Q&A with Robert Krause of Demand Derivatives

Demand Derivatives needs roughly $2m to open the doors, $2m to attempt to make the launch successful, and $2m held in reserve as per CFTC regulations. Our first $2m is key as it will get us to the launch pad. To do so, we need to focus on four items: our regulatory filing, connecting to brokers, installing the technology, and proliferating our IP around the world. We expect to launch the exchange within one year after funding.

Gaining volume. Starting a market is like an old fashion hand-crank airplane. It take a lot of effort to get things going, but after the engine starts, it generally runs on its own. Similarly, market needs to be force-started. But, as soon as there is volume, then liquidity builds from there. This is the reason we allocate $2m to our extensive pre-launch marketing campaign. We need these resources to make the launch successful. Many investors try to get entrepreneurs to launch on a shoestring. Such a strategy will not work in our case.

Absolutely! There are many ways to expand. When we first launch, we will use our three instrument designs on six major assets. After those initial product prove successful, we can expand with longer expirations, more strike prices, additional assets, and in other regions. For example, our RealGlobe product will allow for up to 39 country indices. In short, we are starting with the lowest hanging fruit (the top six assets on one exchange) and plan to quickly ramp up operations into a global empire (hundreds of underlying assets in a multi-regional conquest).