A Real Estate Backed Cryptocurrency Token with Matthew Sullivan
Posted by John Livesay in podcast0 comments
Episode Summary
Many people want to “get in” on the new cryptocurrency innovations, but are nervous about all the ups and downs as well as the fact that it is “not backed on anything but trust.”
Imagine if the real estate market got disrupted by a cryptocurrency token that would help people take equity out of their home without increasing their monthly mortgage. What if that new token also provided everyday people a way to get in to the cryptocurrency game, but do it with a token that was backed by assets in real estate?
Well you don’t have to imagine it because Quantm.one is launching to help people get cash in exchange for a small percent of equity in their home. The social impact of this is huge as people who need money out of their home to send their child to college can now do so without causing their mortgage payment to go up.
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Our guest on The Successful Pitch is Matthew Sullivan who is the host of his own podcast called Hooked on Startups. He is the CEO and Founder of a new cryptocurrency token called Quantm.One and it’s going to allow people to get equity out of their house without having to take on more debt as well as help those people who don’t have the money for a deposit to buy a new home. He has a fascinating background working with Richard Branson on launching a lot of Virgin brand extensions. He flies a helicopter and he also has a story of how he met the Prince in the UK. Enjoy the episode.
Listen To The Episode Here
A Real Estate Backed Cryptocurrency Token with Matthew Sullivan
I have a friend and colleague as my guest, Matthew Sullivan. He is the Founder and Chief Executive Officer of Quantm.One. He is also the Co-founder of a $50 million Secured Real Estate Income Strategies fund, and the President and Co-Founder of Crowdventure, a real estate crowdfunding company. He hosts his own podcast called Hooked On Startups. He worked with Richard Branson’s Corporate Finance Team in the Virgin Group for six years and has quite a story about flying a helicopter. He is the Director and Trustee at the time of Virgin’s London’s Air Ambulance, which is what the helicopter is involved with. He went to school in London and studied law over there and now is here in Southern California. Matthew, welcome to my humble little podcast known as The Successful Pitch.
John, it’s my unending pleasure to be here.
I like to ask my guests to take us back to their story of origin. You can go back when you were a young lad as you call yourself in London or you can tell about working for Richard Branson, however far you want to go back and take us back on, “Here’s how I got to where I am.”
It’s really a story of the moment that I decided that I was systematically unemployable. I think all of us entrepreneurs have a moment where we go, “This job thing just isn’t going to work for me.” I remember I was a stockbroker at the time. It was a great time. I was a Far East stockbroker so I would go around the world to all of the Far East Tigers or the Asian Tigers as they were known then, which were Hong Kong, Singapore, Malaysia, Indonesia, Philippines and Thailand. Every year or twice a year, we would all go in this junket around those countries meeting companies and doing research and just generally having a bit of a wild time. There was a point when I think I was out in either Hong Kong or Thailand when I just thought, “This is great fun but I want to be the person making the decisions and I want to be the person defining the policy. I didn’t just want to sit back and be an agent of execution.” I think I was in my mid-twenties or early twenties at the time.
[Tweet “A real estate backed token”]
A couple of years after that, the guys that I was stockbroking with, Tim and Rory McCarthy, they set up their own company and I went along and joined them much more as a partner rather than as an employee as it were. Rory wrote a letter one day to Richard Branson because his office was just around the corner in Kensington and he said, “Dear Richard, we own Lindstrand Balloons and I’ve always wanted to go around the world in a hot air balloon, but I think you would be a much better pilot. How about it?” I remember seeing the letter when it came back because the letter said, “Dear Rory, Why not? Yours, Richard.” It was a very simple response and then at that point onwards, we then ended up building this incredibly complex hot air balloon to try and fly around the world and there began our journey with Richard Branson and Virgin. For the next five to six years, we ended up being best friends with him and working in all sorts of really interesting projects from Virgin Jeans, Virgin Cosmetic, Virgin Clothing, V2 Music, Virgin Executive Jets, Virgin Helicopters and Virgin Bride, the list is endless.
Tell us your James Bond story because I love that. I think that’s a great visual for everybody to get just how bon vivant you are.
I learned to fly a helicopter at one of the companies we set up, which became Virgin Helicopters. At the same time, Express Newspapers Group decided that they’d spent ten years sponsoring the London’s Air Ambulance but they’d come to the end of their run as it were. The sponsorship or the funding of the London’s Air Ambulance was up for grabs and there was this risk that it would have to close down. The person in charge of the Air Ambulance at the time came to see Richard and said, “I think Virgin would be a great idea,” so Richard said, “Yes.” He handed it over to us and we sorted it all out and we put the money together. I ended up being a trustee and one of the directors or the operations director in charge of the whole process.
One of the perks that I used to get every now and then was that I would drive my car in the morning to the place where they park the helicopter at night, and I would get out and go to the crew room with all the other pilots there. I’d put my bright orange pilot suit on and my flashy James Bond with a mirror glass and I’d get in the helicopter. Because I have a license, they let me fly the helicopter under pretty close supervision I can tell you. They let me fly the helicopter to the parking place on top of the Royal London Hospital. I would fly to work and I would land the helicopter and I’d get out and I’d unzip my flight suit. I’d pick up my bag and I’d have my business suit underneath and I just catch the elevator down, hail a taxi, and I go off to work. That was my James Bond and I would do that. I’d do that a few times a year actually. It was pretty cool just flying over London looking at all these people underneath thinking that at that moment, I was Mr. J. Bond.
On your LinkedIn profile, there’s a photo of you with some relatively famous people who happen to reside in I believe it’s Buckingham Palace. Can you tell us how that happened?
We were closing one of the other projects that I was involved with. It was a sustainability campaign so that was going back a few years, not too long ago though, I think post-2008. In Europe, we were quite ahead of the US in terms of sustainability in carbon footprinting and the importance for companies to be able to demonstrate environmental credentials. One of the companies I set up, which is still running today which is called Clearway, was a consultancy that worked with companies to help them reduce their carbon footprint and improve their sustainability. One of the projects that we work very closely with was The Prince’s Trust. The Prince’s Trust was really very much at the forefront of running programs and educating companies. The picture there was we’d put together a program for schools, which was called Eco-Schools. The particular program was designed to try and get kids at a very early age to understand the importance of energy usage and sustainability and how the world doesn’t have infinite resources. That was something that was very close to the Prince’s heart and his charity. The picture there was where we were working very closely with the The Prince’s Trust at that point trying to roll this out to as many schools in the UK as we could.
We fast forward to your latest venture and what’s interesting about that story you told, Matthew, in your youth saying, “I don’t want to just execute something. I want to create it.” You have the same mindset around cryptocurrency. You don’t want to just invest in one, you want to start your own token. Tell us how that came about?
It’s a case of faint signals from the future having seen what happened with the internet back in the late ‘90s. Once or twice, there’s normally once every ten years or so, if you’ve got your feelers up and you’re listening out for these things, then every now and then, you pick up these signals where, “These sounds and feels like the thing that we had ten or twenty years ago.” The internet at that stage had its fair share of naysayers and the people on the sidelines. The guys that got in the early stages and understood the potential with the guys that actually really benefited. Having followed Bitcoin not for too long, probably for less than a year, had people talking about blockchain and cryptocurrencies, it didn’t really resonate. There was a moment when I thought, “There’s something here.” Then you see the price of Bitcoin going through the roof and you think, “I don’t actually want to be involved as a secondary player here because I have no control over this. I’m purely a passenger and completely at the disposal and at the hands of the market.”
That ride is very choppy and very volatile and it’s not enjoyable at all. To all of you investors in Bitcoin and all of the other coins out there, I know what it’s like because every morning you probably wake up and the first thing you do is you look at the price of your Bitcoin or your Ethereum or Litecoin or whatever the coins are. If it’s gone up, you have a great day. If it’s gone down, you start your day with the equivalent of a cold cup of coffee.
It’s so funny you say that because I talk about helping people get off the self-esteem roller coaster really feeling good about themselves if their numbers and their sales are up, and bad about themselves if their numbers are down. We can do the same thing with our investments and you figured out a solution to that.
The real point is how do you build something where you’re in control of it? Where you are able to shape and define the policy rather than having to react to it. What I’ve figured out over the years is that always, the answer that you want is staring you in the face. You’re just trying to look beyond it. You’re trying to look outside of it. Actually, it’s there. It’s a combination of your experience and where you are right now. That’s what you should try and leverage. Having spent a bit of time trying to get out of my own way and figure out what was actually in front of me.
Cryptocurrency Tokens: It’s a combination of your experience and where you are right now. That’s what you should try and leverage.
If you look at the components of the businesses that I’m in, real estate crowdfunding and just real estate generally, technology and then you overlay that with this cryptocurrency idea where you’ve got bits and bytes flying around the world without the normal roadblocks that you have with normal money, the solution was really to say, “How do you solve one of the big problems?” On the basis that if you wake up in the morning thinking that your Bitcoin price could have gone through the floor but thank God it hasn’t, that means it’s an inherently volatile currency. Is there a place for something that combines the benefits of cryptocurrencies, which is all this flexibility and the ability to move money around the world in the blink of an eye and something solid like real estate, which is really the mainstay of any portfolio? Real estate is there. They’re not making it anymore. We all know that real estate is a great investment. Really the a-ha moment was how do we take something solid like real estate which is predictable, which always outperforms inflation? How do we make it accessible to people by bolting on this really cool cryptocurrency technology? First of all, we don’t want a cryptocurrency that’s bouncing up and down all over the place in terms of prices. We want something that’s predictable.
There are major problems within the US residential housing market that need fixing. They need fixing by people saying, “You shouldn’t be borrowing so much money. There should be other ways to help you fund your house.” At the moment, the only way you can buy a house is by borrowing a ton of money. You don’t actually buy a house, you finance your house. Is there a way where you can get other people to come in and maybe buy a little bit of your house with you so that your debt isn’t so massive? There are ways of doing that but the problem is, people don’t really want to invest in that because you’re locked in for a long period of time and it doesn’t throw off any cashflow. There’s all these problems floating around and if you wrap the umbrella of this cryptocurrency over the top of that, suddenly it starts solving these problems one by one.
From a volatility perspective, suddenly if you add real estate as your underlying asset, it smooths it all off because real estate doesn’t bounce up and down in price. It moves really slowly. If you can tie your currency to that and the currency comes down and doesn’t bounce all over the place and it becomes much more predictable. The thing about the currency is it creates liquidity. If you can buy and sell these tokens and if these tokens represent this big piece of real estate then theoretically, you can chop up a big piece of real estate into loads of tiny little pieces and you can sell those to people by way of tokens. The people that buy the tokens can then sell those tokens to somebody else. Those tokens move around like atoms. When they’ve got this big solid object underneath, it stays there. These tokens are whizzing around the top of it like atoms and that creates liquidity.
What we’re now in the position of doing is creating money that we can spend with people who can’t afford to buy a house and we can say, “I know you can’t afford to buy a house because you can’t afford the down payment, but how about we come in and split the down payment with you?” Or let’s say, “You’ve got a ton of equity that you’ve built up in your house and you need to release some of that because you can’t pay your mortgage, how about we buy a piece of that equity from you? You don’t have to pay us back. You just sold us a piece of your house and then we can give you some money so that you can pay your college fees or you can help get yourself back on track.” That’s a very long answer to a very simple question.
[Tweet “Helping people get equity out of their home with no debt”]
Let’s break it down a little bit. You decided that instead of just investing in cryptocurrency, you wanted to start your own token because it’s too volatile and you get on that self-esteem rollercoaster based on how something is performing and you have no say in it. That’s the first problem you’re solving is realizing there’s a lot of people that need to find a place to put their tokens. Then you have a social impact element to it, which is there’s a lot of people who have some equity in their house that they want to take out and the only way to do that now is by taking on a higher mortgage amount.
Yes, exactly. This is the design. The design is to say, “Here’s the token which is much more predictable where you haven’t got to worry, you’re not going to have those sleepless nights because it’s not going to bounce up and down anything like the other cryptocurrencies.” The second thing is really interesting because I think something like 70% of people who rent homes in the US would prefer to buy their house but they can’t because they can’t afford the down payment.
The 20%.
I think it’s less than that. 20% is the optimal but even if it’s 5% or 10%, because of all the issues we had back in ’07 and ‘08, the banks are now much more stringent about how much money they lend and who they lend it to. Add it to the fact that if you look at the amount of money that the average person has by way of savings in their bank account, I can’t remember what the exact statistics are, but it’s a few hundred dollars. If something goes wrong with your washing machine, basically you’re screwed because most people don’t have enough spare cash for something like that to happen. To actually find people who are trying to get their foot on the property ladder and to ask them to suddenly come up with this big down payment, they’ve got to go and max out their credit cards, phone up their friends and family and beg, scrape, and put together this deposit. That’s why most people are renting houses. That’s why the cost of rentals is going up disproportionately to inflation and to the all other indicates because there’s so much demand for rentals because people can’t afford to buy a house. We solve that problem by saying, “We will help you with the down payment.”
Cryptocurrency Tokens: Banks are now much more stringent about how much money they lend and who they lend it to.
The other problem is, “What about people that are sitting on houses that they’ve had for a long time that have gone up in value but they’ve fallen on hard times or their jobs aren’t paying as much as they used to and the price of living has gone up?” It’s crazy because they’re sitting on hundreds of thousands of dollars of value that they can’t get a hold of because the banks will turn them down if they try and get a home equity line of credit. They are stuck there with all this value, all this money that’s basically nailed behind the walls that they can’t get access to. What we say is, “We want a piece of your house because that’s really valuable to us a real estate asset. Sell us that piece of your house, just a percentage of your equity and we’ll have that and we’ll pay for that.” It creates this liquidity. It puts money back into people’s pockets that the banks are unable to do.
Still have some appreciation but you know it’s never going to go down to zero because it’s backed by some actual residential real estate. The other thing that’s interesting is there’s probably a lot of people sitting on the sidelines going, “I’d love to be part of this cryptocurrency world but it’s too scary for me because it’s so volatile. I could buy a token that’s backed by real estate. That makes sense. That will be a good entry for me,” yes?
You’re right. The other thing is I can buy one token or I can buy a half token. Let’s say for arguments sake the tokens start out at $10 each. I don’t have to buy a whole token. I could go on to an exchange and I can say, “I want to buy a $1 or $100 or $153.45 worth.” I’m not restricted by minimums. I can buy a little bit now, a little bit tomorrow, a little bit next month. I can sell a bit. The great thing about tokens because of the technology, you can actually chop these tokens up into tiny, tiny pieces. That makes it much more accessible for people that don’t want to have to spend $1,000. How much is a Google share or an Apple share these days? You’ve got to be pretty rich just to be able to buy one Bitcoin these days. People understand real estate so it’s the next step where we go, “I don’t really understand cryptocurrencies but I do understand real estate and I do understand that this token is backed by real estate so I’m a bit closer to understanding how this stuff works.”
Also, “I want to put some high investments in residential real estate without having to be a landlord. This gives me the benefits of owning a small percentage of a lot of people’s homes without having to deal with the upkeep because the owners keep the upkeep going.”
That’s a really critical point because the best people you want to look after a home are the owners. There’s a great expression, “If you’re renting properties, you’ve got tenants, toilets and trash.” Those are the three things that any landlord hates. Getting call at 3:00 on a Sunday morning saying that the toilet is blocked so you’ve got to do something about it. If you will own a piece of someone else’s house and you own it in true partnership with them so that if they make money, you make money. If they lose money, you lose money. If you are there as partners, they’re going to look after the house. They’re going to cut the grass. They’re going to paint the walls, they’re going to keep the place clean because they’re proud of the house and you’re a partner in that with them.
The great thing is that there are literally thousands of billions of dollars of people’s houses out there where they would be willing to share or to allow other people to be part owners in their house if they could keep their house or if they could stay as owners. It is a massively untapped asset class or a piece of a section in the real estate economy that people haven’t really been interested in because it doesn’t throw off any revenues. It’s not cashflowing. It doesn’t pay rent. If you buy a share in someone’s house, theoretically, you’ve got to wait until they sell the house before you make your money. That’s what put everyone off to date and that’s what changes with this whole concept of the token and putting the token on top of that.
The real reason to tokenize, if you will, the way people buy a home or get equity out of their home is fill in the blank. Right now, there are ways for people to get equity out of their house and there’s people sitting on the sidelines that can’t come up with a down payment. The real value of having a token do it would be, what would you say? It’s liquid?
What it does is it allows people on both sides of the fence to get involved. On one side of the fence, you’ve got the homeowner who wants to release some capital. Normally, that money would come from these big nasty hedge funds or banks or funds or pension funds and basically men in suits behind glass doors. There’s no opportunity for the man in the street to be able to participate. If I’ve got a bit of cash, I like the idea of investing in other people’s houses. I like the idea of being able to help them get on the housing ladder but that opportunity is not available to anybody right now because the money to do what equity sharing there is, is provided by banks and hedge funds. What the token does is it says, “We’re going to throw this whole thing out to the average investor.” We’re going to say, “Pretty much anybody now will be able to get on the housing ladder as long as they meet certain requirements.” Also, if you want to get involved in this and help people and potentially get a good return on your money, then what the token does is it democratizes that side of the equation as well.
[Tweet “Helping people with downpayment to buy a home”]
Also, isn’t it lowering transactional cost compared to traditional asset trading?
The great thing about the technology is that things happen in the blink of an eye now whereas beforehand, you have to go through brokers and dealers. There will be commissions here and commissions there and paperwork here and sign a form there. If we can do it through this technology lair, all those things happen instantly. The tracking and the securities that we’re putting in front of these properties create more security in these transactions. What we’re doing is we’re taking something that is not tradable, that is not liquid and then using technology, we are making it liquid. The result of that is the efficiency and the magic effectively that the technology brings. It unlocks that. Your question is about cost and efficiency. It will be fractions of a fraction in terms of the cost of doing that transaction compared to what it would be if we try to do it through the normal equity ways that we have today.
Matthew, I love what you are saying so much that I decided to join the team at this very moment. If anybody wants to track what’s going on with Quantm.One token, you can go to the website which is Quantm.One. Any other final thoughts on Quantm and the future of cryptocurrency in real estate?
Cryptocurrency Tokens: In the future, everything we do will have a value and we’ll be able to translate that value into something that we can spend.
As more and more people understand cryptocurrencies, the thing that we’re not really tapping into is just the amazing scale of things that cryptocurrencies can get involved with. My prediction for the near future is that everything we do will have a value and we’ll be able to translate that value into something that we can spend. Whether it’s intellectual property or whether it’s physical activity or skills or the ability to communicate, those skills of cryptocurrencies and tokens and technology, will be able to have a value around those things. That means that people that have these amazing skills that haven’t been able to turn this into capital because capital law, normal money is just a little bit old fashioned, that will be released. We’ll see whole new economies and whole new ways of doing things will also be springing out of this ability to tokenize activities and intellectual property and value.
It’s certainly an exciting time to be a part of all of this. Thank you for being a guest on the show.
John, it’s been my pleasure. Thank you.
Links Mentioned
- Hooked on Startups
- Quantm.One
- Virgin
- Crowdventure
- Richard Branson
- Virgin Helicopters
- Matthew’s LinkedIn profile
- Clearway
- The Prince’s Trust
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