Araby Patch • Jun 3, 2019
This Issuer Spotlight was featured in V.3 Issue 01 of The Protocol Newsletter, an inside examination of the accomplishments within the digital securities industry. The Protocol Newsletter features issuers, issuance platforms, marketplaces, broker-dealers, custodians, marketers, and more, with a specific interest in their real-life stories about what it takes to issue and manage digital securities on public and permission-based blockchains.
Our goal is to provide the digital securities industry with invaluable insights and to serve as a resource for those looking to issue digital securities in the future.
In this issue, we will be taking a closer look at Augmate Connect. In early 2018, Augmate Connect successfully raised $10M with their DSO (Digital Securities Offering). The MATE token began by using a SAFT structure and SEC filings for the option of being a utility or security token, but as the regulatory landscape began to sour on ICOs, Augmate and their legal counsel took the decision to de-risk the raise by converting it to a fully compliant DSO.
The MATE token was then converted to a digital security using the Securitize platform and it is currently managed on the Securitize platform and powered by Securitize’s DS Protocol.
1. Describe Augmate and it’s current place in the market compared to any competitors.
Augmate Connect is built to lead into markets that are underserved by the generalist MDM solution. These have included HMD’s in the past and will include areas like drones, etc. in the future. With the new open architecture, we can bolt on to other solutions to extend them faster than their internal processes allow.
2. Describe how Augmate made the decision to tokenize, specifically the advantages you saw as deciding factors
Tokenization sets up the future where subscription usage of software is monitored in real time. The ability for Augmate to charge variable pricing based on using smart contracts allows for additional revenue streams to be added such as per device insurance contracts that protect the customer in different ways and in the ability to add in data aggregation monitoring on a micro level.
3. What gave you the impression that you would succeed in doing something lacked that mass adoption?
The value proposition for both Smart Glasses and IoT is strong. Issues like hardware price points and communication standards get worked out over time. This time has allowed us to build out our solution offering to better address the market. Our platform enables scalability of devices so from that perspective, Augmate will help drive mass adoption.
4. How many crucial components were lacking like ‘no functioning secondary trading markets’ when you started? How did you justify tokenizing before these components became real?
Early on, we wanted to use tokens as a discount for our platform software and use blockchain to guarantee a set amount of these tokens. We weren't worried about a secondary market at that time since we were a utility before becoming a security and knew that we would be able to accept tokens as partial payment on our platform.
5. Would you consider yourself and Augmate as pioneers of something greater?
Augmate has always been a pioneer of new technology. At our core, we utilize new technology to solve problems in the marketplace. Blockchain and smart contracts are ideal for IoT Security and to provide a transactional layer (both for data and financial) which is greatly needed in IoT.
6. Describe any resistance you experienced when converting to digital securities? Investor/team resistance? How did you navigate?
Two team members resisted it mostly because they didn’t think it was the right time for government oversight and desired a free market without regulation. Their general thought was that the technology should have time to develop and flourish. Eventually, the financial aspect of ICOs as a way to raise capital forced the government to step in. Security Tokens will not replace utility tokens in providing functionality to decentralized protocols. It will be used as a way to capitalize the construction of these decentralized utility token protocols; or exist concurrently with a utility token in a dual-token approach. Ultimately, tokens monetize previously unrealized assets and this mechanism has been necessary for financial markets.
7. What have you learned from this first iteration of working with digital securities? Would you do it again?
We would absolutely do it again. When we started, there was a lack of exchanges and it took time for companies to program regulation into the digital securities. Subsequent issues happen with liquidity, trading volumes, and volatility of the market. It is still early and this will shake out, thus digital securities will become the natural future of paper securities.
8. From a digital securities perspective, what does success look like for Augmate?
Multiple exchanges with high volumes of trading.
9. What does it (would it) mean for Augmate to have Augmate’s digital securities trading on secondary markets?
It would be a profound enabler to democratize the long-tail of private financial markets.
10. What specifically needs to happen to grow the digital securities industry in your opinion? How relevant is the industry’s growth for Augmate?
Large traditional exchanges (the ones that have been around for 100 years) need to adopt digital securities. This means that they need standardized ways to process & program for digital securities.
11. What business opportunity do you see in the space that you just don’t have time to pursue?
We would like to provide more development tools in the IoT and XR (Extended Reality) space. This helps grow the ecosystem and furthers the adoption of new technology. It takes a community of engineers, business people, and customers to make progress with implementing…
Augmate is the first company to develop a blockchain agnostic IoT device management platform. https://www.augmate.io/
Securitize delivers trusted global solutions for creating compliant digital securities. The Securitize compliance platform and protocol provide a proven, full-stack solution for issuing and managing digital securities (security tokens). Securitize’s innovative DS Protocol has the highest adoption rate in the industry and enables seamless, fully compliant trading across multiple markets simultaneously. Multiple Securitize powered digital securities are already trading globally on public marketplaces with many more in the pipeline.
To learn more please visit our website.
Araby Patch is the Director of Marketing for Securitize