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The Dacxi Chain update with CEO Ian Lowe

On this episode, Andy speaks with Dacxi Chain CEO Ian Lowe. The Dacxi Chain aims to connect entrepreneurs and investors all across the world, giving entrepreneurs access to a global pool of potential investors and providing investors with hyper-growth opportunities. Ian says that the Dacxi founders identified equity crowdfunding as an opportunity several years ago, after which they conducted exhaustive research into the industry to build a business model architecture. They found that equity crowdfunding is constrained by its local nature and by perceived barriers for investors around owning equity in private companies. To address these challenges, they are pursuing a decentralized model where existing equity crowdfunding platforms can plug into an infrastructure capability that immediately transitions them into becoming part of a network along with other participating platforms. Blockchain and tokenization can accelerate the adoption of equity crowdfunding by providing digital records through smart contracts on immutable blockchains so people can trade tokens in secondary markets. The Dacxi Chain is in the final stages of building its MVP before launching later this quarter under its three-stage expansion plan. The ultimate goal is to operate globally at scale within a few years or less. Regular updates will be provided until launch, which is expected later this quarter. Despite the complexity of the project, progress is being made according to schedule.

Andy Pickering – Host

Hey, folks, Andy here. Welcome to Unleashed with the Dacxi Chain, the podcast that features experts from within Dacxi and from across the industry. Experts who are here to share their insights on developments shaping the global crowdfunding economy. Now, if you’re listening to this podcast, you are probably aware that a crowdfunding revolution is coming and it is set to unleash true innovation at scale. We’re talking about the world’s first global equity crowdfunding network, and of course, it is called the Dacxi Chain. Now on today’s Podcast, I’m joined again by Dacxi CEO Ian Lowe to get a status update on everything on the Dacxi Chain. Ian, welcome back to this show. 

Ian Lowe – Guest

Hi, Andy, how are you doing? Good to be with you. 

Andy Pickering – Host

Excellent. I’m doing well. Ian. Pleasure to have you here. Ian, the Dacxi Chain is about connecting entrepreneurs and investors all across the world. It’s about giving those entrepreneurs access to a global pool of potential investors, giving those investors access to hyper growth opportunities. This, of course, is the vision of the Dacxi Chain. Ian, how long has this been in the works? How long has the team been working on the Dacxi chain? 

Ian Lowe – Guest

Yes, thanks for your question. The founders identified the opportunity associated with equity crowdfunding, really not realizing its true potential. That opportunity was identified a few years ago. And so the work that’s transpired since then has been an exhaustive research process into the industry. The various segments in the industry, the constituent players in the industry, the technologies that operate in the industry, how those technologies work, and how that ecosystem operates more generally. And then that process established some really important insights that were then used as foundations to build a business model architecture. And from there, the business has evolved into going and building the underlying technology that makes all of that possible. So look, it’s been going on now for a couple of years. 

We’ve tacked along the way, of course, as you do over when you’re innovating in the way that we are. So we’ve made refinements along the way. But this is not something that we picked up yesterday. We’ve been at it now for a number of years. 

Andy Pickering – Host

Got it. Thank you, Ian. And look, another way of describing what the Dacxi Chain is all about is simply, crowdfunding. I’d love it if you could perhaps talk about the potential of crowdfunding at scale, which is what the Dacxi Chain is all about, right? 

Ian Lowe – Guest

Yeah, that’s absolutely right. So look, there’s a couple of core principles that really are the premise to the whole project. The first is a fundamental belief that crowdfunding should change the world. And it should change the world for two core groups of people. One being growth companies that are looking for funding, and the other being everyday investors that want access to great growth companies to invest in and realize a return at some future date. So crowdfunding, when it first came along, was this very exciting new world where the benefits of connecting investors at scale and large numbers of well qualified and suitable growth companies ready for investment would be realized, essentially redrawing the lines of the whole innovation economy. 

I mean, if we think about how growth companies are funded today, something like 99.5% of that funding comes out of venture capital. Now, venture capital is a large market. In 2022, it’s about a half a trillion dollar market, but it’s controlled by a surprisingly few number of very large players who operate a very small number of primary locations. So essentially what it means is that this democratization, if you like, for both the everyday investor and really smart companies who are growing and need growth capital to continue growing, that whole dynamic or opportunity of the byplay between the supply and demand I’ve just described is massively constrained when we only operate in a world where 99.5% of investment capital is coming from one source. 

So if we look at crowdfunding today and we realize that it simply hasn’t developed to become what it should become, which in our view is a 100 billion dollar market, the question is why? Why hasn’t that happened? And what all of our research revealed is that there are essentially two underlying reasons why crowdfunding is constrained today. And the first of those is that crowdfunding is almost exclusively local. It’s not a global proposition. So you might have multiple crowdfunding platforms that operate in multiple corresponding markets, but they are essentially local businesses. So they attract local companies looking for capital. We call them issuers. They attract local issuers looking to raise capital, and then they seek to raise that capital from local investors all within one market. 

The primary reason for that is that it’s extremely problematic for a company or a crowdfunding platform in any given country to go and build a database, a meaningful database of well-qualified investors in other countries around the world. I mean, how do you do that? That’s extremely difficult to do, it requires time and capital that these companies don’t have. And so by definition, equity crowdfunding platforms specifically are local operations. And the fact that they’re constrained in this way limits the scale that is achievable for equity crowdfunding as an industry more generally.

And the second constraint is around the perceived barrier for investors around owning equity in a private company. So we’re obviously talking about private companies, public companies. Theoretically, anybody can own or dispose of shares in public companies. We’re talking about equity crowdfunding with private companies and specifically gross companies. And so for a lot of everyday investors, the threshold of owning equity in a business where I don’t know what my liquidity event might look like, is too high of a barrier, and so it discourages them from investing. So these are the two issues, a lack of scale and the barrier in the mind of the investor around a liquidity event. These are the two things that are getting in the way of equity crowdfunding becoming a 100 billion-dollar market. 

Andy Pickering – Host

Yeah, got it. Ian, so you talked about how traditionally crowdfunding is more locally based, right. It happens all over the world but it is constrained within local jurisdictions. And of course, the vision of the Daxci Chain is to take equity crowdfunding global. What are some of the key things that need to happen to unlock this global potential by making the move from local to international? I’ve seen you mention the Dacxi Chain network effect. So that might be part of this as well. 

Ian Lowe – Guest

We’ve looked at this really closely and thought a great deal about it. Look, globalizing the industry can be done in one of three ways. The first is under what we would call a proprietary model. And this is where essentially one company expands into multiple markets over a period of time, and is able to compete in a very successful way in every market. And as a singular entity, they become a global juggernaut that essentially owns the industry. And so, look, the parallels might be the likes of Google, for example, or Amazon. The challenge with this, of course, is that if you’re an investor you’re going to have to pick the right horse and you’re going to have to wait many cycles and many years for that global dominance to take effect. 

So the proprietary model is a high risk proposition for an investor and the period to harvest is an extremely long one. And the quality of the outcome is ultimately in the hands of very few at that point. It’s not really a network, it’s just a single business that’s dominating an industry globally. 

The second model is a centralized model. And so this is akin to a business like, let’s say, Booking.com. So they are an aggregator where they’ve created a marketplace which is its own standalone destination. And that marketplace aggregates all of the opportunities that exist across its constituent partners businesses. And so in the world of equity crowdfunding, it would mean that a centralized and incremental equity crowdfunding platform is created, and needs to be fully licensed. It needs to be licensed in every market in which it operates. 

And it needs to do deals with existing equity crowdfunding platforms where they share those deals with this aggregator, this centralized aggregator. Of course, the problem with that is that just like the Booking.com model, and there are many examples of this approach, is that the aggregator ends up actually competing with the platforms that it’s partnered with. So really what the aggregator relies on is the investor coming to its own marketplace rather than going to the marketplace of the partner that provided the deals in the first place. So that’s highly problematic. And we’ve seen this become a really difficult business model in a whole range of industries, not just travel, but real estate and automotive and any number of industries. So we believe the centralized model is highly problematic. That brings us to the third one, which is a decentralized model. 

Now, what we mean by decentralized is essentially this idea of providing a technology infrastructure which existing equity crowdfunding platforms can plug into. And through that infrastructure they become part of a network along with other participating equity crowdfunding platforms, where deals can be shared from the platform that is the originator of that deal into an ecosystem of multiple other platforms, all of which have databases of investors within those platforms. And of course, that same dynamic in reverse. So essentially what we’re talking about is a nondisruptive infrastructure capability that immediately transitions a local crowdfunding proposition to being a global crowdfunding proposition, where they can access investors from all the other platforms around the world. 

And really what it does is it gives those platforms, and therefore the issuers that are raising money through those platforms, access to infinitely more capital, which means that more deals can be done and those deals can be done faster. And for the investor, they now have access to a vast catalog of investment opportunities. So the network effect that you refer to is really where, as we build this network of participating platforms, over time, the growth of that network accelerates because you have this multiplier or compound effect whereby the increase in the number of deals and the increase in the number of investors that participate through that network creates more investors and attract more deals. 

And the whole thing compounds through this network effect where if we start to achieve the scale through this global capability, we start to achieve the scale that realizes the true potential of equity crowdfunding. So that decentralized model is vastly superior in our view. And that’s the model that we’ve pursued in the technology that we’re building. 

Andy Pickering – Host

It reminds me, when you’re talking about the network effect, it reminds me of Metcalf’s law, which is that the financial value or impact of a network is proportional to the number of users on the network. So of course the network effect grows as more people are engaging with the network, then it starts to go exponential and the value increases to all participants in the network. And you’re talking about this as a decentralized network, Ian. So my next question is how does Blockchain and Tokenization fit into this? 

Ian Lowe – Guest

Yes, this relates to the second point around this barrier for certain investors, there remains a perception that having equity in a privately held company is a problem because I don’t know when that equity will be crystallized and I can get the benefit of the growth in the value of that equity. And so when we looked at the whole equity crowdfunding model and the global opportunity to become this 100 billion dollar industry, one of the things that we realized would greatly or potentially greatly accelerate the adoption of equity crowdfunding for the everyday investor was being able to tokenize the equity that they receive when they invest. And the reason for that is that if my legal record of ownership of shares in a company that I’ve invested in, if that legally binding record of ownership is a digital record through a Token, a digital token, via a smart contract on a blockchain, an immutable record, then what it gives me is the ability to trade that token on any number of secondary markets that already exist. And the number of these is growing every week. So it means that I can tap into a secondary market to find a buyer for that equity in a way that is literally impossible now. If I have a good old sort of paper-based share certificate sitting on my desk at home, we can totally transform that whole liquidity event proposition for the individual investor if we tokenize the shares. And look, this is not remotely controversial. Blockchain has been around for a long time. The number of real-world applications solving real-world problems built on Blockchain is growing exponentially. 

I think every leading business consulting firm in the world has come out and said that the Tokenization of all asset classes is absolutely inevitable and by 2030 will be a 20-something trillion-dollar industry. So we’re talking about tokenization is on a path to becoming ubiquitous, just like the Internet was 20 years ago. And so on that basis, leveraging the benefits of blockchain and tokenization we think has the potential to accelerate the acceptance and adoption of equity crowdfunding as a broadly accepted method of investing for everyday investors. So we think it’s part of the solution. 

Andy Pickering – Host

Got it. I love it. Just as we start to finish off, can we get an update in terms of where the Dacxi Chain is at and the next steps. I believe you call it the three stage expansion plan, please talk us through what that looks like. 

Ian Lowe – Guest

The stage we’re in at the moment is really the final stages of the build of what we call the minimum viable product. And we’ll make an announcement later this quarter about the launch of that minimum viable product. And we’ll also be looking to make an announcement about the first deal that will go through the Dacxi Chain technology and also share with everybody who our foundation partners are, that is established equity crowdfunding companies working with us on this very important first deal. Proof of concept. So that’s the stage we’re in at the moment. That’s the timeline. We’ve given guidance on that previously and none of that has changed once we get through that. The first deal is about saying the technology works, the partners are real, a deal has been successfully executed, and on that basis we have a viable business. 

So that’s the first stage that’s really important. The stage that we enter after that is really about building out the network. And so by that we’re talking about doing deals with equity crowdfunding companies in select markets around the world as foundation partners to build out the first version of the global network. And so this is about meeting with these leading players in select markets around the world, agreeing how we’re going to work together and establishing that version of a global network. So that’s that second phase. And then the third phase is really about scaling all of that and doing it in an accelerated fashion. So in the same way that you’ve described, once we have the foundation partners in place, we want to greatly accelerate the number of participating partners on the Dacxi Chain network. 

And we envisage a scenario where as we build momentum and look, the response we’ve had from equity crowdfunding companies we’ve talked to has been overwhelmingly positive. We’re not asking these companies to put any money on the table. We’re building all the technology. The integration points are very simple and easily executed. The business models we’ve put in front of them are resonating. So we expect that scaling of the network, once we’ve got all the foundation partners in place in phase two, that scaling of the network and the acceleration and growth of the business that comes from that, we expect that will unfold reasonably quickly. 

So what we’re talking about is getting to a point in the future where we are operating globally at genuine scale, with all of the important markets participating and a really significant number of the leading platforms participating within a handful of years or less. So that’s that third phase is accelerating the growth of the network. 

Andy Pickering – Host

Got it. Thank you, Ian. Thank you for reminding us what the Dacxi Chain roadmap looks like. And yeah, that’s exciting. So later this quarter, in a few months, you’ll be in a position to tell folks what that MVP looks like and the foundation partners. 

Ian Lowe – Guest

Yeah, that’s absolutely right. So we’re committed to regular updates. We’ve been providing those for a few months now. We’ll continue to provide those right up until we make the launch announcement, which, as you can imagine, we’re really excited about. And at this point in time, we’re making refinements to the technology to make sure that the first deal that goes through is going to be a successful outcome for everybody involved and we’re really confident about that. 

Andy Pickering – Host

Fantastic. Well, I’m sure I speak on behalf of the listeners, a pleasure to have you on and to hear what you’ve got to say today. We can’t wait to hear more details in due course later this quarter. But for now, thank you very much for the update. All the best, Ian, and bye for now. 

Ian Lowe – Guest

Good to talk to you, Andy. Cheers.