Russ: Hi I’m Russ Capper and this is HXTV, the show championing Houston’s innovators and entrepreneurs. My guest today Rashad Kurbanov, Founder and CEO of iownit.us. Rashad welcome to the show.
Rashad: Pleasure to be here Russ.
Russ: Tell us about iownit.us.
Rashad: We are a startup, but not your typical startup, we’ve been in business for about 18 months now. Our mission is to build a platform for capital formation for the nonpublic companies. If you kind of think about it both myself and my co-founder coming from the Wall Street background we have 20 years of experience in the public markets and frankly those markets operate phenomenally efficiently for the companies raising capital, for the investors and everybody else who is a part of that ecosystem.
If we look in the private markets this is really where in the past 10 years a lot wealth gets created, a lot of innovation actually happens, those markets are left in the 1960s. So our mission is to bring a platform that that will enable – not quite make the market as efficient because the companies are not of the same size – be at least get some more automation, some more digitization and all the benefits that come with that into the private securities markets.
Russ: So you’re kind of an exchange between investors and companies that need capital, right?
Rashad: Absolutely. We view ourselves – our mission I should say is to build a platform on which the investors and the issuing companies can meet, transact in the primary – kind of at the investment stage – as well as potentially in the secondary market since everything basically becomes digitized.
Russ: But there are perhaps very early stage companies seeking investment, maybe even startups, right?
Rashad: Absolutely. The thing that people quite often think about when they think about the capital and the investment in private companies, their minds kind of go into two different camps. On one hand it’s the startups that really need the capital to get going and on the other hand you have real large companies like Uber, AirBnB that are unicorns and probably could be one of the larger companies in the public market should they choose to go public.
But there’s also a very large population of companies that have kind of gone through the startup stage, maybe raised some seed money, have a product and now need the growth capital. And those are the ones that quite often are starved of the capital; starved of capital to grow, make the investments, hire the teams, create jobs, create the product, get the clients. So what we want to do in our business is really focus on that middle market. The companies that have gone through very early stages, kind of de-risked some of their product…
Russ: And might have already raised some money.
Rashad: Might have already raised some money but now they need more. They need more institutional money, they need the larger sized capital, and this is the place where they can tap into a much larger audience of investors, tell their story and raise money on the merits of their business rather than the net worth that they have or where they are located.
Russ: Okay, let’s say I’m an investor and I see one of these that I might want to invest in, would I only see them if they were already on your site or might I talk to them and say well why don’t we go do it through iownit.us?
Rashad: You can do both, there is absolutely no limitation. We’re hoping that over time – and again, we’re hoping – that we become the destination for the companies to go and actually list themselves and reach the investors, etcetera.
Russ: Say I was an investor and I found a company there and thought this is real interesting and they’re probably offering shares for sale, and they’ve probably got a price already pegged; a lot of times my experience just in the regular world is that there’s a lot of negotiation that takes place there ultimately. Does the platform play a role in that or is it hey, we put you two together, work it out?
Rashad: We’re a platform so technology can do a lot of things and it can actually help people do a lot of things better. So some companies may actually have a price that is based on some valuation or whatever else and they may say this is the price, we think it a fair value, then go from there. Some companies may actually open up more of a Dutch auction or any other mechanism where the price can get negotiated. That is just the technology, it’s easy enough to implement. I think a more critical component of that process is how do we bring the investors that are coming in and can negotiate on a basis of some insight and information and set the market clearing price for that particular transaction.
Russ: If I were to want to invest would I need to be an accredited investor?
Rashad: Absolutely. Part of what we do is we want to make sure that everything complies with the securities organizations in the U.S. So all investors have to be an accredited or institutional investors. we do all the background checks – KYC, AML – to give protection both to the investors as well as the companies.
Russ: As you know this is a business shoe and people are probably looking at your business model wondering how does he make money. I see you could charge to list their companies, you could charge investors to come and check them out, or you could take a piece of the transaction or you could do all of the above. What do you do?
Rashad: What we focus on is the total cost to the investors and to the companies to complete a transaction and our goal is to reduce that total cost. And the total cost for us consists of the fees that you pay to raise the capital as well as the cost of capital in terms of if you have your own network. On a typical basis we have a fairly small onboarding fee that the company pays to come in. Investors actually don’t pay anything, it’s free for them to access.
And then the companies, depending on the size and the complexity of their capital raise they may get charged commission on the back. We believe actually that a lot of value is going to accrue to the marketplace as more and more companies get listed, more transactions go there, there’s enough data generated; you can have other service providers on the platform.
Russ: When might one be able to really come there and do a transaction, find something to invest in? Is that 6 months away you think or a year?
Rashad: I hope it’s not but one thing we did very clear right from the beginning we said look, we’re going to get into the securities business. So for us it’s a very serious thing because we’re dealing with the investors’ money, trust and whatever so we apply to the regulators to get all the licenses and coming onto our website will depend on when we get those licenses. As soon as we do yes, then we’re open for business and we’ll be more than happy to host companies and investors and go from there.
Russ: So another reason I wanted to have you on HXTV is that you’re kind of knowledgeable of everything we’re doing here at HX and we talked about and are doing something sort of together, and we’re talking about the HX Capital Summit that you’re hosting and putting on. Tell us about that.
Rashad: I’m personally very excited about the event and we consider ourselves to be a Houston company. So we’re headquartered here and we’re building and hiring staff here and we’re planning to grow. And a very interesting thing for us when we talk to folks at Houston Exponential, first of all the mission is great. Create the entrepreneurial ecosystem, really generate both the jobs and not just jobs but the ones that have the future, so that’s excellent.
All the pieces seemed to be in place and one thing that kept bugging us that was missing is the flow versus capital. How does the capital actually flow into that entrepreneurial ecosystem? The greatest thing about Silicon Valley or New York kind of near Boston route 128 is over the last 50 years they really worked out how to deploy the capital; how to source the capital and how to deploy it and how to harvest that capital. So what we want to do is actually get the conversation going here in Houston and connect that mission of we want to be an entrepreneurial really kind of big city, in order for you to get there the capital needs to flow; the rick capital. What are the implications of that? How do you do it? How do you do you grow and how do you go beyond angel investing?
Russ: And that’s what the HX Capital Summit’s going to be about.
Rashad: Yes. What we want to do is we want to bring in a broad cross section of the community here, all the constituents. We want to bring in some experts from the Silicon Valley that can talk about the practices there; connect potential to capital that comes from the local community, so venture, angel investors, etcetera. And interestingly enough we think a big role in all of that is going to be played by the corporate sector.
Russ: Tell us when is the HX Capital Summit and where is it going to be held?
Rashad: It’s going to be November 6th. We are finalizing the location and it’s going to be obviously in Houston. And we look forward to seeing as many people that follow the Houston Exponential story, but more importantly that actually care about let’s build that ecosystem here in Houston. Let’s get moving there.
Russ: We’re really excited about it and excited about you launching your company in Houston and the knowledge that you bring on the whole raising capital category.
Rashad: And we’re excited to work with Houston Exponential because it’s almost like if somebody said invent the mission; you guys – for our company you guys did it. SO I think it great.
Russ: Well Rashad I really appreciate you sharing your story, we wish you good luck. We thank you for doing this in Houston, Texas.
Rashad: Absolutely Russ, thank you very much.
Russ: You bet. And that wraps up my discussion with Rashad Kurbanov, Founder and CEO of iownit.us and this is HXTV.
brought to you by