Read on Twitter
1/ Some really important lessons here. #1 is that market economics matter, technology doesn't change the need to apply fundamental economic principles. https://twitter.com/fintechfrank/status/1199435057750061057
2/ “Removing the friction from real estate deals with tokens was expected to instantly attract institutional money and liquidity, but things are moving slowly”...
3/ Securitization (sorry, "tokenization") of an asset is insufficient to create a market. Markets require standard products AND large numbers of buyers and sellers. Investor preferences and mandates don’t change just because an asset becomes tradable.
4/ “A $20 million tokenized real estate deal derailed earlier this year, was down to the issuer, trading giant DRW Holdings, not seeking permission from the senior debtholder to transfer ownership.” Oops. Technology doesn’t obviate the need for complying with rules.
5/ “a second wave of grown-up investors would raise capital and issue loans using blockchain-based tokens, and in the process disintermediate an army of middlemen and bankers.” Intermediaries often add value: The provision of liquidity, bringing together buyers/sellers, etc
6/ “Offering so-called security tokens to select groups of investors, would breathe frictionless liquidity into real estate’s legacy system of finance.” Growing liquidity is hard. Liquidity begets liquidity, but getting it started takes more than just tradeable assets...
7/ ... especially when few investors have a mandate to actively trade real estate tokens. i.e. There may be other good reasons why a market doesn't exist.
8/ “seismic disruption of the multi-trillion dollar real estate market so hotly anticipated hasn’t happened.” Markets value real solutions that solve real problems, not disruption for its own sake. Nowhere does this article identify a customer problem to be solved.
9/ “The market was just too young at the time. It didn't have sufficient institutional appetite.” Every business plan should be grounded in a large enough addressable market that values the proposed solution.
10/ “charging out into the market armed with a subscription book and some blockchain technology, speaks to the immaturity of this new investment paradigm and the ongoing clash between the old ways and the new. “ Not "old v new". Tech in search of a problem to solve rarely wins.
11/ “Tabar’s prognosis on the calcified nature of the real estate market comes down to a broad generational impasse.” Fundamental economic and business principles aren’t generational. What was the customer problem and did enough customers care?
12/ “I think we are at the end of Act 1. Act 2 will bring better protocol layers.” Please, please, please, focus on understanding your market, not protocol layers!
13/ “Baby boomers who are still in the seats of power don't want change at this point in their careers. They just want the system to remain the same so they can extract as much value out of it and have a nice retirement.” Or maybe study economics of markets.
