I. taken over the world. Everybody pictures like Terminator robots and things like that. But I think that in the immediate future. It is really these breaches of privacy that you have no control over that are ultimately going to really bring up big questions and make people forget about. Everything else that existed before because nothing else will matter. When certain countries are mimicking other political leaders just say something about another country that isn't actually them right. And I think that it is scary when I think about children and bullying in schools and on social media. You don't get the ability to mimic someone doing something that they're not actually doing. That being so accessible to us today that is something that's going to bring up a lot of questions and I'm on the camp that data. Your data should be in your hands. And that is a concept that is very great today and I think that that's going to be one of the biggest things we're going to have to solve for in the 21st century.

Manseeb Khan: It's going to be a slippery slope of  how we take the human experience and put it digitally. And what do we decide to like to input it and not input when it comes to building these AI's right because ideally, we want them to be as agnostic as possible,  but we still want them to have human traits of them because there are amazing things about humans with are also very devastating things about human. So that's going to be a weird balance that we're going to be that that's happening the next coming years when it comes to building out these

Saroop Bharwani: It's going to be disruptive  without necessarily our control because you know it's in the hands of developers and entrepreneurs who are really enabling these experiences for good or for not good. Right. Like you know there's both sides of the equation. We've seen this in cybersecurity for years. There’re people who are protecting and there are people who are attacking right. And that that is not going to be a different concept when it comes to the use of AI in these sorts of public settings.

Manseeb Khan: No I absolutely agree with you so I mean you've already touched a little bit of Elon Musk and Stephen Hawking so I'm going to jump into this question a couple of weeks ago you saw Elon Musk go on Joe Rogan and one of the questions that Joe asked you on was his fear of a AI and Elon's been saying for years he's been warning the public it's warning people about the dangers of AI and how we're moving a little too fast when it comes to AI. we've got to be pretty much pulling the reins like slowly analyze everything making sure we're doing this for the right reasons and not jumping because like you've mentioned a couple of times not because of the hype right. Even Stephen Hawking. I'm going to quote the development of a full artificial intelligence could spell the end of the human race. It could even take off on its own and redesign itself as an ever-increasing rate. Humans are limited by slow biological evolution cannot even compete and will be superseded. So that's in and of itself we are seeing all these entrepreneurs all these amazing visionaries saying that like if we don't. Take a very close look at what we're doing with AI and not believing the hype. They could very much if eviscerate  the human race and just completely take over because they are revolving within microseconds. So, my question is. What are you what are you at Senso.ai doing priority wise to make sure none of these fears come to reality and. Hoping that other startups like yourself are doing to make sure these fears don't come into reality?

Saroop Bharwani: Yeah. So. You know in answer to an end to your question it's really, we run our models and  our pipeline in a very controlled setting. And we're constantly monitoring the biases which exist in the you know historical data is only good as the humans that put it at it or the process that input it. Right. But there are ways to rebalance these models to be able to reduce bias. And I think that is a responsibility that every AI company needs to take like we heard about you know Amazon recently brought lunch to recruit recruitment tool which was like bias  I think that was a bit premature for Amazon to launch that because they had to think about their historical data and how to rebalance that data to ensure that. And I'm not talking about statistical bias I'm talking about just general human like bias rate like the bias you would have towards a gender or race. Right. And those are things we see every day when. We use our data. And that's where the rebalancing of the data is very important and there are techniques to do that. And I think it's the responsibility of every AI company or company that's using any sort of predictive analytics to make decisions which impact humans. That's a responsibility they take on. You don't from a more broader perspective in terms of what Musk and Hawking are talking about. I question whether it's even we're even in a position to control. Right. And you know while it is scary  I think all of us have some sort of an addiction towards social media. You know in putting information in the internet searching on google where those are tools that we have we rely on these days to get information to see what's going on with your friends to just have that instant gratification. Right. And you know as generations passed and the younger generation Z and even younger than that they don't even question sharing their data. It's inherent in the way that they were raised, and they grew up because they grew up with this technology. can that input of information stock because if it doesn't. Ultimately the training of these models and these algorithms is not going to stop. And they are going to get more sophisticated over time. And I think that that exponential increase in inputs that we're feeding in to these systems is essentially what Elon Musk and Stephen Hawking are talking about and I feel that as humans were bad predictors in how soon or how soon things are going to happen and you know whether it's sooner than later or later than sooner. I think it's an inevitability that it's going to happen. I think all we can do is be responsible prepare and reduce these biases that exists in our models so that we assure that it's more of an oddment in symbiotic relationship versus ones where you know the AI's goals are different from our own.

Manseeb Khan: No, I absolutely agree with you on that. I guess if we're not if we're not careful of social media everything else it's going have a way bigger pull towards us for not even our generation but for the future generations if we are not careful.

Saroop Bharwani: Every like, every post, every tap. Everything is training right. It's training their models. When you look up the Easter bunny on google and it presents you with a bunch of pictures of Easter bunnies you clicking on that image of the right Easter bunny. You know is training their models even more. Right. Think about that that's happening with every single interaction and where the direction that Amazon. And Google and all these companies are going you know eventually and maybe it's the case right now we know but maybe there are algorithms and their models are much more sophisticated than we think. They may just be controlling it in a way where they are taking a responsible approach but that is questionable. Then you get into the whole conversation of regulators actually treating them like the oil companies. Back in the early 19s hundreds. Are they too big? Do they have too much data? Do they have too much oil to stand on their own or do we need to break them apart.

Manseeb Khan: So, speaking of regulation we're seeing a huge push. Of regulation when it comes to the crypto and blockchain space but we're not really seeing that much. Regulatory push when it comes to machine learning. I guess my question to you would be what some of the regulations are you'd like to see put in place. And I guess what the role of government is. Because you're seeing a role in government. Starting to form when it comes to block chain and crypto we want the exact same thing when it comes to AI?

Saroop Bharwani: I think that the Government's got to really think about how to put the right rules in place to be able to ensure that models being released are not biased towards one human outcome or the other and are making the right ethical decisions. But at the same time without hindering innovation and I think those are the two tradeoffs. That is tricky right because I'm a big proponent of faster innovation and I love this whole concept of entrepreneurs. You know being able to actually create the next Facebook or Uber or whatever the case may be out of their bedrooms. But at the same time based on  Elon Musk and Stephen Hawking's and their concerns and  my feelings towards that too and what's to come.  I do think it is a dangerous path that we go down without some sort of rules being in place. And I think that that moment is going to be more evident. And it's going to get the attention of regulators at a certain point in the future. And I don't think we're too far away from that. So, I know you didn't specifically answer your question but for me it's more of a tradeoff. Innovation versus making sure that these models are built in a responsible way.

Manseeb Khan: Right. So, it's finding that happy medium of still having regulators be the government or be it some other body making sure that everything's OK everything's on the up and up So new players can actually have some kind of structure to work with. But at the same time not hindering innovation because. That's the whole reason why you're seeing such a huge hype behind AI, blockchain and any crypto because it's very agnostic it's very decentral right?

Saroop Bharwani: Yeah. And I wouldn't even say that it has to be regulators to put these rules in. You want Musk as a guy that what matters into his own hands right. I don't know. It's going to be regulators like is government going to be able to move fast enough and implement regulations based on the real facts. Right. And ultimately that's the biggest question for me right. And that well we'll see. I think in the very near future what the outcomes going to be of that.

Manseeb Khan: How we started the whole episode is that you got very lucky when Canada was just getting on the AI boom right. So, Canada's emerged as a global leader in AI. How did it happen? And I guess what it means for innovators and investors entering the space and is it too late to get into the game or is this just the beginning.

Saroop Bharwani: Yeah so, I mean when we got into it the AI Buzz wasn't I When I decide to do this we really mean think about AI. It was a consideration that we were going to use predictive analytics and machine learning really. I mean I think about eight months into it really this whole AI boom started, and we were fortunate enough to be very well timed and being supported by the community very early on when they were still figuring it out. Now it's at a stage where  I think it's fairly it's grown. But I think it's still got a long way to go. The community still figuring things out and that's going to take a while. I encourage anyone who sees it sees a problem a big problem that they could potentially solve as being prime candidates towards starting their own companies. And I think they'll do great again as long as they're focused on the problem and ensure they have the right tools the team necessary to execute. That opportunity is always going to be there. I think from the challenge right now is for entrepreneurs and innovators has higher levels of competition. And that's something that we're going to continue to see. And from an investor standpoint again I think there's a lot of noise over companies that are doing truly innovative stuff and have a good go to market plan versus companies that are just putting A.I. in their deck because it's hype right. They may be great companies not doing anything related to this stuff, but they may be putting it in there that basically to get investors’ attention. And I think that that's come to a point where it will work against you if you just say you're doing AI without having some sort of a fundamental proof that your technology is based on some sort of. Cutting edge technology that's been accessible to us over the last that say three to five years.

Manseeb Khan: What's going to change that would be the education factor towards the right like you're saying Hey you're seeing a lot of startups even throw ICO and even just tokenize their whole business even though they may or may not even actually need one. It's the lack of education. I think in the next three to five years they are amazing companies like you and some of the other ones in space educating people teaching people that like hey this is what AI is, this is what AI means to us. And the more informed the general public just innovators and investors are when it comes to that space. It's just going to start weeding out all the B, C, D players.

Saroop Bharwani: It is yeah people are just going to become as you said more educated on this and I think that the great thing about these podcasts that you're doing is it enables people to become more in the know when it comes to .What is actually real versus what's not, what's worth investing time and money into versus not. And look I'm very sympathetic towards all entrepreneurs and I encourage even first-time entrepreneurs to go for it and really think through and mitigate your risk in starting this and you'll be supported by the community. But ultimately you know entrepreneurs usually have to go through a road of paying their dues in order to realize what this game is all about. But everybody's got to go down that path. Right. but I think that as people get more educated through podcasts like this and through the community. It's going to be easier to differentiate. Between ones that are real and not.

Manseeb Khan: There's no shortcuts when it comes entrepreneurship even though podcast and blog posts and videos on YouTube are definitely going to greatly help who still have to pay your dues. Still go through many obstacles fail, try again, fail try again right. there's no there's no shortcuts. And again these B.S. CD players are going to learn that sadly the hard way. But again, that's life. Man, versus machine. I know we touch this we touch a little bit of what is this going to look for the generations to come. So, man versus machine. Who's winning. And I guess what the future look will like for our kids. Right we're already seeing this rise of you seeing babies just being drawn towards tablets and I don't know if you see the cute little video of this baby who had a tablet and that the mom took away the tablet and then She was just on the table. And then it was a glass table. And she was to swipe, and she couldn’t it and she was like she's looking at the parents like whoa what happened like they give her books you can swipe on the book like she's losing her mind I guess is that is that the future for kids like is it only going to go downhill from here. Like what's your opinion on that ?

Saroop Bharwani: Yeah, I mean look I don't know. It's downhill. I'm more I'm an optimist when it comes to technology enabling us to do better. That's right I also see the other side of it. And look I look at it from the perspective of my dad you know like having a young daughter at home. Really. I see her older cousins. And all the people that are around are the kids that are around her really being attracted towards technology. And I think generation after generation it's just becoming more and more natural for these kids to resonate towards technology and I think it's inevitable. The path that we're going to go down I don't see anything stopping it. Maybe regulation can come in. But technology has always found a way to break through. It may pause it for a little bit or it may slow it down but it's inevitable that one day something incredible is going to happen. And it's also scary too right. So, I think our kids are going to grow up in a very different world. And we grew up and I remember when I was a kid and it wasn't about sitting at home you know playing videogames or anything like that it was playing outside and not coming home until dinner time right. Like I was I was like literally my summer vacation. You know it was. It was never in front of screens or anything like that. Kids today are very different in that technology is part of their lives from the minute, from the minute they're born. And you know I think that that's something that we need to accept. And I think that based on our discussion the last question on educating entrepreneurs and venture capitalists on what startups are real or not. We also have to educate our children. From a very early stage about things like what are the costs and consequences about sharing your data. Don't just freely share your data. Think about the fact that when you share your data someone needs to give you something in return and you have control over that data. Understand that everything that you post or everything that you display publicly is accessible to a man or a machine that could use that data for good or for evil. Right. And these things could have consequences to you as you get older. And I think that it should be a part of our education system and teaching our kids to be very conscious about the way they look at interacting with machines. On the other side of it I think that machines. Being a part of our lives, we wouldn't be where we are today, and we wouldn't be able to do all of these things these virtual podcasts or anything like that without the augmentation of machines. And I think it's incredible the fact that anyone can create this out of their bedroom or their garage. And I'm excited for that. I'm excited to teach my kids to be entrepreneurs and to use technology to create, and to make and to build for their entire lives. Because when you think about the future of work I see it more like being an entrepreneur versus working in a cubicle for 30 years and a large corporation. And that is the future that I find exciting and I think if our kids are educated they'll grow up in a way we'll harness this technology and use it for good in a controlled way where they'll protect themselves at the same time.

Manseeb Khan: Yeah, I think having the talk of just understanding the both the positives and the consequences of technology and the new waves of technology I think that's a very important talk for parents’ teachers. Like any anybody with like younger siblings or younger kids and making them understand like Hey the terms and conditions that everybody skips over is very important to  actually understand having these free services and you freely sharing information that there might be consequences and repercussions in the future and just understand that like right like everything on the internet forever and you have to be cognizant of like even though you're a kid you have to be still be cognizant of what you say and what you don't say.

Saroop Bharwani: Absolutely. And look I hope our education system is thinking about embedding these sorts of learnings consistent learnings throughout the process from a very early stage. Look I think that in the future even now that the talk with your kids about screens and machines is as important as the birds and the bees.

Manseeb Khan: Yeah no absolutely agree with you. And it might not even be school systems it just might be another educational entity. You're seeing a rise of online courses  everything. I learned business wise and marketing wise I learned online what I learned through YouTube and like Udemy and all these other courses compared college, so you might be seeing a shift when it comes to kids as well of like. If they want to learn how and what the  Decentral AI looks like boom, there's 15 YouTube videos I'll just give you step by step walk through of what that looks like.

Saroop Bharwani: On that on that note right. I think you know one of the other fundamental shifts that's going on right now is that if you're not a lifelong learner. ultimately, you're going to fall behind because things are changing at an exponential pace. It's not about getting a university degree anymore and working at the same job for like 30 to 40 years. your graduation from a university is just the beginning of your learning path for the rest of your life. And I think that society needs. To go more towards that than anything else and that is essentially why entrepreneurs become entrepreneurs because their inherent value ultimately is going to increase along the way at a much faster pace than if you're in an environment that doesn't enable that type of forced learning. Based on the situations that you're put in front of that you really got to dig yourself out of. And that's what entrepreneurship is great for and all about despite how hard it is. Your inherent value increases at a much faster pace. Yup no I totally .

Manseeb Khan: There's a really great Muhammad Ali quote when he said that if I think the exact same way that I thought 30 at 50 then I wasted 20 years of my life.

Saroop Bharwani: I know that one all too well. I know it's great quote. And that's exactly what I'm talking about.

Manseeb Khan: Saroop, thank you so much for sitting down with me today. I cannot wait to have you on the show again.

Saroop Bharwani: Awesome pleasure. Thanks so much for doing this.

 

 

End of Podcast

 

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THANKS FOR #VF2018 VANCOUVER!
CHECK OUT THE PICS and SIZZLE REEL!


Day 1 Photos: Leadership & Meeting Exchange
Day 2 Photos: VanFUNDING 2018 Converge conference


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Not yet a done deal

 

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FINTECH FRIDAY$ (EP.13-Oct 12): Road to Fintech IPO: Capital Networks, Scalable Solutions, Putting People First with Ali Pourdad, Co-founder and CEO Progressa

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NCFA Canada | Oct 13, 2018

Ep13-Oct 13:  Road to Fintech IPO:  Capital Networks, Scalable Solutions, Putting People First

About this episode:   On this episode, NCFA show host Manseeb Khan sits down with Ali Pourdad the CEO of Progressa who recently closed out an $84 million dollar round. They talk about P2P loans, loan services operating within the blockchain and why being people first business matters. Enjoy! (see Transcript)

Host: Manseeb Khan, NCFA, Fintech Fridays show host

Guest:  ALI POURDAD, Co-founder and CEO, Progressa (LinkedIn)

Bio:  Ali Pourdad has been CEO of Progressa since its inception in 2013. Under his leadership the Company has raised over $40 million of investor capital and invested over $2.0 million dollars in its proprietary "Powered by Progressa" decision engine for Canadian Enterprise partners looking to enhance collections strategy in a positive way. The company has grown to over 110 employees in Vancouver and Toronto. Ali has decisively positioned Progressa for its next generation of growth by recently executing on several initiatives, including creating one of Canada's most popular Exempt Market Bond Offerings and securing an $11.4 million Series A financing .

Prior to co-founding Progressa, Ali worked in both corporate restructuring and audit & assurance, with the bulk of his professional career at PwC, where he managed top-tier engagements of financial firms. Born and raised in Vancouver, BC, Ali holds a Canadian Chartered Accountant degree and a BBA in Finance from Simon Fraser University. He began his professional career at a young age, co-founding a leading IT services firm with locations in Edmonton, AB and Vancouver, BC in 1998. Ali is also a regular contributor to Business in Vancouver's weekly radio technology panel and was named to BIV's Top 40 under 40 in 2017.

 

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Transcription of Interview

Manseeb Khan:  Hey Everybody Manseeb Khan here. And you are tuning in to another episode Fintech Friday. Today I have the amazing the incredibly talented Ali Pourdad CEO Progresa. Ali thank you so much for sitting down with me today.

Ali Pourdad: Thanks for having me.

Manseeb Khan:   Yeah so Ali could you just give the audience a little bit about who you are and essentially who and what Progresa is.

Ali Pourdad: Sure. I'm happy to. I think for those who are not aware of myself or Progressa I have a background as an entrepreneur. I've been there for about 20 years. This is my second business I had to get out of high school. Pre Dot-com which shows was my age. This is my second life. We started Progresa back in 2013 in Vancouver . Me and my co-founder originally started off as a straight consumer finance lending business. And sort of quietly behind the scenes we were building software. And today. I would say we're sort of a full-blown financial technology company and we have a lending business. That drives a significant amount of revenue but we also. A multitude of software offerings for our major Canadian enterprises. We solve problems for Canadian business.

Manseeb Khan:  Yeah that's incredible. So, this might be a silly question, but I guess we'll make you a little bit more different than Money Mart and any of the other loan services out there.

Ali Pourdad: Sure. Yeah but you don't see companies like money mart or other loan services, companies as a competitor because. We don't we don't go direct to consumer like they do. So. A company like many of markets has branches, HYG online but there are really seeking consumers and going directly at consumers for lending products and offering them. Credit where they actually paying cash in their pocket and not necessarily helping them  helping them. Progressa fundamentally different. All of our customer acquisition comes from other businesses. And we're typically solving problems for those businesses and probably problem for those consumers. And what I mean by that is our software is setting up and offering a number of services. But the main purpose of at least  two thirds of our software solution. Revolves around enterprise collections and try to have a healthier and more of a holistic approach to the recover money as a Canadian enterprise so. That would be an example of you know a young lady or a young gentleman who's going through a tough time in the past that. They owe. You know Roger or TELUS money. Progresa is the company that will come in and help facilitate that recovery for those enterprises. Help them recover money but also offer a better experience. To that young lady or that young gentleman who might be going through that tough time or stressful time. Ultimately. What that means is that larger TELUS, Bell, and other enterprises that use Progresa. Will have better net promoter score. Better. Which is better customer satisfaction. And ultimately manager their risk better for them. There's been real demand for differences between that and traditional lenders. All of our loans for example the customers will actually not seeing money, we're helping pay their debts and pay down the debt. And leaving them into better financial life.

Manseeb Khan: You guys also do. I mean I've from looking from your website and from some of your past blog posts you just do go a little bit more deeper than credit scores. You start building I guess a customer persona. And just like a characteristic of like who this  person is their past history someone is not in and of itself is pretty incredible because now the loan is a lot more  personalized, it's a lot more individualized`.

Ali Pourdad: Yeah exactly and that's a very good point. I mean we do have a proprietary technology that we built over the years. Technology is quite different than what's out in the market today, what's out in the market today is, you put it very well it's not personal. It's very generic and it's very archaic. And so, it leaves a lot of the population in a position where. They can't be helped even though they might be financially responsible or living within their budget. You are doing all the right thing but. On paper it doesn't reflect that. That's where Progressa shines that. That's why we've been successful even quietly growing behind the scenes because. We'd be making major investment. And that technology that allows us to evaluate these consumers just fundamentally differently and give them credit for things that might you might not necessarily see as a traditional lender.

Manseeb Khan: So, you recently raised the 84 million dollars round which is absolutely incredible. Previously you raised a 10-million-dollar round. You took a much more alternative approach compared to the other startups out there. There were a lot more loud a lot more bullish. In a sense they have the mentality of You don't need banks, we don't need do we need the old world because we're building the new one right. We don't need your guys help you guys look much more silent a lot more tactical route of quietly building partnerships with banks and credit card companies. Could you talk a little bit more of that approach and what that approach looks like and what would your advice look like to other startups on collaborating with banks and other institutions.

Ali Pourdad: Happy to answer that question. I would say there was always a very well thought out plan in the early days when we first launched there was a lot of fintech’s out there that. We’re making quite a bit of noise in the marketplace. A lot of that noise revolved around either taking down the bank or replacing the need for banks etc., etc. . And you know in the Canadian marketplace we have an affiliation with the bank that's going to be quite hard to displace. And we saw that in the early days. So, you know what we decided to do is just invest in. Trying to tackle bank problems. What are the things that the banks are trying to tackle and how can we? Help them be more successful. That was a fundamental decision we made early on. We did it quietly and without making noise because. Frankly we weren't ready to scale the business and have been a business that had both. Technology and lending. You're not going to scale until you have scalable technology and you can't have scalable technology until you have a track record behind with. Very chicken and egg. You have the built of a little bit slow and steady or you risk blowing up your company. And that's what we did. And we now reach the point this where we that we have a very strong foundation as you mentioned. We raised a big round that round the reflection of. The sort of the order that we chose to tackle problems. And investors saw that they saw that we hadn't blown up our business and that. We're you know conscience of investors capital. And they doubled down and supported that next stage. You know my advice entrepreneurs considering building disruptive technology you really need to evaluate what your road map looks, what's you path revenue. Or if you have a better revenue try to disrupt banks or try to work with banks. Sometimes both can be achieved at the same time and. That's the route the Progressa chose.

Manseeb Khan: Some of the investors mentioned that you've actually from day one you started operating the business as it was a public company. You know you talked about how you guys built the very strong foundation. Could you just give us a little bit more detail of what that foundation looks like and how you pretty much just muted out everybody else and just put your head down and just build Progressa.

Ali Pourdad:  Sure. Yeah, I mean I know my background in between my first business and Progressa sort of pivoted professional services I became a chartered accountant I worked at PWC for a number of years. Really built up my professional skill set so that. I knew that one day I go back entrepreneurship and I really wanted to have a good tool kit. To build a business in a proper way. You can help businesses any number of ways a lot of entrepreneurs get lucky, some of them blow up their businesses. I knew that this type of business was going to be successful I need to build the skill set. So, with a professional a background I very quickly started to build the team and the right spot. And we focus on things that we knew were going to be needed to rebuild capital. Making sure we have proper financial reporting, making sure we have things like insurance, making sure you know we have good controls, getting audited financial statements and so on and so forth. And we made all of those investments right off the bat. To raise money in the Canadian marketplace. Well there's a lot of heavy regulation. You know the government securities regulations in each of the provinces. Is there to protect investors and rightfully so as a company that you know had a strong report below like we do. We had to have all of these checks and balances in place . In order to be able to successfully raise money. Today, that got an easier because we're more on the radar. But as early stage startup when you're going through these things. Such as one of one of the things you might not think about that makes  will make life easier for you. Make those investments. So, you know allocate capital to proper lawyers. Allocate capital to make sure you build your finance team. Have that reporting to share holder reporting as well it's very important in the early days. To keep you're a shareholder in the loop people and keep them happy. Because you might be going back to them for more money and investors are happy to see the right track to a great growth story. But you've got to deliver what you say.

Manseeb Khan: So, I guess sticking with the same chicken and egg analogy that you previously mentioned you want to make sure you have all your ducks in a row before you start bringing on investors and everybody right.

Ali Pourdad: Yes exactly. I mean we would I mean nowhere we're 6 years in, and we bootstrapped for the first couple years we've totally bootstrapped the business. I don't remember having a management team up until two and a half years into the company. So, we were probably. 20, 26 people before I hired my first other senior manager. You know Ali was HR, He was the CFO. He was legal. I did. I'd basically over just over 20. Individuals in the organization. And tell that point you know as an entrepreneur when you reach that point and your business is run rate is reaching a point where you. De-risk the investment. To the point, we have reached that. You know we've got to the point where the business has started to prove it or start to prove that. Even if we do start to make the right investments and people and scalable technology that we could build something big. Once we had the core competency of the central bank when we take. Both decisions. You know I would be going any other way. in any  entrepreneur that's looking to start a business today. Simply understand you're core competency first. Do that. Make the investment and understanding that before you build. Anything scalable on top of that. You want to make sure that you're building on the right foundation because you'll still move faster you pay your investors a lot of money

Manseeb Khan: You guys are also gearing up to go public by the end of 2019. So. Again just talking about the huge round that you just raised. What got investors excited? Was that a marketing experiment?

Ali Pourdad: To give credit to the investment bankers that were involved in our fund raise they did a good job positioning Progressa of the Canadian marketplace. Listen we may go public, we haven't officially announced anything, but the reality is that a lot of the market driven. we're executing on growth right now. The business is reaching record run rate on revenue and the bottom line and it sets us up to go public nicely. That's what our Board decides to do and our shareholders support. We do have a number a lot of shareholders. They were already about 200 shareholders are Progressa today. So, you know as a small business with 200 shareholders everybody has to be on. The same page about a decision like that. There's lots of avenues for late stage private companies to. Create liquidity for investors if that's their plan. My personal plan is to continue to execute on our strategic plan that our board has signed off on. It's ambitious and it grows this business into a very credible player in Canada. One thing that you mentioned earlier that all sort of reiterated that we had. Very much flown under the radar for 3, 4, 5 years and now we're trying to get on my radar. Where you can fully expect that. So, we're going to be. Doubling down quite hard on that side of things and therefore you know we're going to be more on the radar than ever before. And that's very much a function of launching our technology offering publicly. And you know all of our technology offerings that we made all these investments in. Have supported a growing lending business. But today they're ready to support. Other companies and support them and help them achieve their business objectives. And  you can expect to be hearing a lot more about Progressa as we roll up those products in the coming weeks.

Manseeb Khan: Yeah, I'm super excited just to see like what's going to be like the changes that may or may not happen now that you guys are going to be a little bit more on everybody's radar. So how are you going to keep the team and Progressa motivated healthy and productive and how do you see I guess the environment changing I mean I a rumor going public?

Ali Pourdad: Yeah, I mean there's different challenges for us as a Toronto and Vancouver company as they try to make. There are two very different cultures. I think.,  The first point is that you have to put the people first if you want to grow your team in a healthy and productive way. you make investments and bringing the right leaders in the work of younger teams that motivate them. But you also have to keep an eye on market trend is that you know you're out there especially in a large organization like we are. They're always talking they always have their eyes and ears on their friends that other organizations to stay competitive truly competitive you need to have a proactive strategy with your employees and not reactive. You know as it relates to Progressa today we really doubled down on people we've made serious investments in our senior H.R. people. We just went on Merit Finley the senior executive from over venture just literally started and this last week, really big win for a company like Progressa because you can't navigate this late stage try this. Potentially IPO scenario without a person like that. The IPO that just leads to bigger and better things. I mean I would expect our team to increase in size modestly. But I our H.R function that really where I would be focused. If you were to IPO, you suddenly now have different challenges and risks. And you need to keep people first That have a people first philosophy. As long as that  doesn't change, and you double down with  everything else. Then post IPO should look really good.

Manseeb Khan: There are a lot of startups that both have either office in Vancouver and in Toronto. I guess your best advice to them would be just double down on people focus on HR and just be there for every single individual in the company because they're the people that are going to help build your amazing building and your business right.

Ali Pourdad: Absolutely. I mean are companies are complex, as an entrepreneur you may not see that on day one. You may be just doing everything and happy to do it and that sort of learning things on the fly. But as you build out teams and build out processes start making investments and technology becomes very. Sort of evidence to how complex it is. And., I think. You know my advice obviously try to simplify it as much as you can and keep things simple for yourself and for your senior leaders that you bring on. Businesses are inherently complex and if you don't keep people first they get  burnt out They don't grow. They get frustrated. You really have a people first mindset to drive that. We haven't always had it right. Progressa it's not something you get right. Right away, you sometimes make mistakes you hire the wrong people and you just need to iterate just like iterate technology iterate on your team and get it to a place where it becomes scalable. Because it's not just technology scalability that. Drives businesses like fintech its's people scale ability. Have the right people at the right times. And. You have to know when it's the right time for those people to move on. These companies evolve very fast. I mean you know in the early days you might double, triple, quadruple revenue year over year. If you maintain those run rates for two three four years. And haven't paid those investments in people get burnt out really fast. And so. That would be my advice.

Manseeb Khan: Yeah, I love that people scalability. That's incredible. So, I guess you have mentioned that a little bit early on like how much harder it is for Canadian  fintech companies to get Canadian investment money. What is your perspective on the regulating sector. So, for example consumer loans. Do you feel that the government is including regulators? And do you think they're striking the right balance between investor protection and enabling market innovation?

Ali Pourdad: Yeah, I mean I think certainly some regulation is needed across the board. Otherwise you know you get your in situations a country that things don't make macro sense anymore. The best example would be in 2008 there's no lack of regulation that caused banks in the US  to have aggressive underwriting practices and that turns into major problems. So, you don't want that. Sort of worst-case scenario. In Canada. You know people I think people would be quite surprised to understand there is a fair amount of regulation out there in consumer loans. We know we have a very heavily regulated mortgage-based payday loan base. And even other types of lending were very heavily regulated. You know in my view household debt to income ratios are quite concerning in Canada. That is, you know that could easily be correlated. Other things that may not be a regulation issue simply could be. You know high real estate prices the low interest rate. Those are very hard things the regulators control. So, balance is tough  question the answer from an investor standpoint I do believe provincial governments have worked hard to find that right balance investor protection and enabling innovation. You know a major issue that we continue to have in Canada though. Is that these provinces that security regulators aren't harmonized yet and that may. Make things complicated for starts to navigate and innovate quickly.

Manseeb Khan:  Touching back on what you said you guys have invested in a lot of the technologies right? Do you see the future with digital banking by offering a full range of services. And if so I guess what technologies you are most excited about and that you think is going to have the most impact.

Ali Pourdad: Yeah, I mean I think we're already a lot of the way there in Canada. I think our  major banks have fairly strong digital banking offerings themselves. And so, you know there's lots there's a there's a lot of room for disruption, but I think the single probably the single most important legislation required to. Fully complete digital banking roadmap for all Canadians and probably the one I'm most excited about. Is the open banking concept? And that's something that governments started to get wind down in the year they. Have already started to empower consumers with data. Once the banking data is back in the control of the consumers and not the bank. Then you really will have a truly digital banking environment with a full range of services. And you know the ability to unlock full potential. And until then you know you know I think Canadian fintech’s will continue to innovate. You know again Progressa we play behind the scenes we try to play it with. Predicates. Where that. Adds value to a bank and credit cards and so on. Solve problems. You know. What that could lead to it. The regulators don't offer it if they don't move quick enough on open banking, then the banks could just snap up fintech’s one at a time as they see fit. I think. You know you. Have. Different data that are still around after five six seven years. They are well positioned to. Sit down with parents who are having those conversations hoping they can change the environment in Canada significantly. As it relates to digital banking operate because it could really make life good for Canadian's for Canadians and either the playing field for a lot of consumers out there without traditional access to credit Or Just traditional banking products simply because their data is in the control of the banks. Is not doing anything with that.

Manseeb Khan: So essentially the old gatekeepers of helping Canadians in the past are going to be greatly diminished just making it ,like you mentioned a couple times or just making lives of Canadians that much more easy.

Ali Pourdad: That's the idea. I mean banks I think banks do a  great job I've got. I'm not in the camp that banks need to go down or fold or be this be disruptive. Certainly, there's a lot of services and banks that are frustrating to the consumer to deal with. At the end of the day they happy they think large investment digital banking offerings. The issue is less to do with those offerings and more to do with. Empowering the consumer. As a consumer of a bank. You sometimes feel handcuffed. And. I you know I think fundamentally that a lot of upside here for Canadians. If the government does step in and offer you know to open up the data again it's kimono and give power back to the consumer. It just opens up a wide range of opportunity to offer service that. Really. You know make life good for that consumer I mean best examples are the social media companies in the U.S. that. Are able to take data and improve. And again, depends on who you ask. But if you ask me and you've offered your consent really improve life for you and they think very sort of seamless day to day. There's no reason they can't be in that situation in Canada with banking data and make a well thought out plan.

Manseeb Khan: So, speaking of peer to peer you're seeing a lot of people starting to shift into getting into crypto and very much getting into blockchain and how do you see loan services like yourself getting into blockchain and how do you see loan services in the blockchain and different from existing services that we have today. And what I'm asking is What do you need to see be a KYC, be it regulatory to make an actual shift to be 50/50 blockchain or if not just go all in on blockchain.

Ali Pourdad: Yeah. So, I think the answer to that question is simply to look at where the regulations are heaviest and where. Block Chain can solve those problems. And in lending you know I think those questions are still being asked. There not fully fleshed out but certainly where you have heavy KYC the mortgage space and other types of lending in Canada. Yes, the blockchain can solve a significant problem as it relates to onboarding customers and making sure that there's a paper trail for everything. And so, from that perspective the block chain has some real application. Things more seamless for consumers. I think. You know the parts crypto is concerned there is a lot of the young population out there that. Has been investing in cryptocurrency. And the average age of a crypto user is quite young. And they're building up cryptocurrency wallet. With real financial holdings there so. That money is available.  but not in their Canadian or Canadian bank account it's not available under U.S. bank account. It's available in their crypto account. And so. Naturally. You know there's going to be. Sources and uses for the money and the lending is one option for the cryptocurrency you're going to start to see platforms. That offer peer to peer lending options for the crypto currencies. Simply because people are going to be sitting on those currencies and are going to want to get that money to work and try to generate a return just like any. You know company or other peer to peer platforms the in  U.S.  for example, trying to achieve. Definitely we're going to see shifts into crypto I don't think it's to take over the world as far as lending is concerned, I think lending is just A function of whatever currency is sitting on out there whether it's crypto or fiat. But certainly, the block chain going back to that will make life good. And I think that the companies right now that are Again asking the question when. Where are the problems? Where the pain points? And how can I use blockchain to make things better? At Progressa that  We're certainly exploring a lot of those things but not haven’t decided to use the blockchain yet.

Manseeb Khan: So, you did mention peer to peer loans right. So, do you see peer to peer loans disrupting your business given that it would make it a lot more easier for just Canadians and if not under serviced  Canadians to get loans or just to make sure they can pay the Rogers bill or the phone bill or what have you.

Ali Pourdad:  I don't necessarily see that I think offering credit is a core competency that you have to learn over time. It was something that is easy to reproduce. We have learned by mistake. The have to have money loose. Because you definitely will lose money in the beginning and it takes time to. Again, understand that core competencies that you can start to scale it and make money in greater amounts you know is it possibly disrupt able ? absolutely there is possible disruption there in the future. I think in Canada probably a lower chance of that happening. Peer to peer lending in Canada first of all is being banned by securities regulators for quite some time. In the U.S. certainly you see peer to peer lending is much more prevalent. And you're already seeing a block chain-based companies tackle peer to peer lending. But there is just a drop in the bucket and the reality is the block chain is at this point heavily correlated with crypto currencies. And are like crypto currencies and so that's the main driver. You know if somebody borrowing and they don't need crypto currency then there's really no use of the platform. So. As far as I understand there's we're still talking about tens of millions of crypto currency users across the world not hundreds of millions or 200 you know are billions yet. And so, it's still a quite a small market. Relative  to the overall market and something that. Companies just to keep their eye on and evaluate as they grow and look at market opportunities and pounce on it if you think there's something there to. To grow into.

Manseeb Khan: Yeah no absolutely. Like we said before the average crypto very young so it's tens of millions 100 to hundreds. So, it's not a very young, very infancy stage for companies to pounce on it right. So, I guess one of the things that is out there that's very prevalent in the business media would be alongside of crypto and blockchain would be AI right. AI is definitely going to be disrupting the banking industry for sure in the past couple episodes. It was also mentioned that AI is also going to be very disruptive for the insurance business. How do you see AI either disrupting or helping the loan services and Do you see as an opportunity or do you see it as a threat?

Ali Pourdad: Oh, I mean perhaps this is an opportunity for sure want to be very people are asking this question because I don't know that I would recommend. You know getting into lending if you have an AI that's not the reason to get into lending and I don't think you can use AI effectively right off the bat anyway. I think you have to grow into AI. AI is by its inherently is reliant on big data. You're not just sitting on that data when you launch a business. You have to build the data over time, you need to make sure it's a scaleable data. It's being housed properly that a lot of an investment you have to make it into a  data infrastructure. To leverage AI effectively. So, from our perspective I mean we definitely see it as an opportunity because we've made those investments. Heavy investments in technology and our data infrastructure. I mean we have a  full data team in Vancouver. That to use AI effectively to have automated credit models and use sort of machine learning to automate the recalibration process that we that we currently have humans doing you know. And so that that's all upside for business that make those investments. But it's not something that I don't think  it's not practical for a number of years. You have to you can't just acquire the data, you have learned by mistakes. And build up to date on an appropriate way so that when you're ready to build scalable technology you know they you add AI to the list.

Manseeb Khan: Yeah. So, all of that is just testing and learning right? Where do you see yourself in Progressa the next three to five years? I mean given that we talked about block chain and crypto and AI?

Ali Pourdad: Three to five-year progress as generating, I mean you can see us like a traditional online lending business. But over three to five years Progress is going to generate the majority of its revenue from that technologies. And a minority of its revenues is from the lending business. I mean we made a  significant investment in software. That are driving great growth in  our lending business today. But over the next three to five years you know I fully expect that we'll be able to service our much larger enterprise partners in more meaningful ways as a software provider and much more so than a lender. For me personally you know I'm having fun. We've made significant investments in building out a great team. And I want to see this team be successful. I work closely with our board and I'll continue to run Progressa as long as they have me with the job. At the same time, you know Progressa has set me up for many great opportunities personally well had to get involved with many younger entrepreneurs as I can. And guide them and share my voice. I had the privilege of contributing weekly for a couple years on the Business in Vancouver the technology panel and continue to do that and have fun. You know I'm in a mode personally where Progressa even though we've been flying under the radar behind the scenes. Progressa has set me up to contribute back how meaningfully and guide younger entrepreneurs and try to get involved with younger businesses that have disruptive technologies. But I think that's what I see for Her my future.

Manseeb Khan: Yeah that's incredible it's actually very humbling to hear that like even though you are I guess relatively compared to traditional businesses you guys are a very young company, but you already have the mindset of Yeah, I know I'm still a startup and I'm still building a great business, but I still want to give back to young entrepreneurs. someone to guide them like hey that mistake I made over there yeah don't do that to just do this instead this was going to make your life so much easier. That's absolutely incredible. So as an aspiring young entrepreneur myself I wholeheartedly thank you and amazing entrepreneurs like you for helping and just guiding us and giving back.

Ali Pourdad: Yeah. Thank you. I appreciate it and thanks for having me on the show.

Manseeb Khan: Absolutely. So, what will be the best way for young entrepreneurs out there to contact you. Could we snapchat you. Do you up on Twitter. What we the best way to contact you?

Ali Pourdad: Yeah for sure. I'm on Twitter as my handle is  Ali Pourdad. It's my first name and my last name. You can find me on progressa dot com as well. I will have a bio on there with my name, so you'll find me on Twitter, you'll find me on Instagram. And happy to chat with young entrepreneurs. I mean we certainly have a handful of Progressa. But again, I'm also on LinkedIn. Always a good way to find me in on LinkedIn. Happy to chat with young entrepreneurs  and add I value where I can.

Manseeb Khan: Awesome. Ali thank you so much for sitting down with me today and I can't wait to have you on the show again hopefully post IPO.

Ali Pourdad: I'd love to be back thanked you !

 

 

 

 

End of Podcast

 

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THANKS FOR #VF2018 VANCOUVER!
CHECK OUT THE PICS and SIZZLE REEL!


Day 1 Photos: Leadership & Meeting Exchange
Day 2 Photos: VanFUNDING 2018 Converge conference


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Not yet a done deal

 

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