Dacxi Chain Launch: A Network Effect Driven Paradigm Shift - Episode 2/3

This is the second of three special episodes of “Unleashed with the Dacxi Chain,” to celebrate the launch of phase one of the Dacxi Chain’s global equity crowd-funding solution.

In this episode, host Andy Pickering and Dacxi Chain CEO Ian Lowe discuss the power of the decentralized crowdfunding model and how it can enable equity crowdfunding platforms to connect with each other, share investment opportunities, and provide a richer catalog of options for investors. They emphasize that scaling equity crowdfunding will democratize investing in private companies for everyday investors while also giving high-growth businesses access to much-needed capital. The network effect is expected to drive participation and supercharge innovation globally. This paradigm shift in equity crowdfunding is set to redefine what’s possible for both investors and growth companies alike.



Music courtesy of BlackIrisFilms.com

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Andy Pickering – Host

Hey folks, welcome to episode two in our three-part special series of podcasts that celebrate the launch of the Dacxi Chain. In this episode, we’re going to talk more about the power of the Dacxi Chain, and what the network effect is that is going to help drive the growth of the Dacxi Chain network all around the world. We’ll understand some of Dacxi Chain’s advantages that come from its decentralized crowdfunding model. To learn about all of this, we are joined again by Dacxi Chain CEO Ian Lowe. Hello again, Ian. 

Ian Lowe – Guest

Hi, Andy, glad to be here.

Andy Pickering – Host

Let’s dive right into it. I mentioned the decentralized model of the Dacxi Chain, Ian, so can you explain what that means, and what are the advantages that this decentralized model brings to the Dacxi Chain? 

Ian Lowe – Guest

Thanks, Andy. So to set up the answer to your question, let me just explain briefly what Dacxi Chain is. So, Dacxi Chain is a platform as a service, essentially an underlying set of pipes and capabilities that allow equity crowdfunding platforms anywhere in the world, as long as they’re licensed, to connect to each other. And the reason they would do that is so that for an opportunity on one platform where that would normally only be invested in by their own local crowd on the same platform, that investment opportunity can be shared by that platform with a vast number of other platforms, all of whom have crowds of investors looking for great investment opportunities. 

Okay, so it’s essentially a network model whereby any existing, established, credible, and licensed equity crowdfunding platform can get access to the network through a set of APIs that we provide. And through those APIs, they can connect with other platforms and essentially do two things: share deals that they’re offering to investors to a significantly larger pool of individual investors rather than just their own crowd. And secondly, they can offer the investors on their own platform a much larger catalog of investment opportunities that have started or have originated from other platforms in the network. So this addresses this whole chicken and egg constraint, which is about getting scale into equity crowdfunding by scaling not just the pool of investors through this Dacxi Chain network, but also the catalog of investment opportunities. And of course, the richer the catalog, the more attractive it is to investors. 

So that network effect that you’ve referenced, where we get this compound growth through signing more platforms into Dacxi Chain, connecting them through our APIs, we grow the pool of investors, we grow the catalog of investment opportunities. Really, that compound growth, we believe will reimagine the scale of what’s possible for equity crowdfunding with some really clear benefits that touch the three principal beneficiaries, which are the investor looking to invest, the company that’s actually raising the capital so they can grow, and the platform that sits in the middle to connect those two groups together. 

Andy Pickering – Host

Thanks, Ian. So this network effect that we’re talking about, I think you and I have talked about this before on previous podcasts, Ian. It’s a famous law, it’s called Metcalfe’s law, which very simply says that the financial value or impact of a network, a communications network, an electronic network, a blockchain network, the value of that network is proportional to the square of the number of connected users on the network. This is really just a fancy way of saying the larger the network, the more potential value. I’m sure that can make sense to people. So you’ve talked about going from local to international and being able to unlock the scale and potential of the Dacxi Chain opportunity. So, again, just in simple terms, explain how that works in terms of the decentralized network model? 

Ian Lowe – Guest

Absolutely. So one of the things you’ve already referenced is that we are operating under what we call a decentralized network model. So let me explain what that means because it’s quite significant. So essentially to provide this network opportunity for independent platforms to plug into, to access scale on both supply and demand, there are two basic ways we can do it. There are actually three or four, but let’s just stick with two for now. One is a centralized model. One is a decentralized model. So I’ll explain what the decentralized model is by starting with an explanation on the centralized model. So a centralized model is where somebody comes in and says equity crowdfunding lacks scale. That’s a big constraint. That constraint is felt by everybody. Investors on one side, growth companies on the other. 

Let’s solve that problem by creating a network and let’s make that network a centralized network. And what that means is that you’ve got one central party that controls that network. You’ve got one central party that is essentially aggregating the investors and aggregating the deals. They probably need to become a licensed crowdfunding platform themselves. They would need to do that in every market of operation. That would cast doubt over the ownership of the crowd for each of those platforms. It would cast doubt over the control and ownership of the deals for each of those platforms. And a centralized model would essentially create unhealthy competition between the network operator under that centralized model and the constituent partners that are plugged into that network, whereby the centralized player is saying, come to me to see the deals, come to me to invest. 

And they are actively marketing a different destination to the destinations that already exist in the forms of the participating platforms. So a centralized model, just like bookings.com or expedia.com and all of these different industries where we’ve got a centralized model, if not immediately, shortly after that, is actually in direct opposition of the partners that create that catalog and aggregate those investors. 

So if we look at a centralized model, we think that’s deeply flawed. Equally, I think over the next ten years, players will emerge who are already in equity crowdfunding, who will pursue a centralized model. And they’ll do it by trying to expand into lots of different countries, acquire and operate lots of different crowdfunding licenses, acquire and look to build lots of different standalone crowds, and then start to find ways to connect those crowds. 

But in the end, it will still be a centralized model. 

The decentralized model is a model that says we do not want to compete, the network should never compete with the partners that create the network. In fact, far from that, the decentralized model says, at its very core, our job is to make all of our partners spectacularly successful, because if they are successful, we are successful. So this very tight alignment of interest is what we achieve under the decentralized model. And the way we do that is the following. When a deal is exposed on a platform in the network, and it’s therefore, by definition, exposed to that platform’s own crowd, by releasing that deal into the Dacxi Chain network, that deal is now surfaced inside the platforms of all the other participating equity crowdfunding players. 

So essentially what that means is that if I sit in another investor pool inside another platform that’s connected to the network, then I can see the investment opportunities that originate from other destinations, from other platforms in the network. I can see it inside my local platform. So what we’re essentially doing is we’re building the connective tissue between all of these platforms that allows them to share deals with each other. And then when investors on their local platform participate by investing in a deal that they didn’t own from the very beginning, those investors can participate in a much richer catalog of investment opportunities. But we don’t aggregate that in a centralized model. We actually distribute all of those deals into the platforms that people are already using. 

So it’s a very important distinction that has very real implications for the potential for Dacxi Chain to redraw the lines of what’s possible for equity crowdfunding. 

Andy Pickering – Host

Got it. Thank you, Ian. Another fascinating part of the potential of the Dacxi Chain, and the potential of equity crowdfunding is the ability for investors to drive impact through positive social and economic change around the world. So I’d love to get some big-picture thoughts on how you think the Dacxi Chain can help participate in driving this global positive social and economic impact? 

Ian Lowe – Guest

Yeah, of course, one of the things we talk about a lot is the potential to democratize investing for everyday investors. So this is not just retail investors, though it includes retail investors, and individual everyday investors who want the opportunity to participate. They’re not going to invest in everything. They don’t have huge capacity, which of course makes crowdfunding perfect for them because they’re not like an institutional investor that is placing very large bets. They’re placing much smaller investments probably in a small portfolio of businesses they feel that they understand. And so really to this point in time, the only path to providing those investment opportunities to everyday investors is equity crowdfunding. But of course, it lacks the scale that drives participation. 

And what we mean by that is providing a much richer catalog of investment opportunities where somebody that comes to that catalog will have an affinity with one or more of those investment opportunities based on their own life experience, their professional experience, all sorts of different things that are unique to them as an individual. So we need scale in both the catalog of opportunities and the pool of investors to really drive that synergy between supply and demand at scale. And so Dacxi Chain is really about providing that scale, providing the technology infrastructure to enable that scale. 

And that scale by definition is this democratization of investing by giving everyday investors access to a larger pool of investment opportunities, many of which would typically only be offered to the chosen few that sit around the high net worth table where they get an inside run on the best opportunities. We believe that scaling equity crowdfunding will actually completely reimagine what’s possible and in the process, democratize investing in private companies, high-growth private companies for everyday investors. 

Andy Pickering – Host

Fantastic. All right, let’s start to wrap up this episode. We’ve talked about the decentralized model of the Dacxi Chain ecosystem, we’ve talked about the network effect that will help supercharge the number of participants in the ecosystem. We’ve talked about the potential for the Dacxi Chain to drive positive social and economic impact. If you put all of this together, it starts to sound like a paradigm shift. Let’s close out this episode by explaining how we think the launch of the Dacxi Chain is a paradigm shift when it comes to equity crowdfunding?

Ian Lowe – Guest

Certainly. Today, less than 1% of the funding that finds its way into growth businesses comes out of equity crowdfunding. Now, that just has to change. And the only way it changes is through scale. And we’ve talked about this idea of empowering individuals with the opportunity to participate and to do that at scale. But think about the implications on the other side of these investment opportunities. We’re talking about founders, high-growth companies in the early stages of their life. They’ve got a proven product or a service or an offering. But to scale that business, they need access to money. They need growth capital, and they’re willing to give away some of the business to achieve that, to realize their dream. 

And so on that side of all of these transactions, that’s what we talk about when we talk about the innovation economy. This is the way that capital finds its way into businesses with great ideas and great solutions that need capital to realize the benefit of those great ideas. And, of course, that benefit can now flow to everyday investors. So at scale, equity crowdfunding truly is a win where we’re not just providing access, we’re actually giving innovators access to capital. And we’re doing it in a way that gives them access to more capital, gives them access to capital faster. And we think over time, it will also start to give them access to capital at a more competitive price because of the scale. 

And so all of those things in combination are not hard to project as we start to sign more platforms and build this network and see the effect of that network and its growth. 

Andy Pickering – Host

Really good stuff Ian, it really is about supercharging the ability for people to innovate and get funding for those innovative ideas. It’s a really exciting time, I think. That brings us nicely to the end of episode two in our three part special series celebrating the launch of the Dacxi Chain. In our third episode, we will look at the Dacxi Chain roadmap and beyond. What is the future of equity crowdfunding? It’ll be very exciting. Please join us for episode three. But that is the end of episode two. Thank you again, Ian. 

Ian Lowe – Guest

Thanks, Andy.