Iconiq Holding is the world’s premier digital asset management platform and the team behind Iconiq Lab, the world’s first decentralized VC club for the blockchain community. Alongside its other group, Iconiq Funds, the company gives investors a platform to invest in only the highest-quality opportunities as well as providing them advanced asset management tools for maximum returns on their digital investments.
Iconiq Funds offers investors the opportunity to diversify their cryptocurrency investments through a series of professionally managed digital asset index funds, such as PIFs, ETFs and ETNs.
Launched in 2018, Iconiq Funds’ digital asset management platform of regulated financial vehicles integrates premium market data, trade execution, custody, audit, and compliance tools, creating a holistic solution for digital asset management for retail and institutional investors.
We recently sat down with Iconiq Holding CEO, Patrick Lowry, to have a chat with him about the project as well as learning more about his thoughts and insights.
Hello there, Patrick! Thanks for joining us today. Can you tell us more about Iconiq?
Financial Instruments are evolving. Blockchain technology has redefined what is possible to secure and make our financial institutional markets fully transparent. In the near future, it will not be just Bitcoin and other cryptocurrencies or tokens that define crypto or digital assets, but equities of fortune 500 companies, large debt issuances, other financial instruments and perhaps even digital representations of today’s fiat currencies such as USD and EUR.
There is a need for investors to have the ability to manage these assets and gain exposure to them. Iconiq Holding, through our brands Iconiq Lab, Iconiq Funds and our Asset Management as a Service (AMaaS) platform, have created the platform that for investors of digital assets now and in the future. We are bridging the traditional and crypto financial ecosystems.
Tell us about how you came up with the idea of Iconiq.
Did you personally face a problem within the industry or do you think there is a gap in the market for Iconiq Lab to fill?
It all began with Iconiq Lab. In February 2017 I was sitting at a bar in Berlin, Room 77, known as the “crypto bar” in the city because you can buy beer there with Bitcoin. I was invited there by Sandris, one of Iconiq’s co-founders, who was starting a real estate blockchain company that was looking for investment from a PropTech VC fund I was preparing to launch for a Berlin-based real estate group at the time. Everyone at the table was preparing their laptops to invest into an ICO “because the team has real LinkedIn profiles on the ICO website.” I could not believe that was the answer these “investors” were giving. I asked them if it made sense for a practiced VC to diligence these companies and if that would help them make decisions and got overwhelmingly positive feedback. Sandris and I looked at each other and knew we had something. Max, Luke and Arabdha joined, and together the 5 of us co-founded what is Iconiq Lab today.
What do you think is the biggest problem Iconiq Lab will solve and why is it important to solve?
Right now there are trillions of investable capital with traditional wealth managers sitting on the sidelines of crypto just waiting to get into the market. They see the returns we have realized before but they are also seeing the scams, the bad players, the bubble bursting and they have no proper means to enter the market place. Iconiq is the bridge for these traditional, institutional or retail investors. We provide this bridge through the diligence the Iconiq Lab team performs on all projects we vet before admitting them. We provide the bridge through the regulated, investment-grade vehicles at Iconiq Funds to offer diversified exposure to the blockchain ecosystem, and lastly, we provide it to any asset manager who wishes to launch their own regulates vehicle through our Asset Management as a Service platform.
This is an important problem to solve because there is no infrastructure that exists in the world that provides the same quality assurances to investors that the traditional institutional financial markets offer. Our ecosystem fixes this, opening the doors for the trillions of interested capital to invest safely in the blockchain ecosystem to further grow and enhance the crypto community.
Editors Pick: Iconiq Lab ICO
Cryptocurrency markets and investors all over the world faced a discouraging return to reality after all-time highs in crypto were achieved at the tail end of last year but the consensus around the blockchain remains the same—the technology is here to stay and it is growing faster ever. The blockchain
There are other platforms that are also offering asset management to investors but what sets Iconiq Lab apart is its decentralization of the system.
For our non-technical readers, can you explain what are the differences between a decentralized and centralized asset management platform?
Are there any risks to investors (e.g losing their portfolio) in decentralized systems and if these risks do happen, are there any systems in place to help investors recover or protect their losses?
Let’s look at how a VC fund works. A VC is traditionally the General Partner of a fund. Limited Partners, the investors, invest into the fund. Using the money the from the Limited Partner investors, the VC decided, for everyone, which companies the fund invests into. The VC earns a 2% management fee on the fund, plus 20% of the profits above a hurdle rate. The fees are incredibly expensive, and the entire decision making process is centralized around the VC. They decide how to invest the investors money.
In Iconiq Lab’s model, Iconiq invests its own money into startups that enter the program after performing the same level of due diligence and research a VC traditionally would. In the program, the company is groomed and grows over the span of 6-9 months. Once ready, the company offers its tokens to prospective investors, or ICNQ token holders, who have the freedom to choose if they wish to invest or not in a completely decentralized way.
The similarities are that Iconiq Lab and VCs offer the same investor quality assurances around the companies and projects. The difference is that the only fee in Iconiq is the once in a lifetime purchase price of ICNQ, rather than recurring “2/20 fees”, and that our token holders can make their own investment choices based on which projects that graduate the Lab they believe in, rather than being forced to invest into companies the VC wishes.
Of course there are risks, as with any investment. This is why we offer objective due diligence reports rather than investment advice, empowering investors to make their own decisions through our platform. Investors should only contribute what they are able to lose based on their individual financial situation.
What is the significance of implementing an accelerator program in Iconiq Lab instead of purely being an asset management platform?
Did you feel that growing promising blockchain startups would help Iconiq Lab grow as well?
What do you look for in projects that are looking to be accepted to the accelerator program?
Pure Financial VCs are worthless. They invest, then complain when a company isn’t reaching its milestones and they aren’t making a “unicorn” status. This is why Iconiq Lab works as a strategic VC, similar to my prior firms, in order to grow and nurture our portfolio companies together. As such, it was important to implement the accelerator program to grow our companies, offering only the highest quality token sale opportunities to the ICNQ holders. We were recently named a “Top-3 Accelerator in Germany” alongside the likes of TechStars, a real honor. We are proud of the progress the Iconiq Lab accelerator team has made not only in the EU, not now in the US with our New York-based team.
We look at real companies that have a real-world use case for the blockchain or are looking to better secure their financial instrument (equity, debt, revenue or profit sharing, etc…) token on the blockchain. The companies should be able to demonstrate revenues or strong customer demand for their solutions and have a working prototype. Most of our emphasis is put on the team, however, and their demonstrable ability to generate value for their investors, community and other stakeholders.
Are there any limits or restrictions on how many ICNQ tokens are needed to access the services of the platform? For instance, if I hold 1 ICNQ token, do I enjoy the platform’s services similarly to people who hold more tokens?
Are there any exceptions to companies or corporations who want to invest in fiat or other currencies instead?
All you need is 1 ICNQ, however, participation rights in token sales from the Lab’s graduates are done so on a pro-rata basis, so the more ICNQ held, the more membership rights you have to the ICNQ VC Club. Further, only holders of €100,000 or more ICNQ reach ICON status, opening doors to special opportunities such as the right to negotiate the size of your own investment with the Labväs graduates, and access rights to discounted management fee share classed of our digital asset index funds.
We accept investment in fiat and crypto for ICNQ.
Iconiq Funds plans to add ETFs and ETNs in the future which is an exciting prospect for the platform. How has the progress been so far and are there any challenges (especially legal-wise) in offering these financial products on the blockchain?
Could we see Iconiq Funds expand to other industries (real estate etc.) in the future?
Yes, there are many legal challenges as evidenced by the continual rejection by the SEC to authorize a Bitcoin ETF in the US. However, given our connections with the exchanges in Germany, the European regulators and access to the best legal teams in the world, we are confident our products will be live in 2019. We have been making great progress and our first fund will be live in Q1 2019.
We always have our eyes on the horizon for the next market issue we could potentially address that delivers value not only to ICNQ holders but to prospective stakeholders. Real Estate is an opportunity, however we already have plans to focus on Asset-backed tokens tied to real estate as regulated investment opportunities, rather than real estate in its current orientation. This aligns to our long term view of tokenized financial instruments of all kinds secured on the blockchain. Our ecosystem will be able to support all blockchain-based financial instruments.
What are the incentives for external digital asset managers to manage their portfolio on Iconiq Lab? Do they receive a portion of the profits generated or is there another incentive system that drives them to use the platform?
Are there any filters or systems put in place to ensure that only high-quality and experienced asset managers are allowed to handle client assets?
Putting together the ecosystem just to support our first fund was a daunting task with many technical solutions we had to build that nobody in the market can offer or has the capability to. Our intention to put this together, from custody, to fund accounting, to auditing, to trade execution and much more, was initially focused to support our fund. Once we built it and took a step back and viewed what we had created holistically, we quickly saw it was much more than a single fund, it was an entire platform that not only Iconiq, but all digital asset managers could use.
External managers of such funds chose their investment strategy and merely leverage the ecosystem we have created to seamlessly launch their own vehicle and manage digital assets on behalf of their clients. Of course, only licensed professionals can launch vehicles on our platform for other investors, however, we are exploring ways retail investors can leverage our platform for their own portfolios.
While working on the project, what’s something that you believed to be true for a long time until you found out that you were wrong, or if you don’t like the dichotomy of right versus wrong, what’s something significant that you have really changed your mind about over time?
I once believed in Santa Clause. That led to a shitty Christmas when I was 10.
In regards to Iconiq, I once believed crypto was largely filled with bad players, and it’s easy to see why with rampant scams and frauds getting all the press. The truth is anything but. The vast, vast majority of crypto and blockchain is filled with good people who genuinely work hard and are trying to make a living or the world a better place by leveraging this amazing new technology. It’s these people we are surrounding ourselves with at Iconiq, and these people who will change the financial world.
As the company grows, it is inevitable that the team will be catering to a community of thousands, even tens of thousands, which is a challenge.
How will the team prepare for this and ensure that the community remains satisfied with the project?
The community is the heart of blockchain and the heart of Iconiq. We make ourselves available to anyone in our community at any time through our telegram channel. Our office at Wework in Frankfurt has an open door policy where anyone can come in and visit. In fact, we had an ICNQ holder reach out passing through Frankfurt just the other day who stopped in and had a beer with me to learn more about the company just yesterday.
What do you think is the biggest challenge or obstacle Iconiq Holding will face? How do you plan to tackle that challenge?
It is regulation, bar none. However, unlike all other token sales and everyone else in crypto, we embrace regulation and acknowledge why it exists. Only through embracing regulation, and working hand in hand with regulators, can we reach mass adoption of blockchain technology and create that bridge between traditional and crypto finance.
What do you think is the most important aspect to focus on in increasing the adoption of Iconiq in the future?
It is around education. Educating not only investors, but the general public, about the merits of blockchain and digital assets is our ultimate priority and the #1 tool we have to increase adoption of not only Iconiq, but our entire crypto community.
Can you express one personal opinion of yours about the blockchain? It doesn’t matter if it’s negative or positive, we just want to hear your thoughts on it.
Blockchain represents the future of financial instruments. The infrastructure is still being defined, and maybe BTC, ETH and other will be relevant (at this rate, not likely). While these cryptocurrencies will always have their niche, the value is in the evolution and scalability of the technology itself. In the near future it will not be BTC or other cryptocurrencies that has the largest market cap in crypto, but the equities of fortune 500 companies, debt instruments, derivatives and other financial instruments. Once governments truly wrap their heads around the space we could even see digital, blockchain-secured treasury notes and currencies such as USD, EUR and other fiat. The latter may be a fool’s dream of a cashless world, but for the former is on the horizon.
Finally, what other personal goals (besides your career) do you have in life? Is there anything else in life you want to achieve?
I’ve always wanted to be a father and a teacher. As I am answering these questions I am also planning for my first wedding anniversary with my unbelievable wife who has supported me and Iconiq through the entire process, even while I am traveling constantly. I am looking forward starting a family in a few years together with her and starting that chapter of my life.
I’ve always enjoyed teaching. I loved helping new interns or first years during my time at PwC or helping the management teams of our startups in Iconiq. I know I will never be able to truly retire, so I always envisioned myself pseudo-retiring by teaching finance at the high school or university level. Who knows… maybe I will be teaching courses on digital assets and blockchain in a short time at universities.
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