Q&A with Richard Johnson of Texture Capital
Texture Capital is a FINRA member and SEC-registered broker-dealer focusing on the issuance and trading of digital securities in the private markets. We are building a marketplace for issuers, institutional investors, and related parties to connect; our utilization of blockchain technology enables our platform to increase transparency, reduce transaction costs, and enhance liquidity in the private markets. With our digital securities offering and tokenization platform, and Alternative Trading System (ATS), we are creating a new institutional marketplace for private capital, leading to greatly improved capital formation opportunities for issuers, and lowered hurdles for institutions to access private investment opportunities, both in the primary and secondary market.
We are preparing to launch with a fully developed technology platform supporting private placements, token issuance and secondary trading. In the future, we will harness the creativity coming out of DeFi (Decentralized Finance) to deliver on our bold vision to rebuild global markets and improve capital flows throughout the economy.
Join us for a private Family Office Insights Webinar/Teleconference featuring Texture Capital. Texture is building a blockchain powered marketplace for private capital.
December 10th, 2020 • 2:15pm-3:15pm EST
Family Office Insights is a voluntary, “opt-in” collaborative peer-to-peer community of single family offices, qualified investors and institutional investors. Join the community here www.familyofficeinsights.com
Why is Texture Capital focused on private markets?
The private securities markets are a vital source of capital for both emerging growth companies and mature businesses. In fact, the US private markets are many times larger than the public markets. In 2017 for example, over $170bn was raised in private securities offerings for US operating companies. This contrasts with just $35bn raised in initial public offerings globally that same year. And yet virtually all of this capital markets activity is occurring without any of the technology or market infrastructure that underpins public markets. Securities are recorded in book entry form with ownership records stored in Excel spreadsheets or the filing cabinets at lawyers’ offices. Liquidity in the secondary market is severely restricted by the lack of transparency and the complex array of regulations that restrict the resale of these securities. While some trading does occur across a number of disparate private markets and specialist OTC desks, the trades are infrequent and characterized by high costs and wide spreads. At Texture Capital we see this as a tremendous opportunity to create a market structure from scratch, leveraging the most advanced and revolutionary technology available. Texture Capital will deploy blockchain technology to facilitate the issuance of digital securities – also known as security tokens – enabling increased transparency, auditability and accountability for investors, issuers and regulators. Smart contracts will programmatically enforce compliance with securities regulations, removing frictions leading to increased liquidity in the secondary market, and reducing the liquidity discount. With companies choosing to delay going public, private markets will continue to grow. Recognizing this, institutional investors are increasing allocation to private securities. A recent study by Blackrock showed that over two thirds of institutional investors in the US and Canada planned to decrease allocations to public equities while 53% planned to increase allocation to private equity markets. These competitive dynamics underscore how important it is to develop a robust market structure for the private markets. Blockchain technology and digital securities will be instrumental in transforming and modernizing these markets. The distributed ledger will create a much needed layer of transparency around securities ownership and transaction history, and provide for improved regulatory oversight, while ensuring a fair and orderly market that protects institutional and retail investors alike.
What benefits can Texture Capital deliver to market participants?
Texture Capital will serve both issuers and investors in private markets; and creating secondary market liquidity through blockchain technology is a key part of this strategy.
A recent study found that two thirds of institutional investors avoided private markets because of the lack of liquidity. And those that do participate must factor in this liquidity risk into their investment strategy - it is currently unlikely they will be able to exit their position before until an IPO or other liquidity event. Texture Capital's ATS will provide secondary market liquidity for private company securities enabling greater participation from institutional investors.
Companies issuing securities in private markets may often have to accept a ""Discount for Lack of Marketability"". This is well documented in academic research and is estimated to be between 11% and 45%. Issuers who work with Texture and enable their stock for secondary trading will be able to reduce this liquidity discount and achieve a greater valuation for their company. In addition, with a network of institutional investors on our platform, Texture Capital can streamline the capital raising process for issuers.
Why should family offices consider an investment in Texture Capital?
Texture Capital is an exciting investment opportunity for family offices because of our positioning at the forefront of the digital asset revolution. The total addressable market for digitization and tokenization of securities is massive. Our management team has significant experience experience applying modern technology to solve the financial market’s biggest problems. Upon regulatory approval, Texture Capital will be one of very few companies able to offer investment banking, advisory and trading services for digital assets.
Additionally, 76% of family offices make direct investments in private companies. Family offices will have an added benefit of working with Texture Capital, as we are are developing solutions that can directly benefit your investment strategies, including access to deals and secondary market liquidity.
Richard Johnson of Texture Capital
Richard founded Texture Capital in 2019 to take advantage of the emerging opportunities in the digital securities space.
Prior to founding Texture Capital, Richard was a Senior Analyst at Greenwich Associates in the Firm’s Market Structure and Technology practice, where he conducted market structure research and consulting in the equities, crypto and blockchain markets.
Richard began his career at Barra (now MSCI Barra) as a sales consultant for their suite of risk models and portfolio construction tools. From Barra he joined Investment Technology Group where he was able to apply his quantitative skills to the rapidly growing algorithmic trading business. He was a founding employee at Miletus Trading – a boutique electronic brokerage firm – where he served as the Head of Sales & Trading. In 2007, Richard led the sale of Miletus Trading to Liquidnet where then served as a senior product manager focusing on execution and analytics. In 2011, Richard joined Société Générale where he ran Electronic Trading in the Americas.
Richard holds a BA in Economics and Statistics from the University of Exeter.