Episode #254: Ken Nguyen, Republic “In The Past Ten Years, The Private Market Has Become Larger Because Companies Are Taking Longer To Go Public”

Episode #254: Ken Nguyen, Republic “In The Past Ten Years, The Private Market Has Become Larger Because Companies Are Taking Longer To Go Public”

 

 

 

Guest: Ken Nguyen is co-founder and CEO of Republic. 

Date Recorded: 9/9/2020

Sponsor: Rinse

 

 

Run-Time: 1:14:53

To listen to Episode #254 on iTunes, click here

To listen to Episode #254 on Stitcher, click here

To listen to Episode #254 on Pocket Casts, click here

To listen to Episode #254 on Google, click here

To stream Episode #254, click here

Comments or suggestions? Email us Feedback@TheMebFaberShow.com or call us to leave a voicemail at 323 834 9159

Interested in sponsoring an episode? Email Justin at jb@cambriainvestments.com

Summary: In episode 254 we welcome our guest, Ken Nguyen, co-founder and CEO of Republic. In today’s episode, we’re talking startups, and how to make private investing widespread and available to everyone.

Traditionally, investment minimums have been high, but in grappling with their mission to bring startup investing to the masses, Republic has brought investment minimums down to twenty and even ten dollars in some cases. We get into Republic’s investor friendly model, and some of the advantages companies may gain from fund-raising on the platform.

We cover some background on laws that shaped who can invest in private companies and discuss recent developments that have brought about some welcome change to accredited investor rules. As we wind down, you definitely don’t want to miss the innovative approach Republic has taken to offer yet another iteration on startup investing through the Republic Note.

All this and more in episode 254 with Republic’s Ken Nguyen.

Links from the Episode:

  • 0:40 – Sponsor: Rinse
  • 1:21 – Intro
  • 2:14 – Welcome to our guest, Ken Nguyen.
  • 6:00 – How the regulations have changed over years in private investing
  • 9:11 – Recent proposals by SEC
  • 14:52 – Runway to launching Republic
  • 19:02 – Republic’s business model
  • 21:57 – The original offering
  • 27:05 – Fees as an investor in Republic
  • 28:59 – Examples of companies that have raised on the platform
  • 29:58 – Being an engaged shareholder
  • 34:36 – Republic Note
  • 36:30 – The Republic Note
  • 38:27 – Explanation of how the Republic Note works
  • 44:20 – Opening the platform to other companies
  • 54:06 – Tax treatment on Republic Note distributions
  • 54:42 – Final thoughts on the Republic Note
  • 55:28 – Investing in video games
  • 1:00:52 – Real estate platform
  • 1:05:21 – Biggest challenges
  • 1:06:49 – Ways to improve the ability for more people to invest in private companies
  • 1:09:08 – The trend of celebrities making more money in business than what made them famous
  • 1:09:13 – The Get Rich portfolio (Faber)
  • 1:11:20 – Making investing more accessible
  • 1:13:09 – Most memorable investment
  • 1:14:04 – Connect with Ken: republic.co, Twitter @kendrickesq; LinkedIn

 

Transcript of Episode 254:

Welcome Message: Welcome to the Meb Faber show, where the focus is on helping you grow and preserve your wealth. Join us as we discuss the craft of investing and uncover new and profitable ideas, all to help you grow wealthier and wiser. Better investing starts here.

Disclaimer: Meb Faber is the co-founder and Chief Investment Officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambia’s funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com.

Sponsor Message: Today’s episode is brought to you by Rinse. Have you ever thought about what you could do with three-plus extra hours per week? Rinse is here to help make that happen by taking the laundry and dry cleaning off your plate. For all your listeners in the Bay Area, LA, D.C., Chicago, and Boston, Rinse is here to pick up, clean, and deliver your dry cleaning and laundry. Check out Rinse and Repeat, which is their wash and fold subscription service, priced by the bag not by the pound. Spend your valuable time on more important things, take a break or just take some time to breathe. Learn more and receive a $20 credit by visiting rinse.com/meb. That’s rinse.com/meb.

Meb: What’s up podcast listeners? Fun show for you today. Our guest is Co-Founder and CEO of Republic, a platform bringing early-stage investing to the masses. In today’s episode, we’re talking startups and how to make private investing widespread and available to everyone. Traditionally, investing in startups meant high minimums of 10s or hundreds of thousands of dollars. But Republic has brought the minimums down to 20, in some cases, even 10 bucks. We get into Republic’s investor-friendly model and some of the advantages companies may gain from fundraising on their platform. We then cover some background on laws that shaped who can invest in private companies and discuss recent developments that have brought about some welcome change to accredited investor rules. As we wind down, you definitely don’t wanna miss the innovative approach Republic has taken to offer yet another iteration on startup investing through their Republic Note. Please enjoy this episode with Republic’s, Ken Nguyen. Ken, welcome to the show.

Ken: Thanks for having me. So good to be here.

Meb: I’m excited to talk about a lot today. Where in the world do we find you in Coronavirus?

Ken: Right now in New York City. Tomorrow, I don’t know yet.

Meb: New York City, one of my favourite places, used to get there every couple of months, fall time. Some of those parks is just a perfect place. What’s the vibe like now? Give us a report from on the ground.

Ken: Well, it’s definitely better than San Francisco or LA, but it’s still very slow. Midtown Manhattan is like Central Park on a Sunday at 5:00 am, meaning there’s no one. But in Soho and Tribeca, you start to see small businesses coming back. I do think it’s gonna end up faring better than some of the largest cities in the U.S., mainly because it’s still the center of finance and people still flock here. It’s a dense city. I think it’s gonna help.

Meb: Hopefully all this Coronavirus just sort of disappears this fall. But the one trend, I mean, I see my friends’ pictures from New York City with the outdoor dining, and part of that looks just wonderful. It’s a trend in LA. Historically, it hasn’t had as much outdoor dining. Hopefully, it sticks. Anyway, okay, let’s talk about all things startups, entrepreneurship, give me a little lay of the land. We have a lot of our listeners or professional investors all over the world, institutional all the way down to individual, but give us a lay of the land of the private investing landscape. I know a lot of people invest in both private and public markets on this podcast. But there’s been a lot of different moving parts and the rules and regulations for the past 10, 20 plus years. Do you wanna give us a quick history or overview of how all this works?

Ken: I would love to because that’s what I’ve been spending the past four or five years focusing on and probably the next half a century if I live that long. But if you look at the word of a private market versus public, in the past 10 years, the private market is becoming larger and larger because companies are taking longer and longer to go public. It used to be that the Yahoo and Microsoft, and before that, HP of the world, they went public at a valuation of about a couple of hundred million dollars and about four or five years since inception. Now, a company like Uber takes a decade to go public at a $40 billion valuation. So, a lot of the gain, the wealth to be generated, to be earned has been captured during that private phase of a company. So for professional investors, the need to get in early to invest privately becomes more and more relevant over time. And there’s no question that even just a couple more years, I do think that the private markets will be 10x besides the public market.

Meb: And so part of that’s just… We talk a lot about the distribution of returns. And I think this applies to both private and public markets. Madison just had a great piece on this. And it’s even more important in private markets where you’re investing and getting the ten, the hundred, the thousand baggers, and it’s just a lot harder to do as you’re… It’s probably a tougher example because I was getting ready to say it’s a lot harder for Apple to go from 1 trillion to 10 trillion. But look, I think they’re are at two already this year, but in general, just the weight of size, relative to a company that’s at 10 million, and the ability to get to 100 million, a billion, 10 billion. Talk to me about the regulations. They’ve long been archaic, maybe well-intentioned, 100 years ago. Can you walk through sort of how the differentiator has been, what the regulations have sort of changed over the years and where we stand now?

Ken: We’ll take a walk back on memory lane to about a century ago, the Great Depression, at the end of that great depression, there was a change in the law. And Congress decided that, “Hey, you gotta be a millionaire to invest privately,” because the reason why the Great Depression happened largely because companies, private companies “defrauded grandmas and unsophisticated individuals.” So there was, like you said, very well-intention, but it was a very arbitrary line that if you’re a millionaire, you could invest privately. And everyone else you could do, you could gamble. You could give away money. You could spend things endlessly, but you could not invest in a private company you really believe in. So, as we saw the rise of venture capital, leading through the 90s, into 2000s, and beyond, it became very clear that it didn’t make a whole lot of sense to shut out everyone except for millionaires from their ability to invest into private startups. So under President Obama, there was a change in the laws or regulation crowdfunding, part of the JOBS Act that opened it up a little bit for, you gotta go through a few hoops. But now in the year 2020, anyone, literally even a student, can invest in a very new company formed by his or her dorm mate, or in even Airbnb before it goes public. So that regulatory change, I do think is gonna open up the gateway to private retail capital. It’s really gonna change the economy and the concept of investing in the same way that Charles Schwab, and Fidelity, and E*TRADE what they did to the public market half a century ago, and bringing people into the public stock market, I think the next 10 years of platform, we hope we’re gonna be one but there are other platforms as well. We will do that to the private markets.

Meb: We talk a lot about on the blog in the podcast for many years about how you have to be an equity owner. And it’s the most nonsensical policy and, again, with many government policies, obviously, well-intentioned, back then but the fact that, like you mentioned, you could go by, log on your E*TRADE or I guess today would be Robinhood, buy some micro caps. You could go invest in futures, by the way. You can buy lottery tickets, and God forbid we even start talking about forex. If you look at the Forex brokerages that are public and they disclose the percentage of investors that lose money, it’s like 98%. It’s the most horrific setup where you’re encouraging sort of day traders, but the ability to invest in amazing entrepreneurs and startups. Now, there has been some recent potentially positive waves the SEC is making. Any comments on kind of their recent proposals on how to take things into the new millennium, I guess?

Ken: We have a lot to say because Republic was actually referenced in the SEC’s public announcement where they changed the definition of accredited investors. So I mentioned a moment ago that you gotta be a millionaire to invest privately as a legal construct. And the legal term for that is being an accredited investor. Up until very recently, you gotta meet a certain net worth and income threshold, essentially be a millionaire as you make more than $200,000, $300,000 a year for two years in a row. It obviously didn’t make sense because a Goldman analyst, who just graduated from Harvard Business School, and who’s not making that much money or doesn’t have a million dollars in a bank account is still a lot more aware and sophisticated when it comes to the risk tolerance, and risk exposure, and risk profile compared to my mom, who is not super financially sophisticated, but she did a lot of saving in her life. So that changed to add on the sophistication, definition or element to this accredited investor definition. I think it’s so sensible. And we’re the only developed country that doesn’t have that. And it basically hasn’t changed in 34 years, until about two weeks ago when the SEC made that change. So, I’m sure it will have far-reaching impact. And Meb, I wanna touch on a point that you mentioned earlier about high risk investing the people have been able to do even if they’re not accredited. Gambling in Vegas, every single year, $80 billion are lost into casinos in Vegas primarily from non-accredited investor, another hundred billions in lottery ticket, same thing. If people spend 5% of that in investing small dollars amount in companies, in innovations they believe in and don’t make one investment, invest $10 in 100 deals, if one of that ends up being the next Uber, you’re gonna make all of your money back and more even if the other 99 companies happen to be app checks every year.

Meb: Yeah, it’s so dumb. And it’s such a contradiction. The reason being, and we can all recognise this is that the lottery, gambling at the casinos, if you asked a politician, who does this tend to penalise, you know, it ends up being predatory on people of lower-income, lower educational status. And look, I mean, it’s the American way, you’re on your own as far as making your own decisions. You have freedom. But at the same time, if you were to ask the politicians, why won’t they focus on those is because that’s where they get all the revenue. No one’s gonna turn away all that revenue. But yes, changing the mindset of, it’s almost like framing it to investors, not speculation or gambling, but rather, putting this money away And these investments that at least have the potential, at least have the somewhat chance versus no chance if you’re going to the casino. One of the things I’ve always thought about the accredited investor rule for a long time, as I said, why not just make it instead of an income requirement, just do it like a DMV test? You gotta go online, you gotta take a 15-minute, 30-minute test that you maybe can study 20 an hour for understand the basics of risk, and reward, and the concepts. I said that’s much better because I know plenty of rich people that love to just ignite their money on fire and do really dumb things too.

Ken: With the new change, the new SEC regulatory change, it may very well be moving that way, Meb, in the sense that they’re not prescribing that you gotta pass test A or test B in order to meet the sophistication test. They’re saying that you’ll be able to meet it, we’re gonna tell you over time, what that threshold and benchmark may be. So, there may very well be in a few years that there’s simply a test online, rather than you having to be a broker-dealer representative, whether you have to pass certain licenses, it may very well be a simple knowledge base test that we have. But that’s a little bit of a speculation on our end.

Meb: You can feel free to answer this as you see fit. But what is even the penalty for someone who says they’re accredited and they’re not? Is that, like, a crime that’s not even punishable? I know the companies that do the fundraiser are supposed to verify it, but if the person is somewhat misleading about their status, have you ever heard of anyone getting in trouble for that?

Ken: No. The penalty, by and large, is on the entity or the person taking the money that they have to, if not verify, they have some basis to believe that the person representing, that he or she is sophisticated or accredited is actually so, but the person, the investor, that there’s no penalty, as far as I know, from making an investment when you, in fact, are not accredited. I obviously don’t recommend that. But you asked about penalties straight up on the issue.

Meb: It was interesting because many, not many years ago, a couple of years ago, we run an asset management firm, and to my knowledge, the only traditional asset manager that’s done a public kind of fundraise… We ended up raising 3 million bucks, and had thought about this many times as we were doing the fundraise, and we had a way to check it, but it seems like it’s, again, evolving in a world where that shouldn’t even matter. Anyway, okay, let’s talk about all the good stuff you guys are up to. Ken, give me a little summary of your runway to launching Republic? Because the background I think informs a little bit of what you decided to do and when. I’d love to hear your short timeline.

Ken: It came out of a really a desire growing up. My family immigrated from Vietnam to California, settled out in the Bay Area, kind of like a poor side of town, but smack in the middle of Silicon Valley. And we definitely weren’t accredited. And I still remember thinking of, like, “Hey, there’s all these new companies, Amazon and Google, and how come mom and dad aren’t investing?” And certainly, they weren’t able to invest. But even if you were a doctor or a dentist, you didn’t have that access. Just because you have the money, you weren’t in Parkland in crowd. I also ended up like most good immigrant son and daughter, I ended up picking a safe career and became a lawyer because you gotta be able to pay rent and all of that, and so ended up starting out as a securities attorney in New York. And moved over to work on the investment side and the legal side for a very large wealth advisory firm in New York City. And out of that, I kind of like just discovered in me the notion of, like, hey, very clearly that this world of investment and wealth preservation, pretty much limited to the lucky few, and somehow through one way, and another and a stroke of luck that I got to be a part of it. But it wouldn’t be amazing, if later would have hedge fund, and private equity, and venture would be a little bit more accessible to everyone. I ended up going back to academia to teach law for a couple of years, enjoyed Angel list. So what Angel list does, and for those of you who are not familiar with Angel list, is essentially a platform whereby millionaires can pull their money and invest early in private companies.

And one of the first companies that raised on Angel list was Google. So, venture capital has this weird issue that is so inaccessible, that even if you’re a billionaire in New York, or in Taiwan, you couldn’t even if you wanted to invest in new, and hot, and promising startups in Silicon Valley. So Angel list is essentially when online connected, high net worth capital, with high-quality startups. And so I started out there as the general counsel, helped build up that platform and helped it scale. And when that law changed under Obama, in 2016, there was an aha moment that, hey, the true potential of it all, this new wave, this new trend of society is everyone, even if you’re a student, saving $5 less on a pitcher of beer. You should be able to invest rather than just buy things, but have ownership in things, in products, in people that you believe in. And if they do well, you would do well to. So that notion of private investing for the masses, and to believe in that being the next big trend of human behaviours, of consumption behaviours, based on that belief that we launched Republic a few years ago.

Meb: I gave a similar analysis to your pitcher of beer, that’s probably a more relatable one. And I was in Europe pre-Coronavirus, and was talking to some students and used the analogy of, “Hey, if instead of going to Ibiza for spring break, you save that $1,000 and invest it, and just use the magic of compounding said, by the time you retire, that could be worth $100,000.” And the conclusion probably was you should still go to Ibiza but this constant trade-off of current consumption and what that actually could mean for your future self as well, it’s just real wealth creation, I think is something that lays the foundation for people that to kind of grow out of this mindset of today and spending. Okay. So let’s talk about Republic just for context. This podcast, we’ve been talking probably since inception, a lot about private investing. I’ve invested I think, in this point around 200 private companies, and usually my day job, but it’s a little less quantity when companies are starting up. But tell me about Republic, about what you guys are doing, the business model, the whole experience all the good stuff, because you guys have been around for… When did you get started? 2017?

Ken: Yeah, 2016, four years now.

Meb: Congrats on surviving, by the way.

Ken: We just did a token sale. We closed it not long ago. So more financially stable than before. But thank you. We think of ourselves, not just as a startup investing platform or a venture investment platform, but really as private Investing and how to make that accessible. We did start out focusing on startups, you know, on early-stage tech startups because we spun out from Angel list. But over time, we added residential real estate. We added game development financing, crypto-assets, securities token that is. And the notion here is to go back to a point that you made earlier, that $1,000 that you would save for making a trip to Ibiza. Well, we bring that minimum investment down to $10 and $20, in some cases. So let’s pick real estate as an example. The American Dream is obviously owning a home. You grew up hearing about every movie talks about it. It’s completely out of not reality for a huge percent of the American public. We, two months ago, brought on a product that is allowing people to invest as little as $100 in residential real estate that we curate and bring on the platform, very low risk, low return as well. You’re not gonna make 10X. You’re not gonna make 3X. You’re never gonna lose it all either. But the notion that now anyone, rather than spending $100 on a new shirt or a new pair of shoes, can invest in real estate, learn from it. And as they make more money, they can feel more comfortable investing in more things. They may take an interest in a real estate startup on Republic and invest in it. They may be a game enthusiast, and see, and wanna invest in a game. And if that game does really well, it shares back revenue. So over time, even though we started out focusing on tech startups, we have grown into a multi-faceted investment platforms that bring investment products that used to be only available to the super-wealthy and now to pretty much anyone as little as 10, 20, 50 bucks a pop.

Meb: All right, let’s start to dig deep in each of these because I think each of these silos could probably spend an entire hour-long podcast on and, by the way, congrats on the last couple years. I think I saw that you guys are close to a million investors historically, over 100 million in AUM, and really seem to be hitting on all cylinders. And I really wanna get into the Note too. So let’s go kind of do one hopscotch at a time. Talk to me about the original platform, people come to Republic over the years, they wanted to invest in companies, how does that kind of work? Give me the overview of that original offering. And then we’ll kind of get deeper on the tree branches as we go.

Ken: In terms of tech investing, startup investing, similar to a venture fund, that is we look at credible companies that come to us to fundraise go through a due diligence process. And then we present them on the platform. Once they go on the platform, anyone can look at the information that they present. And within whether half an hour of due diligence, make an investment using their bank account, their credit card, even crypto asset if they want to. And when they make that investment, the instruments behind that few options. But the thesis there is that whether it’s debt or equity, you’re investing into an early-stage company, assuming that the company’s value at say $5 million in valuation. If that company gets bought at $50 million, three years down the road, your investment, give or take, it’s about 9X or 10 X. And if that company doesn’t work, and you get nothing. So unlike buying a product, it’s all or nothing value proposition for much of these deals. And I wanna obviously clarify one thing that I’m sure a lot of people already know, private investing is highly risky. If you invest in 10 deals, you may have one major winner, and 8 or 9 would not work out so well. But the one that does do well, the hope is that it’s gonna be 100X, 50X more than making up for the losses that you have in your portfolio. So the notion of it is very much just like a venture fund method. Over the four years, we’ve gotten over 30,000 applications to feature less than 300 on the republic platform. So less than 1% actually get through the application lens.

Meb: You hit on an important topic. And we actually try to convey this in public markets too because it’s funny people have a certain mindset where no one’s gonna go out and just buy one or two stocks. I mean, maybe they will, but if they do, it’s incredibly risky and the distribution is something like about a quarter go to zero, about a half essentially have no return zero over their lifetime, about two-thirds underperform the index, and really it’s only this tale of the 10% or so of the McDonald’s, the Walmart’s, the Amazons, the Tesla’s depending on what’s happening today, that drive all the return. And that’s true with private markets too. And so if you have a reasonable approach, which is, “Hey, I’m going to invest a small amount in 20, 50, 100 private companies, I think you’ve transformed it from being what people perceive as risky to not that risky of an asset class.” Again, that’s my opinion. But it’s very similar to public markets that has two benefits. One, you’re stuck in them, which I think is a feature, not a bug, can’t sell them if you don’t want to, which causes people a lot of problems in public markets. And there’s also a huge tax benefit. The QSPS rules and listeners aren’t gonna go deep on that, but it’s a massive tax benefit of investing in companies with less than 50 million in assets.

Ken: Yeah, yeah I will add one thing, which is the personal satisfaction. This is a rumour, and it’s true, that anyone who dives in being an Angel investor, most often stays and get deeper and deeper. And the reason is that if you invest early in a company or a product, there’s an emotional attachment. You ended up buying that product, giving it away to friends, contributing to building it, and learning in that process. It’s a lot more fun than, like, buying three shares of, like, Google or Apple and being 1 out of, like, 10 million people. So I think that satisfaction is also so unique when it comes to private stock investing.

Meb: And there’s a consistent education component. So getting to see all these deals, see these really cool entrepreneurs that are so passionate, but also, there’s an optimism versus the public markets, which is a constant bombardment of negative geopolitical news flow, it’s really refreshing. And so you’re preaching to the choir because, again, after investing in 2, 5, 10, 20, 50, now 200 companies, it’s that same sort of mindset where, yeah, you know, and it’s fun to see the companies grow. And it’s also educational to see them go out of business and why, and all these other reasons. Okay. How does the business model work on the traditional sort of startup, if I’m an investor, what are the fees? What are the just the general logistics of making these investments and exiting over time?

Ken: We’re very investor-friendly, in that we don’t charge investors any fee. We charge the company that come to us to fundraise from the crowd. And we have a cash commission, let’s say, out of $100, raised on Republic, we take $6 to help service the entire process. And we have a little bit of an upside potential in that company. So, again, the example of raising $100 on Republic, we would own $2 worth of equity in that company, meaning where that company does 100x better, that $2 is gonna be $200 for Republic. So that upside carry is gonna be relevant to our token, which I’m gonna talk about a bit later on.

Meb: Is this still a million bucks max on the fundraise or how does it work or is there accredited side is different? How does it work on your platform?

Ken: There are two bodies of law, one is called Reg CF, the other one is Reg A. I’m gonna use an example of think of it as riding a bicycle, riding a Honda Civic, and going public is like a Ferrari. So Reg CF is very simple. Any company can launch a campaign. You can only raise up to a million dollars per year, which is what you were alluding to, for now. Reg A is that you gotta spend about a quarter million, maybe six months to prepare, and you can raise up to 50 million in the retail public. You go IPO, you gotta spend at least $2 million on legal fees and logistics up to 10 or more, and probably a year or two years to prepare for it. So those are the three ways that anyone can invest in a company. We focus primarily on Reg CF and Reg A, but we do both.

Meb: What have been some of the companies that have raised on the platform? Any that particularly stand out as being memorable?

Ken: Well, we deploy a fairly substantial investment into a company known as Robinhood, as well as Carta. Now that was done under Reg D, which means that only accredited investor were able to invest for a number of reasons. But yes, we do work with companies that late stage. In the earlier phase, on republic.co, it shows that 50, 60 companies currently actively raising. And the interesting thing is that about 30% or 40% of them already raised venture financing before coming to Republic to raise because the value proposition is gaining customers who are now ambassadors for your brand. So that value proposition makes crowd investing very, very compelling and will be more so over time.

Meb: This concept of ambassadors or engaged shareholder, I think is so important. And it’s so strange to me, seeing a full spectrum of companies that I’ve invested in. There’s really two types of sort of CEO founders. There’s the type that actively engages and understands there’s a benefit from that shareholder base. And then there’s the other ones where they kind of ignore that resource. And having also been through it on the fundraising side, and one of the reasons we went down that route and said, “Look, I would love to have some engaged helpers, people that have skin in the game and stake in our business that believe in the mission, they wanna see us succeed. So this not just my mom and my wife.”

Ken: One of the few, I think false assumptions that founders and VCs, if not make, then often asked me, which is, “Hey, wouldn’t it be too problematic and too much of a headache to deal with 1,000 investors?” My answer is always, “Well, you’re a B2C business, you wanna have tens of thousands of customers.” And if you have your customers who love you enough to invest in you, wouldn’t you be excited to engage them, provide them with more information, use them to beta test your new product ideas, so that it speaks volume, that is the founders who shy away from engaging customers and communities, save for a few types of businesses. Those are probably not the solo founders that you wanna see or expect to operate very successful businesses that are consumer-focused. So it may be self-screening or self-selecting.

Meb: That seems like a good segue to hop over to the Note.

Ken: Before that, a personal view on the impact of blockchain as a technology when it comes to investing in a financial product. The technology itself, there’s many things, and books have been written about how impactful it will be. But for me, as someone who’s been in finance and as a securities lawyer, there are two attributes that I think most people would find relatable. Here’s a technology that enables you or anyone to fractionalise, break anything, any asset into tiny, tiny pieces. That’s one thing. And the second piece is this ability to automate what used to be a cumbersome and expensive process, like transferring money between countries, confirming accreditation or KYC AML. So that the automating feature of the technology combining with the fractionalising nature of the technology means that you can lower the barrier to entry. That means that one day, an investor in Vietnam can invest $2 into a startup in San Diego. And the transfer fee is still affordable because it’s a fraction of a cent. And that it can happen immediately. So the end result of that is that it’s gonna bring pretty much the entire world of retail capital, meaning money that people are now stashing under their bed in Ecuador, in Peru, in Brazil, in Alabama, and bring that into the financial ecosystem and redeploy that into investment product. So think of it as just energy into a whole new ecosystem to help you grow. So I think it will have tremendous impact in boosting, and maintaining, and growing the economy at large, and certainly the different classes of financial product. So that’s why our hope is that through blockchain technology, we are gonna make private investing such a mainstream construct, that even a kid in the most undeveloped country know that one day with $1 in saving, I too, can invest.

Meb: And it’s interesting because a lot of the business models that are evolving currently and the concept of your friends over at Angel list doing these rolling funds, without software and a lot of the technological developments, would have been nearly impossible to just even manage the fractionalisation. Like, can you imagine having not just 100,000 shareholders but 100 gets unwieldy? Talk to me, what was the origin story of the Note concept and idea. Were you just walking around New York City one day and the idea came to mind? What was the original inspiration?

Ken: The inspiration I think came to me when I was in Washington, D.C. on a congressional visit to, I’m sure discussed different legal implication of blockchain and digital token. And it occurred to me that, hey, if you can figure out a way to provide community members of Republic, at the time, we had less than 100,000. By now we have about 1 million. But how do you give them a stake in the company without us actually going public? Meaning, is there a way that if you do more, if they invest more on Republic, they naturally benefit more from that activity. And so we put together a token economy, the concept of the Republic Note token is that it’s the first profit-sharing token, as far as I know, in the U.S. available to non-accredited investors, meaning any user of Republic, and many do, hold Republic Note token, that if we continue to grow, if they send investors deals, if they make more investments, a little bit of it would go to benefit the Note down the road. So it incentivises them to do more for that community. Obviously, something like that would be straight up fitting the definition of securities under U.S. securities law. So how to make that accessible to the general public, well, we’ve been in the business of doing this for four years. So we’re, like, ended up being a perfect player to really adopt this model and build our framework to make that work, profit-sharing, revenue sharing, digital token.

Meb: All right, so for those who haven’t read the white paper, and we’ll add it to the show notes, how does it work? What’s the overall structure? And let’s err on the side of simplicity, but give us how it works, and then we’ll drill down from there.

Ken: With a disclaimer is that, please do read the entire white paper posted on republic.co/note. But as I mentioned earlier, Meb, that out of our revenue stream, we have an upside interest in every single company that fundraised on Republic. Today’s about 300, two years ago was 30. And I hope that two years from now it’s gonna be 2,000. With every company, we have a little bit of upside potential. When a company succeeds or sees an exit, that upside is realised in cash profit. Through a structure, a portion of that profit is paid back out to the Note holders. So in essence, even if you hold 10 Notes, not for making an investment, but from referring friends or from buying it from someone when say Robinhood, which is a deal or company in our overall portfolio. Even when Robinhood goes public and Republic realises a cash proceeds, call it $100,000, we’re gonna distribute that proceeds back to the underlying Note holders, using stable coins and making it possible to make a $2 distribution in a way that would be impossible to do with the traditional banking system.

Meb: So at its simplest description, it’s as if someone is getting exposure to a percentage of all the potential carry from all the investments you not only that you’ve already made, but will make in the future. Is that accurate?

Ken: That is accurate. In some ways, does have that evergreen growing attribute to the framework.

Meb: All right, so tell me a little bit about the mechanics because most people will not have invested in a Note before like this. How do they buy some? How do they sell some? And then what do you guys…? How much did you raise? And what are you doing with the proceeds?

Ken: We just wrapped a token sale and there should be a public offering coming in the next few months. But in short, you can buy it directly from Republic or you used to be able to. And then down to road, I’m sure you can buy it on the secondary market as well. But let’s say you acquire 1,000 Republic Note token, that token can be acquired and held, simply with a Republic email account. You don’t even need to create your own Etherium wallet or any complex structure. All you have to do is opening up an account with Republic with your email address. And immediately you also have a wallet that can hold the Republic Note token. When there’s an exit, meaning, when there’s a profit stream that Republic realises from its portfolio, once it reaches a certain threshold, we plan to make a distribution back out either in terms of Fiat, USD, credit, or we make it through a stable coin on-chain and make that feasible given that the number of wallets and owners would be vast at one point. So people would actually get cashback or share a dividend payment from each company that had fundraised on Republic each time any of them sees an exit, that means getting acquired or going public, that yields a return for Republic.

Meb: And so how much you guys end up raising?

Ken: We have raised up until now, between actual fundraising and future commitment is almost $28 million in the token offering.

Meb: That’s awesome. Congrats. And what is that sort of siloed for? Is that for operating the business? Is that for growth? What are y’all spending that money on?

Ken: First of all, a big piece of that were raised about two years ago to develop a framework. This is obviously a very complex and costly undertaking. The most recent route is to add on infrastructure, you know, from accounting, to product, to engineering, and to grow the Republic ecosystem overall. But investors in Republic can expect regular reporting. We deal with outside auditors to come back in and review our holdings. So the framework for this is beyond the Republic Note token. I call it the tokenization framework for pretty much any enterprise. So, we ‘rebuilding out this framework so that later on when you’re a big fan of say, “Spider-Man,” the movie series, that the next “Spider-Man” can fundraise on a tokenized basis, and my cousin can invest $50 into it, receive 50 tokens. And later on as the movie does really well, get cash payout from the proceeds of the movie sales. So this entire framework is currently being built. It’s about 85%. 90% there, but we’re gonna complete it within this year.

Meb: Okay. I got about three things I wanna get into, so we need a lot more time. First of all, I love this concept. And correct me if I’m wrong, but weren’t a couple of the big tech companies talking about this, like, a few years ago trying to have some sort of… It may not have framed exactly as a token sale but incentivised owners, you call it an ambassador’s, who was it? Was it Lyft was Uber, Airbnb? I can’t even remember.

Ken: I mean, almost all of them to the Facebook to the west App of the word. I don’t know that Airbnb and Lyft had proposed it. I wouldn’t be surprised they have been internally [inaudible 00:42:29].

Meb: They were talking about some of their, not shareholders, but people that are in the community of the network, earning some sort of almost like equity, but having an incentive to just be part of the whole, where you’re not even necessarily employed, but there was a broadened ownership base. Does that ring any bells? I feel like one of them was.

Ken: I mean, there have been so many promises, but under delivery in the space that I’m quite frankly losing track of the pitches that we have seen in the news and the Republic. But we are truly the first of its type in the U.S., particularly, one that can make it accessible to non-accredited participants.

Meb: All right, let’s say I wanna buy some, let’s say we got some listeners, they say, like, “This is a cool idea. We missed the subscription this summer.” How does the sort of secondary trading happen? Will it happen at Republic? Will it happen on some other exchange? Is it only private? Like, what’s the…? And let’s say somebody buys them, they’re like, “All right, I just got divorced. I gotta get out of this.” How does that all work?

Ken: Your question is about secondary solutions for the Republic Note token, and we happen to be one of finance very first portfolio companies. So we do have been working with some of the leading exchanges in and outside of the U.S. This is not a promise, but a statement of confidence that within the next six months that you would be able to buy a Republic Note or some version of it off the secondary market on at least one exchange, and may very well be through a Republic sponsored platform as well.

Meb: Well, it’s interesting because a lot of the private companies, there’s been brokerages for a long time, like shares post. We’ve had equities in on the podcast a few times, and even Angel list. A lot of these are working to do some sort of the private market liquidity for equities, but it’ll be interesting to see this world develop. Obvious follow-up question, by the way, are you guys gonna build this out for a lot of other companies to do on your platform? Because I don’t think I could do it because we’re in, like, the most highly regulated single industry on the planet as far as public funds and asset management. But it seems so obvious to me, like you mentioned, whether it’s a studio, social network seem like an incredible way. We used to always talk about search engines using them. Why wouldn’t you get some sort of benefit? All these concepts. Are you guys ever gonna allow your infrastructure to be open to outside parties?

Ken: Most certainly, that’s very much in development right now. I envision the tokenization framework. And even the fundraising and possibly the secondary trading solution to become essentially a SaaS in three or five years. The goal is that a food truck on the streets of New York can be fundraising on a tokenized basis without the owners knowing what blockchain is, in the same way, that we send an email right now. And I personally cannot give you any detailed explanation of how emails work, we want that to be the case for the future generation of founders. And it’s completely feasible. And my speculation is that you’re gonna see the first Republic facilitated enterprise tokenization to happen in the next 12 months, rather than having to wait for a year or two.

Meb: I’m excited to watch that, that’ll be really fun. Again, this would be something I would love to even consider. But your friends in the legal world, it gets to be expensive. We spend more money in our friends and our legal bills than probably anything. So…

Ken: You always have my pro bono legal advice. But you know, more seriously, as well, for a business, particularly someone like you with such a vast community of fans and followers, a model that can incentivise and reward people even more that each time they send a new subscriber or new fan, they did gain a little bit of something from it, I really think is going to be the default mode in a few years, rather than it being such an edgy thing to do right now.

Meb: All right, so, for the security analysts listening to this, you can go online and find people that have done, like, the most ridiculous discounted cash flow analysis of the Republic Note and go really deep if you wanted to. But give me sort of, A, somewhat objective, look, here’s the bull case, and I’ll try to step in and comment so then you can just edit my responses. The bull case, in my mind, would be Republic keeps snowballing. You get more and more companies coming to the platform, they’re raising more and more money. You start to see some big exits, which then, of course, causes more companies to be interested. And the Note becomes a pretty amazing cash flow stream. There’s obviously the flip side, which is I imagine the markets go sideways or there’s some weird legislation or, and you can comment on this too, what happens in the off chance you guys go out of business? Does the Note continue? Does it transfer? How’s it work? Kind of walk us through sort of to the extent you can, all disclosures applied listeners, what are sort of the potential outcomes, and for people who would be the naysayers, or the bears, or risk on what are the downsides to an investment like this?

Ken: Thank you very much for kind of like putting the spotlight on the disclaimers. And needless to say, everyone should read the white paper and the disclaimers there. But I’m just going to dive in and share my personal take on the bull case and the bear case on how one should look at something like the Republic Note token. So, given that this is an evergreen portfolio concept or that at least the dividend payment is linked to a growing basket of deals, past, present, and future, these are also private deals. So, obviously, there isn’t a fair market value to be attached to any of them. But if you believe, and based on the quality, and your one’s own assessment of the quality of the deals that we have done in the first four years of our existence, and use that to extrapolate on a similar quality of companies, as we continue to grow, then all the estimation boils down to this. How many unicorn exit would I need to have before I recoup my investment based on just dividend payment going out? So, if you invest 10 cent in a token, and you hold one single token, at what point and how many companies need to see 100X or 1,000X in order for me to get that 10 cent payment back out? That’s one way of looking at it. Given that is an evergreen thing so, of course, if you hold it for long enough, and if Republic lasts for long enough, there’s new question that statistically you will get that back. Our hope and our desire is that by onboarding, the Robinhood, the Carta, and the smaller companies that one day grow into these household names, that more and more and more of them are being added, that we hope that distribution, that dividend payments can be made, sooner rather than later, possibly even within 18 to 24 months for that full amount to go back out.

The bear case is that what if this global economic collapse as long as Republic’s survives? And we’re now in a position that we think that we can outlast even the extreme cases of economic fallout, in terms of the global macroeconomic. As long as we can last, it’s just a matter of time. But in the last recession, companies like Airbnb, [inaudible 00:50:39], Stripe, all of those company came into existence, right in the middle of the recession. And then 5, 10 years later, they become multi-multi-billion-dollar household brands. So the name of the game is one of survival, and time, and not so much of whether or not you’re gonna get that back, I want to share another piece on that, which is that, most active tokens out there, Etherium, Bitcoin, pretty much all of them, they’re not backed by any real assets. They have a community and a growing community that have a growing demand for a limited pool of digital assets. In the case of the Republic Note token, we too have a growing and a far faster-growing community than many tokens out there. So even without the revenue stream backing these tokens, the supply and demand, and the growing community should result in a higher and higher pricing for the Republic Note token because more people want it, independent from the underlying economics to dividend payment stream that can come to back the token. That’s why it is so unique, that there isn’t anything like that, as far as I know, out in the market, backed by a company now four years of existence, and we have done nearly $200 million in total investment by the end of today.

Meb: Yeah, I mean, in my mind, I frame this in my head, less of a blockchain sort of tokenization. And you can disagree with me or listeners, that’s fine. And more of a securitization of potential cash flows and carry from a bunch of startups, the association, depending on what year it is, with a lot of the coins and the coin offerings that you mentioned, were just kind of built on, ether is probably the wrong word, but on sort of vapours. But this is actually… In my mind, I love thinking about in a new decade, uncorrelated or these might be a little correlated, but it depends, cash flows streams that you can acquire, that will be different. What happens if you guys go out of business?

Ken: It is a contractual right. So the upside potential that we have allocated or dedicated to the token backwards, those token holders are entitled to that. So there’s always an existential risk, meaning, is there any possibility of the token being rendered completely valueless because the Republic team all get hit by a bus, disappear and gone bankrupt? Yes, I mean, in life, there’s very much that possibility because it’s still a centralised operation. It depends on the effort of the central team. That said, between contractual promises made to investors and now memorialized in various SEC filings, and particularly our framework and our experienced asset manager, we do even anticipate that in the event of Republic not working out that token Note holders still are entitled and still down the road will be able to have an economic interest in the revenue stream that we have pledged to the Note token.

Meb: What’s the expected tax treatment on the distributions? Will it just be income?

Ken: Yeah, it should be depending on that’s also even changing based on who gets elected and when. It is a variation between straight-up dividend payments, even when you sell the Note and long-term or short-term capital gain depending on how long you’ve held it.

Meb: If you have any final thoughts on the Republic Note, feel free. I think it’s fascinating. I signed up for updates. I’m definitely gonna buy a few Notes at some point whenever they become available just to follow along. I think it’s gonna be fun to watch the space.

Ken: My only final thought on the Note token, just as you said it, I would consider it like fun vesting, investing for fun. Highly speculative, as I mentioned at the outset. We can’t really fix a fair market value to the economic stream but it is new. And if you invest the money you can afford to lose, our hope is that you’re gonna have some real value and a lot of fun, and education out of it.

Meb: Spoken like a lawyer, Ken. I mean, we just got done talking about junior gold miners on the last podcast. We talked about cannabis investing, space investing. So, don’t worry about the speculation side. Everybody here has got it buttoned down. They’ve read my asset allocation book. They got their foundation set. This is the periphery. They get it. So let’s talk about something even more interesting in my mind, different, weird, innovative. What’s this concept? You mentioned about investing in video games. I grew up on the Atari, the Commodore 64. My brother used to take all my lunch money playing Atari baseball if that dates me. My mom used to get furious at him and said we could only bet a nickel, and then she would go away, and then I would lose all my money again. What’s this idea of video game investing?

Ken: Imagine, let’s take Nintendo Super Mario. I’m sure everyone knows the video game series, Super Mario. If you had the opportunity to invest $1,000 to finance Super Mario’s million-dollar race to develop the game. And the promise is that out of the revenue stream, the sales proceeds of the game over the years, that 5% of that, every single year is gonna get sent back to the pool of investors who have deployed that first million dollars. I haven’t done an analysis on Super Mario but I would know and speculated you’re gonna get I don’t even know how many hundreds or thousands X in return for your thousand dollars investment in Super Mario to finance that development. Turns out the world of video game development and financing for the development of video games, similar to movies, but even much more profitable than movies is itself both an art and a science. There are people out there who know how to pick projects and developers, and knowing that those games once developed have a higher probability of success of getting adopted and sold than others. So, we did not have that expertise, we just were lucky to get to know a platform called FIG, fig.co, and FIG raised, I think over $12 million from great profit spark capital. And they’ve done very well out of the four or five years of existence. They finance deploy $20 million into video games, have already sent back more than a quarter of that back to investors, which is a very short timetable compared to venture financing. But we essentially bought that on and used that to launch the Republic video game vertical, so that now investors can go on Republic or FIG and see a video game project, invest as little as 50 bucks in it, and have a share of the future revenue and proceeds if the game does well. And so far, I think every single game on FIG had return capital back to investor or had generated revenue and on track to return capital back to investor.

Meb: That’s fascinating. I need to spend some time on that. I’m not as much of a gamer as I was as a child. But my problem is I have, like, the addictive personality when it comes to video games. I bought, what was it, the Oculus, played some game until like 3:00 in the morning and returned it the next day. I was like, “I can’t have this nearby. This is too enticing.” But it’s fascinating. That’s really cool. I’m definitely gonna go do some research there.

Ken: Do you remember the issue with Oculus, which is fundraise on Kickstarter, $2 million? So people were buying early versions of Oculus, I don’t know if you were one. And then years later, they exit at a billion-dollar valuation. But the very first people who bought these products and financed it got nothing, zero. What you got is a console. If that was an investment, they would have gotten probably a few hundred X of the investment.

Meb: Yeah, you guys got a much better model. Kickstarter, I think works for enthusiasts that, and in my opinion, wanna fund a play or just want… It’s like a donation. But it’s a shame that it’s not tied to some sort of rewards of future outcome because, in my opinion, that’s the way it should be. Look, I live in Los Angeles. It’s a city of restaurants, and media, and movies, and plays. And supporting a lot of these ventures, it’s part social benefit, part Philanthropy In some cases, but it’s a very real, tangible investment outcome. In some cases, even being a professional investor for 20 years, you don’t also always know which one’s going back to the early days of the when I started investing on Angel list and I posted this on Twitter a while back, if you look at the first 10 investments, I never would have predicted the ones that became the rocket ships were the ones that did and the ones that went to zero were. One’s like a toilet paper company, essentially. So that’s fascinating. How many games kind of are available right now? How many do you guys offer per year? What’s the sort of flow on that?

Ken: It’s a new addition to the Republic platform less than half a year old. So, currently, I think web five games available. We do plan to scale that up rapidly. Similar to the real estate platform that we recently added about two months ago, we have fundraised, sold out for four properties…for three properties. The fourth one is currently live, but we plan to do a lot more in 40 or 50 properties, at least in [inaudible 01:00:53].

Meb: Yeah, give me a quick overview of the real estate side because that’s a lot more traditional, a lot more tangible for a lot of the listeners. Is that single-family rentals? Are you guys managing it? Are you just buying it or, like, how’s it work?

Ken: A single residential. Typically, in cities like New York, Miami, Nashville, Austin, the concept of it is very similar to buying the entire house, which is if you buy a house, and you rent it out, and you get the rent, income, and profit, and when the market goes well, you flip it and sell it for a profit or sell it to buy another property. Now, the whole concept is exactly the same, except that there’s, instead of one buyer, you have 1,000 buyers, each pitching in anywhere between $200 to $20,000. And they have a proportional interest in the property. So they still have factional all of that residential unit and from income proceeds, from rental all the way to, again, this flip that they would get that dividend, that distribution, the payment coming back out. So, to your point, no one would ever… I can’t foresee a scenario where someone investing $1,000 into a real estate project on Republic and end up losing the entirety because there’s always real value. But I also don’t foresee the scenario whereby they get 5X return, maybe they get 20%, 30% in a good market. But that is appropriate for people with lower risk profile. And one of the interesting thing you touched on earlier is financial access and sophistication. We’ve seen a lot more diverse first time investors from our community, investing in real estate compared to startup investing, meaning people have signed up, never deploy capital. And now they do, and taking a very quick look disproportionately high in folks from probably not only just diverse but also lower source of income.

Meb: You make an interesting point. And I’m gonna take a little bit different opinion on the real estate not being a potential big compound or because it’s interesting that if you talk to the older cohort and most investors, they’ll look at real estate and they say, “I live in Manhattan Beach, California. So and so’s mom bought this house in the 70s for 50 grand and now it’s a million bucks,” whatever the numbers. And if you go back long enough, and then I’m sure I got the numbers wrong, but may have only compounded at 10% per year. But because it’s been over 30, 40, 50 years, people see that tangible wealth building. And real estate, in my opinion, is more that people are forced to save and invest in the first place. The thing is that also applies to investing and everything else. So, I love it as an asset class. I think that people can relate to it more, but that the same sort of benefits accrues to the other investing in startups too. What is the reporting…? So let’s say all right, listener goes on to Meb Ken, awesome podcast, I’m gonna put 10,000 to work overtime and a bunch of different deals, and the next thing you know, they have 50 companies video games and real estate. What is the reporting that they get as far as taxes? Is it K1s? Is it consolidated? How’s it work?

Ken: K1 only comes to plays when someone invests in an LLC that has ongoing deductible expenses or income. And very few financial products are actually based out of an LLC. But if it is, then yes, you do get a K1. And if you have enough of an investment, we’ll consolidate your K1 into one voting entity. But the whole point of Republic or a platform like Republic is that we provide that experience for investors and make it simple. They can go to an account and be able to see everything they’ve invested in, the amount of money that have received coming out. At the end of the year, hit a couple of button and be able to obtain the documents they would need to help them do financial reporting. Obviously, this deal is always work in progress. But we are making it so simple in a way that it’s hard for people to believe how simple it is without actually testing it out.

Meb: Simple on the front end, but five years of development and pounding on the legal challenges of this, I imagine wasn’t so simple. What’s been the most sort of difficult part of this process? Has it been policy? Has it been Coronavirus? Has it been what?

Ken: The biggest challenge and potential, Meb, is mainstream adoption. Uber, when it first launched, it was new, but almost everyone in the world, those were taking a taxi knew it. Almost no one, including almost no doctor, no lawyer in the United States knows what private investing or startup investing actually means. Through you, and platforms like… More and more people are getting educated about it. But we are building an industry that requires getting people to spend enough attention span and learn about a complex new topic. So it’s always gonna be a, for the foreseeable future, the biggest challenge, but also the biggest potential. As I mentioned at the outset, our goal, our objective is to have 70%, 80%, 90% of the general population, knowing that private ownership and private investing is something that one should just do as like financially and self-care advisable.

Meb: You have an audience, I have an audience, but let’s be honest, we’re not gonna get over 90% of the population from Ken and Meb. Do you have any policy, suggestions, ideas, ways that we can improve this situation here? I have a lot. But I’ve droned on about these too many times for my listeners. Do you have any just ideas of how do we make this happen?

Ken: I think it’s less about policies and more on media and influencers. I think that the Kim Kardashians of the world can really activate the followers, the fans. And now, here’s a new way to drive action and get the word out, it doesn’t matter what it is you support, female founders, climate change, whatever it may be. Anyone, even a student can spend $5 in one day, $2 investing in it, and actually potentially earning something. So, I think that message, that narrative, once it gets evangelised by more and more influencers, I think that’s how we can get to mass adoption. I’m gonna use recycling as an example. Back about 20 years ago… And if you were to visit Shanghai, I don’t know if you’ve ever been, beautiful city now. But if you go to a normal restaurant, you’re gonna see Kleenex and napkins and plastic on the floor. It’s pretty messy. Now, you can go to, like, a cheap hole in the wall restaurant in Shanghai, and it’s just like the U.S., the concept of recycling has now been permeated throughout. It took almost three decades, though. We think that it’s gonna take about 10 years, and we’ve already done four of that. So sometime over the next six years, I think it’s completely doable that everyone, even if they don’t do it, like they don’t recycle, they know that, “Hey, I shouldn’t just buy coffee or a mug. I really like that restaurant, a coffee shop. I should have the chance to invest three or five bucks in it and get something out of it as being an early adopter.” I think that concept of ownership in things in the environment around you will be a mainstream adoption. And I think it’s gonna be driven by media.

Meb: You touched on an important point. And we talked about this in an article we wrote as a four-part series earlier this year, it was called the Get Rich Portfolio and stay rich investing in a time of corona and then how I invest my money. But in the Get Rich Portfolio, we used the illustration that you hit on of, I hesitate to use the word influencers but we said, like, athletes and celebrities, how many of them who have made sort of generational wealth, whether it’s Jay Z, Ryan Reynolds recently, on and on and on, have done it not through usually their stated career of acting, or rapping, or sports, but rather through their business. And I mean, it’s almost universal. And so this trend you’ve seen over the last 10 years, by the way, you’ve seen this change to almost like people starting to get it in this investor class, whether it’s basketball players, NAS investing. I mean, you see the cap tables now, and it’s often a laundry list of investors that have made a lot of money investing in entrepreneurship. And I agree with you, first of all, hopefully, they can then use their platforms to educate. I would like to see it coupled with some public markets, teaching personal finance and investing in schools. But that’s a hopeful dream of mine.

Ken: A hundred percent. I think that starting even in middle school and high school, and the concept of, it’s almost like you can’t be what you can’t see. And all of the… I forgot what the statistic is, but, like, $40,000 a year spent for public school students in what is obviously a very broken educational system in America, a little bit tiny bit of that in an economic class, the 8-grader, a 9-grader, a 10th grader should have, and it doesn’t have to be much. The school would give out $1 each and make that student sit down, and learn, and make a decision for him and herself to invest, I think it’s gonna change so much and imprint a notion of financial sophistication that would impact many people’s lives down the road. There’s no question about it.

Meb: Here’s the trillion-dollar idea for Republic. All right, you ready? So we get personal finance and investing in middle and high school. We frame it because the narrative is important. We frame it as a class on money. Don’t call it economics. Don’t call it personal finance. Maybe call it like money and wealth or something, money and freedom. Then have instead of Yang’s proposal for universal basic income, tie it to the concept of I called it the Freedom Dividend, where each citizen gets a yearly payout, and it doesn’t have to be much tied to the overall revenue of, you can call it all the companies in the S&P 500, tokenized by Republic that way everyone can have their own freedom dividend that would reduce income wealth inequality. What do you think about that idea?

Ken: I absolutely love it.

Meb: The presidential candidates will tell him to reach out okay.

Ken: Yeah, the concept of, and making it accessible, but the concept of having not just skin in the game, having a role, an active way of being part of entrepreneurship, which not just in America… We’re obviously the flagbearer of entrepreneurship as a force of good but everyone knows the society, global society is moving in that way. Having that possibility to participate, even with just a dollar or two, I think gives us a sense of being part of the narrative, part of society in a way that a lot of people haven’t been feeling. And that in and by of itself, whether directly or indirectly, I’m sure contribute to diminish these social issues that we see in the headline news in and out every day.

Meb: All right, all the policy politicians listening to the podcast, hit up Ken for ideas. Last question, what’s been your most memorable investment? It could be good. It could be bad. It could be in between. Anything come to mind?

Ken: The most memorable investment was an investment in a cannabis company. In fact, my only Canna investment today in a company called Ebbu, E-B-B-U. And I had already written it off in my mind. And lo and behold, it was acquired by a very large Canadian public company. But usually, I’m not an experienced vice investor, but I do think that that industry has been unfortunately politically vilified for so many decades, but there’s true potential to it in the use cases in healthcare, and all of that. So, that by far is the most memorable and unexpected, positive return that I’ve had before.

Meb: I love it. Ken, if people wanna find out more, what you’re up to, what you guys are doing, where do they go?

Ken: Republic.co, that’s CO, and I’m just Kendrick Nguyen, if you send me a message on Twitter, or LinkedIn, I’ll be sure to get back that week.

Meb: Careful what you wish for. Our listeners are very engaged. Ken, thanks for so much for joining us today.

Ken: Thank you so much, Meb, for having me.

Meb: Podcast listeners, we’ll post show notes to today’s conversation at mebfaber.com/podcast. If you love the show, if you hate it, shoot us feedback@mebfabershow.com. We love to read the reviews. Please review us on iTunes and subscribe the show, anywhere good podcasts are found. My current favourite is Breaker. Thanks for listening, friends, and good investing.