This Singapore-based Swedish serial investor also talked about Animoca Brands and why this blockchain-based gaming firm is poised to become a $10 billion company in the next 12 to 24 months. He also discussed True Global Ventures (TGV)’s other portfolio companies such as The Sandbox and Forge Global.

Stojanovic also revealed that TGV will continue to invest in blockchain application in the following industries: entertainment and gaming, artificial intelligence and data analytics, financial services, and infrastructure.

Significantly, he believes that NFTs should expand into enabling robust digital identity infrastructure to meet know your customer (KYC) and anti-money laundering (AML) compliance requirements for cross-border payments and other financial transactions in an increasing digitalised environment.

The following key points were discussed:

• The creation of blockchain game CryptoKitties is considered one of the milestones in NFTs, along with the sale of a Formula One licensed NFT car for $108,000 in 2019.
• The REVV and SAND tokens were created to facilitate players in F1 and The Sandbox.
• There are endless possibilities in The Sandbox as it allows users to build anything.
• MetaKovan and Beeple are creating collectible digital tokens and NFTs in the crypto realm, Metaverse, that can be invested in and owned.
• The difference between an ICO and NFT is that the former is a fundraising mechanism while the latter has real-world application with the potential to “solve global problems”.
• COVID-19 accelerated digitalisation
• NFTs are going to push digital identities to the forefront of innovation.
• Investors in Europe and Asia tend to exit early, as compared to their counterparts in China and the US.
• Forge Global raised $150 millionin fundraising with investors like Temasek, Wells Fargo, and Deutsche Borse

The following is the edited transcript of the interview:

Emmanuel Daniel (ED): Dusan Stojanovic, good to meet you again, my good friend. It's been a long time since we had a discussion of any kind, Mr. Serial Entrepreneur, founder of True Global Ventures. I think you're running into your third fund right now, or is it your fourth fund? And you’re doing very well? How are things with you?

Dusan Stojanovic (DS): Thanks, Emmanuel. It's good to talk again. It was a while ago. And yes, you're right, it is already our fourth one. Time runs quickly. And yes, life right now is actually pretty good. 

ED: You know, every time I catch up with you, the world is changing, and a lot of new things are happening. The conversation I would like to have with you today is on Animoca Brands, your latest investment with $88,888,888. That's a very good number that you've raised for Animoca, which is on the back of its business in supporting non-fungible tokens (NFTs), which is all the rage at the moment. Why don't you start by telling me what you're up to with Animoca?

Playing with virtual cats

DS: First of all, I think we should congratulate Yat Siu, who is the founder and chairman of Animoca to get it beyond $88 million dollars raised and what they've achieved, especially in terms of educating the whole world since roughly 2017-2018 on what the non-fungible token is. In those days, 2017 and 2018 if you remember, there was something called CryptoKitties. A lot of people had made some money on Bitcoin and Ethereum and wanted to buy unique cats, that's why it's called CryptoKitties. You could buy a unique cat, and Ethereum at the time got congested because there were a lot of people who wanted to buy this and gas fees went up. And then it kind of faded away. Animoca and Yat, and all the others in the team, we were stubborn as investors. We believed that we would actually change the world way more than the Internet and mobile had. Basically, the team had spent enormous amounts of time educating the whole world on what is non-fungible token. We didn't even use the word non-fungible token, until recently. But in those days, we tried to explain that non-fungible token is a piece of land in a game that you can buy, own, and that you can build something on. Then you can play the game. At some stage, you can sell everything you built in your Second Life or in your game, exit the game, and get some money for that. It took ages to basically educate and educate and educate. A couple of milestones in that company's life was number one, they got the CryptoKitties licence for China. You probably know that Dapper Labs, which is behind NBA Top Shot, were the original guys from Vancouver who created CryptoKitties, Animoca got the licence in China. That was a big breakthrough in May 2009. The first Formula One licensed NFT was sold for $108,000 in May 2019. That was huge. We couldn't believe our eyes that somebody would pay $100,000 for a digitalised Formula One car that for us, you couldn't use but only brag about. And the guy who bought it in May 2019 is the same person who bought Beeple for $69.3 million in digital art that most people in the world have heard of him now. That was the breakthrough, I would say, for Animoca. After that, there have been a lot of things that they've done since May 2019. But step by step, they have gone into one of the top global players in NFTs and now have about 350 people across the world based out of Hong Kong. They have a big development team in Argentina. They also have very strong presence both in New York and San Francisco in the US where they have acquired NFT collectible companies last year. So, they are pretty strong across the world when it comes to sports NFTs and gaming NFTs. 

ED: So Animoca is not a platform? It's actually an owner of NFT assets. Is that what it is? Or would you like to correct me on that? 

DS: Yes. So Animoca is a lot of things. So, they have really played an important role in the ecosystem. They are the owner and not the marketplace. But some of the companies that they actually have are also marketplaces. They have also invested five years ago in OpenSea, which is the number one marketplace when it comes to NFTs globally. When new things arrive and when new ecosystems are built, it's a little bit difficult to say clearly who is doing what in the ecosystem. And one thing that Yat has done extremely well with Animoca is to make sure that he's part of the whole ecosystem of NFTs, no matter if it's his own 100%-owned subsidiaries or marketplaces.

ED: I'm doing this conversation with you for the benefit of old-fashioned people. And the question they would have is, for some investors to put $88 million on the table, we look at the balance sheet and say, what does it hold at the moment? It looks to me like Animoca has got real assets, although these are virtual assets. But your original assets were gains, wasn't it? It wasn't NFTs?

DS: Yes, originally, it started as a gaming company. Even before 2017, it was basically a mobile game for kids but it was kicked out, for many different reasons, from the Apple Store, in terms of their positioning there. Then the founders were thinking, how can you turn around this company and really position it for the future? And yes, they have some real assets, these are digital assets. And these are definitely real because people buy and sell these, and own these at long term, short term. So, it is not trading, it’s not the main driver, but real assets.

ED: Tell us a little bit about the tokens that Animoca owns or distributes. You've got REVV and SAND.

Gaming with REVV and SAND

DS: So REVV is exactly what we talked about, which was that Formula One car which was sold for $108,000 in May 2019. Once you buy a car, you kind of go, well, what are you going to use this car for? What is the utility for it? In order to get the utility for it, you build the game. So, they built a game around Formula One. In order to participate in the game and be able to pay for the different NFTs, you need a payment token. That's where the token comes in and that's REVV. Sandbox, which Animoca is majority owner and where True Global Ventures has also invested directly, is very much built on the lands that I tried to explain. So somewhere in December 2019, which was six months after the Formula One car, we had invested into Sandbox. And they were explaining this Second Life concept, which those people that are at my age may remember, was about 20 years ago, you can have the real world in a digital world. That's really what they wanted to establish. So, what they did in December 2019 was they sold the first pieces of virtual land for $100,000 in a couple of days. For us, that was a huge success in those days. And then they sold for $200,000 in February 2020. And then came March 31, which was as you remember, COVID, more than 15 months ago. People were staying at home and they sold for more than $450,000 in four hours. Boom! That was the breakthrough at that stage. We sold for $800,000 on NFTs in August and then every single transaction of the land that we were selling, we were using Ethereum. Now at some stage, we were saying we have such a strong user case that you can buy this land and potentially sell the land. So why don't we also introduce our own payment currency, which is then called SAND token. We kicked out Ethereum and replaced it with SAND. As of September of last year, that exists. If you really want to explain it in the old-fashioned world, think of it as an eBay and PayPal. eBay, in this case, is the game and PayPal, is the payment mechanism. It's basically a very strong relationship between the two. And then the rest of the story for Sandbox, they sold NFTs for $3 million in February this year and then boom, 14th of April, sold for $6 million in one day. It keeps growing and growing and growing. And it's really making sure that you have true ownership in your game that you can buy and also import assets from other areas. 

Anything’s possible in The Sandbox

So, I talked about MetaKovan, I talked about the first guy who bought the Formula One car for $100,000 and Beeple for $69.3 million. And this answers the fundamental question on what do you do with one of those collectibles once you have bought it? What is the utility for it? That's the kind of answer that Sandbox is trying to give for everybody who's bought NFTs. You can build a basketball stadium, an American football stadium, a museum, you can actually discover music and rock concerts, you can do whatever you want, and import the NFTs from anywhere in the world to Sandbox.

ED: It is wonderful that you're talking about MetaKovan. And his space is called Metaverse, that universe that he created. I just want to get to the mechanics of Animoca’s business. So, you have digital assets, you have a digital token, you are a platform. The revenue fee, is it from the capital gains on the token, or is it from the gas fee, as they would call it from the transactions? 

DS: There are very many revenue streams across the platform of Animoca. But to give you one example, I told you about all these virtual lands. So, for instance, that example I gave to you, when they sold for $800,000 in August last year and for $3 million in February this year, and almost $6 million in April. So that is basically generating revenue whenever you buy and sell that piece of land, And and in the game, it’s generating depending on the game, some 5%-10% of revenue. So, these are two very important revenue streams. And that is recognised.

ED: And revenue is recognised in the forms of the token, the REVV token or the SAND token, right?  

DS: No, not in this case. The token itself, I would say, is a payment mechanism that is facilitating all those transactions. That's why the relationship is so close. What happens is exactly what you pointed out, that the more NFTs are being bought and sold in the marketplace, the demand for the token increases, which means that the token price potentially increases. It's obviously linked to the activity. But I would still say it's like eBay and PayPal. They have revenues there for whatever is being traded. And the more it's being traded on eBay, the more the demand for PayPal is there.

ED: The eBay PayPal analogy is so old fashioned, we should just leave that. It's a totally new dimension. The token is both a store of value as well as a transaction device. And people who don't understand this new universe just want to know whether it's monetisable. Ethereum is far more monetisable. 

DS: The difference would be that whatever you did with PayPal, you will never be able to sell that to somebody else. That's really why the financial systems have been a little bit negative to a lot of these developments. Because those who should be adopting it and have started to adopt it is PayPal. You can accept Bitcoin, you can buy and sell a lot of stuff in the PayPal wallets. I still think that this will start to become big when all those traditional players will also start to be part of the ecosystem. 

ED: So, the difference between PayPal and the token is that the token is an asset in itself, is a transaction mechanism. And interestingly, it's also potentially a technology in itself. There are things happening on the token front that are developing and growing. One interim question, what fear do you have as an investor that the NFT phenomenon is no different than an initial coin offering (ICO), which came and then the regulators sort of pulled it down and put it in its place? It's still there, but it's not as big as it was when it first started. What sense do you have that NFT is not a passing phenomenon?

Comparing ICO and NFT

DS: Well, I think you need to look at it. Did ICO solve any global problems? Can you name one?

ED: Did ICO solve any global problems? It monetised? Well, it was an alternative capital raising mechanism.

DS: Exactly. It was a fundraising mechanism. In itself, it might solve some fundraising, potential problems for some startups. But it didn't solve any fundamental problems in the world. It was a way to finance your companies. So, let's compare that to NFTs. Let's take one of the NFTs mentioned here, Formula One, as an example. So, what is happening now during COVID-19 times? How do you maintain Formula One races when nobody can go to the stadiums? How do you maintain any revenues? How can you even pay the drivers today if there are no sponsors, no audience? Nobody's there. So that’s why we've had such an enormous uptake in every single creative industry in NFTs is because of this enormous need for any creative industry to find extra revenues, commercial extra revenues. That's what has happened. You haven't been able to see your Formula One race, but here, you have the opportunity to buy your own Formula One car and participate even if you can't watch it. That's a phenomenal extra revenue stream for the F1 industry and makes the whole F1 industry survive COVID-19. Exactly the same analogies for NBA’s Top Shot and the basketball association there and the clubs. How can they pay the players if there's nobody in the stadium and there are no sponsors money and no merchandise being sold? Again, NFTs go in there. You can own your own players, you can play in some of the games that are being produced, and you can purchase this as a collectible. It’s the same for music. You can't go to any music venues. Again, how are the music artists going to survive? It's basically creating and solving a huge problem for any creative industry right now, especially during COVID-19. The main reason why the NFTs have exploded during the first quarter of 2021 is actually COVID-19. Now, you would argue that once COVID-19 is over, then the need for NFTs is going to lessen. We can have different views on it. If you believe that everybody's going to work as much out of office like they did before COVID-19, well I don't think so. Even if we get into a post COVID-19 world with less infections, a lot of people will still stay and work partly from home. 

ED: What do you think is the most likely scenario after the pandemic is over? As it tapers down? 

Accelerating digitalisation

DS: The most likely scenario after the pandemic is that it's going to other areas because we have only started to look at the NFTs in creative industries. We mentioned film, video, music, gaming, and art. We haven't mentioned non-profit organisations, what you can do with the Red Cross’ interests or tangible assets that you get in exchange for your donations. I believe the more time we spend on digital, the stronger the NFTs will be. So, my fundamental question here for every single banker who is listening to this is who do you think is really accelerating digitalisation? Is it your chief innovation officer? Is it your chief executive officer (CEO)? Or is it COVID-19? Those who have built bank branches for Deutsche Bank in Europe, they know the answers. The Deutsche Bank branches are not there anymore. This change is permanent and it will not be reciprocal. And the NFTs are exactly there wherever a ditch actually happens and is accelerated. The NFTs can be used in every single industry, not just the creative industries.

ED: So, the money that Animoca has raised, what is it going into? Is it to buy more assets? Or is it to develop the technology further? Also related to that, the token itself. I'm very curious about the fact that you have your own token, instead Ethereum. How much more work can be done on the token to create a utility element into it or into them? You put several tokens.

DS: Before I answer that, I would just give you one last statistics. Today, we have between 700,000-800,000 NFT wallets in the world, We have 135 million crypto wallets. We have 5 billion users of creative industries. So NFTs are really just the start. Now going back to your questions, which is basically asking where is the money going to go for Animoca going forward? They have been very strong in doing acquisitions until now and they are very good at turning around companies. One of the main focus areas will be to do 100% acquisitions. They have a lot in the pipeline and will continue to do that. Some of it will go to just purely organic growth to develop further all the games that have been done, including marketing, and get the big masses of the four billion people to use it. This would be the proceeds of Animoca. I'm happy to talk about Animoca for ages, but then, you should really do go into an in-depth interview with Yat Siu, who is the CEO and founder of Animoca. What I can tell you just from an investment perspective, True Global ventures has been there and supported Animoca. 

We believe as a fund that this space, which we call entertainment and gaming, is an area that we want to have a first mover advantage. We want to continue to invest in that area because we are actually very bullish about it because we believe that this is bigger than Internet and mobile. So, we as a fund, basically invest in four areas. One is entertainment and gaming, which is this NFT space that we mentioned. Another piece is artificial intelligence (AI) and blockchain. The third one is financial services and blockchain. The fourth one is infrastructure and blockchain. Let me talk about the fourth one, which is infrastructure and blockchain and relate that to what we talked about in Animoca.  

Connecting NFTs with digital identity

So, when you do a transaction, which is pretty big, like the $69.3 million transaction of Beeple to fuel this growth, we're going from 700,000 to 800,000 wallets to maybe the 135 milion crypto wallets or the four billion gamers that we have there. You need robust infrastructure. This really worked smoothly because there are still a lot of small problems out there in this ecosystem. One is very simple. When we’re doing a transaction of $69.3 million cross border, we need to know who is who? The know your customer (KYC)-anti-money laundering (AML) piece, and all that. We believe that global identity solutions can fuel together the identity solutions to one country to another country and make sure that we have KYC and AML there. It’s going to be more important than ever given this digitalised world and this cross-border payments world, which is exactly what’s happening in NFTs. I would argue, there is nothing more cross border than actually NFTs. It's not local. The whole issue about getting digitalised identity is the innovation from the NFTs that is going to push that area. We've been talking for so many years about all these processes that should be digitalised. I'm a true believer that areas like NFTs are going to push that to the forefront of innovation. And I'm very, very bullish about those areas. 

ED: On the technical front, I have many questions for Yat Siu, including gaming as a platform, as opposed to sitting on HTTP, or the World Wide Web. You actually create entire communities around yourself for the gaming platform to be a platform in its own right.

DS: I think you're right there that the social element of the gaming platforms are extremely important. And that's why we became interested in all these because we are all originally from the payments industry. When we see that intersection between social and payments, that's when we get really excited as investors. One of the main reasons why we invested was this passion for Formula One, for basketball, for the virtual world for gamers. When there is such a strong passion and you have a payment mechanism linked to that, that's when it can become really big. For us, this was like U Wii Chats, new PayPals, but in a completely digitalised blockchain world. And that was one of the main reasons why we invested originally. 

ED: If you have an exit and that's a nice tie in to the second part of our conversation, which is private market. But just before we get into Forge, if you have an exit for a business like this, what would that exit be? I take it that you have no intention to exit at any point in the near future. But what are the sort of reasons for exit, not mechanisms for exit, whether it's public markets but it's more for an investor to enter a very brand-new platform like this. In the platform era, it was easy to see the exits if you invested in Amazon or Grab. There are reasons why you enter any one of the series as they go up the line then you exit at some point where the technology is mature, the market share gets very clearly defined. But for the gaming business, for the token business, what are the exit mechanisms?

DS: We are still a blockchain equity funds, so we don't invest in tokens. When it comes to Animoca, we've been supporters there for a pretty long time. We are invested in Animoca from True Global Ventures II, III, and IV. What that means is, when you have a $1 billion valuation, you start to think if you are potentially going to do just a traditional second array and see if you want to sell what you originally invested. Just the standard thinking there. Given that this is such a big thing, which we believe NFTs is, we decided True Global Ventures is not actually selling anything at this $1 billion valuation, obviously not TGV IV because we recently invested. With TGV II which started in 2013, yes, we did sell what we originally invested, which is overall peanuts compared to what we have. We still believe that that is probably the interesting part, that we took some money back. But why didn't we take more money back, like the initial investment for more for funds? Fundamentally, we believe that Animoca can become a $10 billion company, because of the growth rate they've had in interest revenue. They've gone four times revenue between 2018 and 2019, four times between 2019 and 2020, and four times now between 2020 and 2021. That is really hyper growth and given that we want to stay longer, we believe that this company could have a value of about $10 billion in the next 12 to 24 months. That's how fast it's growing. And that's how exciting this industry is. 

Exit trends in Europe and Asia

From an exit point of view and I do want to mention that a little bit of both Europe and some parts in Asia, there’s a sickness to actually take money – except for China maybe – to take home the initial investment and even exit too early because people haven't had that much experience with actual unicorns. So, people tend to say, ‘Okay, I did three times, five times. There is some liquidity, let's sell everything off.’ What I've seen in True Global Ventures is really a global partnership. We have Europeans, we have Asians, we have American partners. As we all know, the J Curve starts with high expectations then things go a little bit down. We don't reach expectations. One out of 10 actually go in the right way, but nine out of 10 go a little bit down and you start a J Curve then you turn it, and you soar to scale it up, and wow! That's when most Europeans and also some Asians want to sell. Whereas the Chinese and the Americans, they just want to ride it all the way through. That's really what I can tell you about the exits that I've been. I really had to convince my partners not to sell too early. That's really important for the ecosystem to have some of these extra mega successes because once you have them, you're more likely to invest heavily once you exit into new companies. That’s where Forge comes into place. So private companies tend to stay private longer and as we all know, it started to be a US phenomenon. Companies are now averaging probably 10-13, even 14 years, so people are impatient and want to have the exit earlier. The only way to get it earlier has been a secondary sale, where a venture capitalist (VC) comes in and take a 30-50% discount on the latest round. And that happens every second, third, fourth year in a company's history. That's not really liquidity. So what Forge is really doing is basically matching the sellers that go through this J Curve and the buyers who want to buy cheaply because there's a load of upside still there. Animoca is a perfect example. If you look at the names, we invested in Animoca, with Kingsway Capital, and many others. They believe that they're going to make 10 times now where some of the sellers made 10 times, so it's a perfect match. And all those trades should really be done in a professional way. That's really what Forge is doing, providing that liquidity between buyers and sellers. It started with Facebook, Twitter, and LinkedIn. As we all know, 10 years ago, they were the only so-called unicorns in those days. So, the history started by trading Facebook, Twitter, LinkedIn. Then basically, after that there were a couple of years that there weren't that many unicorns. And people said this is not really an asset class, Facebook, Twitter, LinkedIn was a one off, three big companies, it's never going to happen again. Now we have 400 companies that we have been trading since the inception of Forge and SharesPost, and basically executed $9.1 billion of trades, only in the last quarter $700 million. It's definitely an asset class that is there. And it's now worth about $2 trillion.

ED: Take us back on Forge a little bit. When was the company set up? And what is the funding right now? You say 400 companies, $9 billion worth of trade, so far. Is it effectively a private market? Is it based somewhere? Does it have a concentration pool of investors in specific markets? Is it a Silicon Valley-oriented company, a global Singapore intercompany? Give us a little bit more to profile. 

DS: So, the history between Forge and SharesPost started in 2010 with SharesPost being founded in Silicon Valley. In those days, there was a competitor called Second Market, but they sold too early, exactly the J Curve I explained. Equidate, as it was called, was Equidae founded in 2013, that later changed name into Forge. Forge Global today is the result of two early movers in Silicon Valley, one called SharesPost and one called Equidate. It was very complementary for them to merge because at that stage SharesPost had about 300,000 individuals, accredited investors, whereas Forge had 50,000 mainly family offices as investors, about, 350,000 investors. So, if we were to merge these two pools of investors, which are completely complementary, it could become one unique marketplace with way more liquidity than we have seen ever. That was the fundamentals why we agreed roughly a year ago to merge the two entities. The merger offered us a Securities and Exchange Commission (SEC) approval on November 9. After that, we raised money on the same valuation as November 2019. Obviously, the merger and approval took way longer than expected.  

Investments pour in Forge

So, the overall fundraise is actually $150 million. It is a US company with the majority of its revenue still in the US and majority of the company's still being traded still the US. But what this fundraising of $150 million brings to the table is number one, the lead investor is Temasek based out here in Singapore, which we believe is going to open up for Forge the whole of Asia and the whole world because Temasek is investing everywhere. We hope that it will also give some extra benefit to Singapore itself, where I actually live, because the Singapore Stock Exchange has some liquidity but not that much for tech companies. It could be a second liquidity venue here. So, it basically opens up Asia for Forge. Also, Deutsche Borse went into this around with $50 million, which is an existing investor and that opens up Europe completely for the company. Lastly, we have also Wells Fargo from the US. So, we’re very bullish about the internalisation of the platform.

ED: Where does Forge play the seed and then the series A – G? Where is its sweet spot? Is it pre-initial public offering (IPO)? If there is such a thing? Or there is no intention for an IPO, but to keep the valuations in private hands? 

DS: If you are asking valuation-wise, it's somewhere between $250 million and $30 billion. Companies that are valued within that range need to be tech companies and they need to be VC-backed. That would be the three things that will really hold it completely together. What you will also see, which is a COVID-19 phenomenon is that for the last 15 months, people have learned how to make investments through a Zoom call, not meeting the entrepreneurs, and actually doing it on documentation and data. Again, COVID-19 has been a huge accelerator. And this quarter, it says in the press release, they did 700 million of volume and I think that it's actually 270%, more than a year ago. The growth is enormous. Like I said, it's not just because Forge is a fantastic company, it also because the market is ready for the same kind of fundamental reasons we expressed. 

ED: Before Forge, there are any number of companies like Forge that want to be a marketplace for private capital. What is the critical success factor that creates the liquidity that finally creates the momentum that is able to run on its own? Because the initial phase is the difficult part. As you say, you don't know when is when is the next thing coming? But now you start to see a flow and then comes the flow of investors as well. At which point does a company like Forge make that breakthrough?

DS: The real momentum breakthrough has been in the last 15 months. But what has been driving that? If you look at it from a seller's point of view, if you have invested in all these companies, you're going to try and sell your shares where there are buyers. You don't have to go to one shop. You can go to a couple of shops and you're going to go and see where there is a buyer. And if you have made 10 times, 20 times, or 30 times more money, you're probably pretty happy to pay a substantial commission, if you can get 10 to 20 times of money. You're looking for the best price. You're not that incentivised on keeping the commission level low. You just want to make sure that somebody is buying for a high price. So, from a seller's point of view, you really want to go where there are most buyers. And that's what Forge SharesPost has. But the second is on the buyer side, until recently, a lot of people have said that these valuations are crazy, they're so high. Why would I buy in a company that I have so little information on? That is what has fundamentally changed during the last 15 months. Given that we have $9.1 billion of trades and we have data about those, and these are proprietary data points, we can like in a private Bloomberg, show exactly the data points for every single transaction. For instance, Palantir when it was private, the private markets more or less established the pricing of the direct listing because that's the only data points that somebody would have doing a direct listing. So that is really what has changed, that there is more proprietary data there and that there are more direct listings.

ED: So, there's better data points, from there, the resolution of the of the evaluation is clearer. How much of that is Forge itself involved in picking and choosing which companies it wants to support? Because you'll have one loser and everybody will talk about Forge. So, what sort of due diligence is in place? What sort of guarantees? What does Forge do to make sure that every one of its investments creates a brand name around that? That it’s a forge invested platform. It will be good. 

DS: It is a FINRA broker dealer and it is an alternative trading system (ATS). But like any FINRA broker dealer or any ATS, it's not an investment bank doing due diligence on the companies. They're only facilitating trading. So that's not the role. 

ED: But it's been able to avoid adverse reactions or adverse deals that would have affected the brand of the company of the platform. 

DS: Absolutely. The companies that you want to be traded there, they are backed by top tier VCs, because the top tier VCs have done a proper due diligence. They're not responsible for due diligence. But that's how you make sure that you have really good companies there.

ED: Therefore, it's the investor community that validates the investment and Forge is the platform. In the last 18 months after COVID started, the public markets have come back on. You mentioned Palantir. It went public last year and suddenly, public markets are just as attractive as private markets or so it seems. Give me a sense of how you think the dynamics work between the two until now.

DS: If you look in terms of the returns on the private markets, you do two graphs. You do a graph and you see who entered the public market and the returns they had, and you enter the same companies and see those that have invested early in their private markets, what kind of returns they've had. The picture is very clear that the returns to the private markets are way higher. Obviously, it should be because there is less liquidity, there is more risk. The fundamentals work there really well. That hasn't always been the case. If you remember Facebook in 2013, a lot of investors went in on a too high valuation. The IPO came and it went straight down. That could have almost killed the private markets at that stage. It didn't. But there was quite a lot of trust lost for a year there. Now that you have three companies, which are unicorns, and one is too heavily a part of the overall total sum. Now, when you have 400 and start to build the indexes of how all these 400 companies have gone, you start to have really strong data points. So, for today, it’s a no brainer. The returns are higher in the private companies trade. In order to buy in private companies, it's a different mindset than in the public, because again, there's way less information even if we have $9.1 billion of transactions and all your data is still way less than in the public markets. So that the skill set for somebody buying the second market is different on the buyer side than the public markets.

ED: How is the culture or the skill sets expressed in different geographies? With Chinese money, anything above 200 million, not a problem. You go to Southeast Asia, they tend to be so much smaller. US, again, it's West Coast, East Coast, it's different. How are the cultures in each of these different ecosystems represented on something like Forge? 

DS: I would say, in general, in terms of institutional investors, there are way more secondary funds in the US that only specialize in buying private market shares. That is really a US phenomenon. Having said that, taking the risk in the Middle East, in Hong Kong, in Singapore in buying a private company from a family office, for instance, is definitely there, and the willingness to do that is definitely there. Putting a bet on it outside of the secondary funds is very strong in Asia. That's one of the reasons why Forge wants to expand to Asia before Europe. Now in China, the price discovery for private market shares has been very complicated. Whatever is being sold on the Chinese private markets, sometimes has been pushed on the sales side and inflating. Basically, the price is too high. So having a platform with a lot of more data points is very welcome. It's difficult to generalise, but I would say in China, the price discovery mechanism of Forge is very interesting. For the whole buy side in Asia, to get access to the most interesting Silicon Valley companies is very interesting. We see some of the kind of short-term things that I think will happen in Asia in the next 12 months.

In China, no matter Forge or any other company, the model needs to be tweaked and needs to be well personalised. It's too early to say that big vision, how it's going to work in China. All we can say is that without doing anything at all, we already have strong interest and just by word of mouth, we managed to trade some of the unique Chinese unicorns, both on the south side and the buy side.

ED: What is True Global Ventures investment in Forge? You mentioned Temasek, Wells Fargo, other traditional banks or exchanges that are invested in Forge, just to profile the investors themselves.

DS: So, the three main ones that I mentioned that came in in this round. Forge is big for us because we invested originally in SharesPost, which is part of the merge way back in 2010. We've invested in 2010, 2011, 2017, 2018, and now in March 2021. We've invested five times into the company. So, from an exit point of view, we’re looking at True Global Ventures I, II, III, and IV exit anything on this. And in the end, obviously, not TGV IV because we just invested. TGV III has not exited anything. TGV II hasn't exited anything. And in TGV I, some of our partners are coming out of age. They've been with us for 10 years. We bought them out to stay on Forge. We really believe that this is just the start of the beginning, even if we've been invested in the company for 10 years, and for all the reasons we mentioned. 

ED: Amazing. You know Dusan, it’s always great to catch up with you. Because I get an insight of what it feels like in the venture community and the things that are making you excited, which are going to be redefining the industry. What's interesting here is that you mentioned that you were True Global Ventures is invested is gaming, AI, FI and infrastructure. Now, FI and blockchain, how's that different from infrastructure and blockchain? Give me some names in terms of traditional, financial institutions that you're invested in? Or is it traditional at all? FI in blockchain? Why do you have that category?

DS: Both AI and infrastructure can go across verticals. The infrastructure can serve many different areas. Identity, to give an example, can be a wonderful solution for Forge for instance when they do more cross border payments, as much as it can be a wonderful solution for the NFT trading that we were talking about. Clearly, it's an infrastructure play that can be held in many different verticals, as sometimes the competence of our investment committees, those who know financial services, would also know infrastructure. But we have decided to give it a different angle because infrastructure in itself always takes longer and trust to building it up and growing it. So, we believe that from a vertical point of view, that kind of patience is needed when you build up infrastructure, as opposed to let's say gaming, where you can see results quicker. We wanted to have an investment committee of 10 people. we have only solid infrastructure competence, so that they are actually patient enough when we build up those infrastructure companies. So that's mainly the reason. 

ED: Dusan, this conversation can go on. I'm going to be able to catch up with you in a short while when I see the NFT revolution work its way through. And I do want to speak to Yat Siu on the technology front, on the frontier of his business and the technology just taking him forward. Thank you very much. 

DS: Emmanuel. Thank you very much for having me. 

Guest include:

Scott Shay

Co-Founder ,Signature Bank

View More

x

Scott A. Shay

Co-Founder of the Signature Bank

 

x

Emmanuel Daniel

Founder, The Asian Banker & Wealth and Society

Emmanuel Daniel founded The Asian Banker in September 1996, first as an intelligence publication but later added benchmarking and consulting elements to make it the authoritative repository on the financial services industry that it has become. He sets the broad direction of the company without managing its day-to-day operations, but is mostly on the road as a speaker on a broad range of issues facing the industry.

 

Host:

Emmanuel Daniel

Founder, The Asian Banker & Wealth and Society

View More

About the series:

The Asian Banker RadioFinance aims to enhance understanding of the finance industry globally by bringing together thought leaders, industry experts, practitioners and futurists to examine current, critical issues through a discussion facilitated by visual and web-based platforms. Through the use of interactive technology, participants do not have to take time out from their crowded schedules or leave the comfort of their own desks.