Private Tech Network - The Age of Total Disruption by iThink Media

THE AGE OF TOTA L DIS RU PTI O N

B U S I N E S S I N T E RV I E W

We talk to the CEO of PrivateTechNetwork, Eric Kadyrov, about the exciting changes currently taking place in the Venture Capital and private investment sector.

ric Kadyrov helps clients raise Venture Capital, as well as advising private customers on investments, specifically in pre IPO private technology companies globally.

Eric Kadyrov

He launched PrivateTechNetwork two years ago to assist his clients in automating fundraising processes, as Eric explains, “Many Venture Capital deals are still done the same as they were 20 years ago. It is a slow, manual process, without using technology tools or any of the advances we have made in data science and AI. I launched PrivateTechNetwork with the objective of using data science and AI to automate Venture Capital fundraising processes and investments in private tech firms.” It starts with a very basic question – if you are a start-up doing fund raising or an investor looking to invest in a tech firm, where and how do you get information on you targets? With new funds and new companies being launched almost daily, how do you analyse players, and navigate the ocean of information and hundreds of sources? One could read Crunchbase, Forbes or special 4

reports for weeks and still not have a complete picture of the fintech sector, that now counts many thousands of start-ups. Search engines like Google will also give you thousands of results that will take a lot of time to digest. Eric says, “We want to have smart algorithms that will analyse all the various sources for you and give you answers at the touch of a button.

“The second basic question is one of optionality – as a professional in industry, I have a large network of Venture Capital funds, but it probably does not cover even 10 per cent of all options available. How do I know I am talking to the right counterparties and not flying in the dark? “Our platform uses AI to identify and collect information on

Venture Capital funds and private tech investors and pre IPO tech companies globally.” PrivateTechNetwork has built algorithmically a huge database of est 90,000 Venture Capital funds and private investors from information signals left in various public sources. Eric says, “Clients use the database as a fundraising tool. The system recommends a 5

selection of funds, which is global, with clients in the US, Dubai and Europe. Communication via the platform means they receive funds faster, so rounds can close quicker, with more liquidity and cross-border options. We call it Venture Capital as a Service (VCaaS) platform. We also have non-tech clients – for example, insurance companies and investment banks – that use us as an information tool to identify tech trends and future winners, as

“Our typical client is a rapidly growing tech company in a specific market segment” we track private companies that are likely to make an impact in 70 sectors.” PrivateTechNetwork has attracted over 40 clients since its launch. Eric continues, “Our typical client is a rapidly growing tech company in a specific market segment. We have a company that is building a NFT marketplace for gamers, a neobank based in the UK, a company that is building a social network for pet owners in 7

Monaco, and one of the top three global job search sites. Most clients are digital, but some are nontech, using our platform solely as an information tool. The platform helps to speed up communication and get more liquidity options, collecting all the information in one place.” Combining AI-driven intelligence with founder to investor communication tools and transactions technology 8

functionality, Eric says the platform uses AI and data science algorithms to capture insights. He explains, “Our technology expertise lies in Natural Language Processing, text and speech analytics in another company LanguaMetrics (www.languametrics.com) that I co-founded with partners in 2012. We develop algorithms to measure language and speaking proficiency automatically. Products are used in more that 80

countries – in automatic language tests in schools by North West Evaluation Association, by Amazon for the call centre automation market, and by Stanford Research Institute. “We also released a product called Fluency Rev that helps children to learn to read interactively and to communicate properly. It helps to assist where there is the problem of busy parents; its slogan is ‘no child should read alone’. Surprisingly,

reading proficiency, one of the most important social skills that children have to learn, seems to be a problem in many public schools, even in the US. Algorithms can model human interactions better, as even passing standard tests like TOEFL does not necessarily guarantee that a person has good spoken language and can be a call centre agent. It takes 10 seconds for the human ear to make the conclusion that you can understand another person. 9

Algorithms can do the same and save lots of testing resources. Of course, there are many more future potential applications that one can imagine based on speech analytics – from security apps, to door locks based on voice recognition; from analysing how rational the speech is, to forming a ‘digital portrait’ of a person and identifying real-life parameters such as emotions, age, profession, income, or location. “We use a subset of AI called text mining and Named-Entity

“PrivateTechNetwork’s platform mixes classical Venture Capital with blockchain-based equity tokenisation capabilities” Recognition (NER). The way it works is it analyses public data sources, and the algorithm automatically identifies Venture Capital funds, private tech investors and private tech companies. All the output is further analysed and the relevant data ends up on our database. There is also an AI recommendation engine that recommends a set of contacts to make based on your parameters. It is kind of giant information radar that catches and 10

sorts signals from multiple data sources, giving you pre-processed, focused key information. It is a rather powerful concept, as with one single click, you can see all Venture Capital funds in a country or whole sector map of private companies not typically covered by analysts and researchers. You could see the funding and valuation history of a company in one easyto-read graph. It will also detect if a new company is launched in say the UK or Australia, and could potentially become an interesting investment target.” PrivateTechNetwork’s platform mixes classical Venture Capital with blockchain-based equity tokenisation capabilities. So, is blockchain really capable of completely changing finance as we know it? Eric answers, “We have already seen a lot of transformation in classical banking and classical insurance. Neobanks are taking market share from traditional banks that have been around for many decades. This is also reflected in their valuations. Sixyear-old Revolut is now bigger in valuation than 100-year-old, reputable, established financial giants such as SocGen and Credit Suisse. Valuations of payment processors Stripe and Checkout are comparable to the valuations of Amex and Visa. It is quite unthinkable but real. What does the

future have in store for thousands of retail banks, insurance companies, and various payment systems? “I was amazed to see crypto transactions on blockchain wallets, recorded when one billion was moved in a matter of minutes for the fee of $50. The standard way of banking would probably take weeks, as well as escrowing accounts, many lawyers and 10 million in fees. This example speaks for itself. I think we are going to see all kinds of tokenised assets, starting with tokenised real estate, art, and tokenised securities, as it really addresses the value dilution and inflation problem of central banks. Blockchain and digital applications will then filter down to other areas such as supply chain management. It really has the power to change everything.” With NEAR Protocol recently raising $150 million in its latest funding round, Bloackdaemon raising $207 million, and Fireblocks raising $550 million, accelerating their mission to help billions of people learn and use blockchain, Eric believes we will see a spike in the NFT (nonfungible token) marketplace. He continues, “The last valuation of the NFT marketplace OpenSea was $13 billion, and that’s starting from zero a few years ago. It reflects the fact 12

that people are trading and buying more NFTs, which shows how fast this trend is taking off.” Eric seeks to bridge the gap between public and private investing, which he views as a fundamental problem in the industry. He explains, “If you want to invest in a company such as Apple of Facebook, it’s simply a case of pressing a button. But, there’s also a lot of fast-growing private companies, offering great investment opportunities in multiple

sectors. If you are not a professional Venture Capital fund, how do you invest in a market that is not transparent? On average in the private market, there are as many as three to five intermediaries per deal. When you buy shares, up to 10 per cent is lost in commissions to these parties. The market is therefore hugely inefficient. We are experimenting heavily with tokenisation to address this issue.” One of the key advantages of using PrivateTechNetwork’s platform is

it makes the process of reaching out to Venture Capital funds much faster for its clients. Eric adds, “Clients can communicate with a number of Venture funds without having to spend weeks analysing which ones are available, with the system recommending funds based on previous deals etc. When it comes to private companies, we analyse 70 private sectors globally including AI, big data, blockchain, crypto, biotech and education. Our algorithms allow us to identify which private companies are likely 13

to have the most impact on market segments. There is a lot of change taking place across the board, as tech starts to impact more traditional sectors like education, energy, agriculture, marketing and HR.” Speaking of changes in the market, the pandemic saw a huge rise in digital, as Eric explains, “When Covid happened, many people travelled less and started working online. Some of our clients had to figure out the balance between office work and remote working. As a result, there has been a lot of growth in different digital sectors, such as video calling, online

conferencing, gaming, and media and entertainment. The latter presents a very fascinating story. What will happen after Spotify? What will the next model look like? We have seen AIgenerated content, from music to digital art, so I think there will be a lot of new and interesting media and content digital companies coming through.” Eric refers to ‘the age of total disruption’ when many changes take place across the major sectors. He believes it is a very exciting time to be working in the Venture Capital and private investment sector right now. Eric continues, “Synthetic media is completely new. I think we will see 10 to 20 new companies in this space. Sustainability is a massive sector, and we track that one separately. We need to reinvent a lot of processes, given the carbon footprint from aviation fuel and cement manufacture, because climate change is a big problem. Agriculture tech is another segment that we track separately. There are some fascinating companies in this space such as Plenty in vertical farming, or Farmers Business Network and FarmDar in big data. These are companies looking to increase farming productivity by using big data and technology tools.”

“We have lots of exciting tech companies across the board and multiple sectors are being disrupted, not just AI and big data. It will be interesting to see how industries will work in the future because the pace of change is so fast” Eric believes it is critical to form partnerships with other companies to help shape the future. He adds, “For us, we rely on our clients. I work directly with a number of clients, advising them on mandates and strategy. It is something I really enjoy. It is all about thinking about how they can improve their processes to help contribute to the future landscape.” One such client with which PrivateTechNetwork enjoys a long-standing relationship is MVP (Manhattan Venture Partners, MVP.VC). Eric says, “I have worked with MVP for about 10 years. They were one of the first merchant banks with a platform providing clients access to investment deals in the private technology space. This segment grew quickly, but it was very small back in the day, so MVP are true pioneers. They provide access to some of the top technology names globally including SoFi, Coinbase, Udemy, Palantir, SpaceX, Cohesity, Turo, Epic Games, Revolut, Uber, Lyft, Patreon, Flexport, and many others. They have first-class research of the

private tech companies and operate several funds as investment vehicles. We set up a partnership to provide them with broad information on a global scale, as well as algorithms to identify future trends.” As far as the future is concerned, Eric says he is focused on adding transaction functionality to the platform, as well as exploring the technology to create a private shares marketplace. He concludes, “It is a unique time in our history and maybe in the history of civilisation. With a rapidly growing world population, climate changes and future resources shortages, technology seems to be the only way to multiply resources and to find practical working solutions to these challenges. We have lots of exciting tech companies across the board and multiple sectors are being disrupted, not just AI and big data. It will be interesting to see how industries will work in the future because the pace of change is so fast.” For further information, visit www.privatetechnetwork.com 15