Exclusive: Paragon Post-ICO Interview with Cryptovest; SEC, Blockchain, Cannabis and More
Cryptovest interviewed Paragon CEO and CBO, Jessica and Gareth and discussed the project's ongoing development, strategy and future roadmap.
Natasha: OK, welcome guys, welcome to Cryptovest post-ICO review. Today we’ve got Gareth and Jessica in from Paragon Coin. Jessica is CEO, and Gareth is Chief Business Officer. Welcome Guys.
Jessica: Hi! Thank you.
Gareth: Hi, thank you, Natasha.
N: So guys, first I want to congratulate you on an incredible ICO raise. A real achievement; seventeen million.
J: Oh, thank you for that. The number, though, we’re not really going to take congratulations for yet, because we’re still in the middle of doing our auditing. But, but thank you in general.
N: It was a good raise. I’m also going to commiserate [with, ed.] you guys because I did see that recently you’ve had a lawsuit filed against Paragon Coin for violating a securities law. And I don’t think there’s a founder out there that doesn’t have huge sympathy with you right now, knowing what a massively tricky area this is to create an ICO and you know, have to deal with the SEC legislation.
H: Yeah, thank you. I mean, unfortunately to me, to Gareth, to everyone in this company, it’s a norm for doing business in the U.S. Like, in a way, it’s this legal form of racketeering and in my personal opinion it’s unconstitutional for both sides of the lawsuit. Lawyers are clearly abusing this practice, especially in the U.S. For example, many of our community members just loved the idea described in our Paragon white paper and bought PRG tokens because they trusted what we were going to deliver and trusted what we promised to deliver, but there’s, like I said, unfortunately, lawyers that are just trying to bring this complicated nature of the securities laws that, uh, that we believe are not even applicable to our case in hopes of just getting a settlement. I mean, we know that that’s all they want.
They know that they’re not going to win, they want just some sort of settlement and I’ve seen a lot of ads on Twitter and on Google from these lawyers trying to find any plaintiffs to join their case against Paragon. And they’re talking about PRG purchasers losing money if they either – you know, it’s like they either don’t understand, or they’ just pretending not to understand that it’s not about the loss of money. It would be a loss of money if we failed to build what we promised, but so far we’ve been on track on with our road map and we’ve been successful in achieving everything that we’ve promised in our white paper to these lines, deadlines of our roadmap. Umm, and we’re optimistic that we’ll beat our own deadlines; to be honest, we’ve already done it with some of them. And frankly, I see this as abusive to our community, to us, to the team.
H: Well, how are you going to handle this? You know, [Are, ed.] you guys goin’ to lawyer up? You know, what’s your strategy on this to handle this?
W: Yeah, well, from the very beginning we took this extremely seriously and we strapped up with lawyers from the very, very, very beginning before we even announced what we were doing, so, we’ve been prepared and done everything that we can from the very beginning and with staying within regulation so we had lawyers then, we still have lawyers now. Some of our lawyers have even worked in the SEC before, so we’re not threatened or worried, or - we’re not worried about the securities laws that these other little lawyers are trying to come after us for.
N: Umm, I want to touch on a few different topics, yeah, the first one is your road map, yeah. So, I went and I had a look at the site and I can see that you posted a demo of the Paragon ledger, yeah. And for people out there, what does ‘demo’ mean. Is this a live NVP on the chain or this a just a mock-up, a click-through mock up.
G: Well, the supply tracking on blockchain, that was a sneak peak, and essentially what we wanted to do there is demonstrate our proof of concept of how this was going to work. Since wire contracts are relatively new, and storing data in them for a supply chain is also a new concept, what we wanted to do is show people how that worked, how we’re going to approach it and why it’s a better approach. Ahm, so it’s not a live demo yet that people can use, it was just a demonstration of how we’re doing that now today.
N: OK, so guys, how are you on your DAPS marketplace, where are you build-wise?
G: We’re currently still working on our beta, so our team is currently working on the development, that’s something we’re trying to expedite as soon as possible, but naturally we don’t want to end up releasing several elements in a slow paced manner. We’d rather get a full suite ready and release that in one go and make sure that functionality wise everything is right and we beta test it as much as possible.
N: OK cool. Guys, I want to ask you some questions around the team because there have been questions thrown out in the broader community. You guys have been questioned by leading ICO sites like verifiedico and aboutforex about whether your team has the experience, the skills, to pull this off. Jessica, you’re CEO, but you’ve got no experience previously in tech startup land, you’ve got no experience in tech accelerators, but you are planning to run an accelerator program. You’ve got no experience in the app space, but you’re planning to build an app marketplace, and you’re not really from the fintech industry and yet you’re going to be running a payment processing business with your wallet and coin. So I want to ask on behalf of the broader community, what do you think qualifies you to lead and scout Paragon?
H: Well, there are few things here that you asked, so one of them, the negative reviews from the sites that you had mentioned - unfortunately, there are… it’s a pay-to-play. This, thus requiring large payments to write good reviews, and I along with my team didn’t feel this was just journalism. A lot of the time, you can contact them and pay a review fee and they’ll update the review to a more positive one. We just chose not to do that. And, umm, I haven’t been to these ones, but that’s usually the case. And regards the credibility of our team.
N: Well, I’m specifically actually asking about you about your background.
H: OK, yeah, so. This is for me. I’m of this certain school of thought here, a very particular one. Any company that doesn’t see themselves as a tech company first is already losing. Any company I’ve been a part of, my outlook has been through this one type of lens. Furthermore, scale is a frame of mind. All masters of scale were at one time just dreamers with an idea. And you’ve mentioned about not - I can’t remember everything, but not from fintech, or a few things that you mentioned but I have an amazing…
N: No fintech, no app experience, no high tech accelerator experience.
H: So I have an amazing CTO, who owns this software outsourcing company in Ukraine. If you follow anything software developing, [sic] at least a little, you probably know that it’s in the best – it’s one of the best places for outsourcing. Umm, incredible talent, he’s got it all there. So, whatever I’m lacking, he’s able to find the people to support that.
N: I’m still gonna stay on the topic of the team, OK? So, you’ve got a Chief Creative Officer in the senior team. Now, forgive me, I’ve got no idea what a creative officer is doing in a startup trying to mainstream the cannabis industry. I’m trying to work this out. Is he going to be running your accelerator and your community? Is that his focus?
H: No, so the accelerator and the community, that’s coming later. Umm, you’re talking about our creative officer. He’s had a number of companies that he’s been a part of. So, he started his first business when he was sixteen years old, the first printed magazine called Planet Internet, I believe, and had a multi-million dollar exit that same year. He launched his magazine to promote the internet in Russia after the Soviet Union, which was pretty cool. Every time we go back, people are always talking about that. He was the second web design company in Russia, he even launched the first public wi-fi hotspot in Moscow, which I cannot imagine living in a place that didn’t have that option, ahhm, so he was ahead of his time. He later moved to the Dominican Republic and founded a company that was officially representing Apple, Bang & Olufsen, and not sure if you remember these Virtu phones in Latin America – another successful venture. In total he’s had dozens of business experiences and most of them were IT-related, which is what we’re doing now with Paragon, since we’re focused on the blockchain. Some failed, some were really successful, it’s just part of, you know, being a serial entrepreneur. But it gave him tremendous experience and that experience is helping him now with what we’re doing.
N: OK, so what is he doing as Chief Creative Officer?
H: He’s literally doing everything, to be honest. Any, anything that I have a question of, he’s the one saying “yes, this works,”, “no, this doesn’t work”. He has way more tech experience than I do, umm, he’s extremely creative, he has such a vision. So, this all kind’uv started because I had this cannabis company in the past, and I was having trouble trusting the transparency of the lab results I was getting and we’ve always been a fan of crypto and blockchain so I just said, “Do you think that this is something that could work? Could we put these lab results and data on the blockchain for me to track and trace it, basically, because I was getting lab results that were fabricated.” He said, “Absolutely, let me call my developers, let me see what we can do,” and we started going that way. So he’s been here since the very beginning.
N: Sure, so it sounds like he’s the strategy within the group, that like, he’s the strategic driver. It’s just that I’m not understanding the job title. Umm, it’s just a strange job title to, to put into any startup. I’ve never seen it in my nineteen years in the startup tech space. Umm, so I’ve obviously seen it in the marketing and digital agency space, but I’ve never seen it in the tech startup space. Hence my question.
H: You take this one.
G:Nah, nah, indeed it’s not a very common title, absolutely, but then again this is also a new space that’s changing a lot of things including job titles, perhaps. Umm, I would say, to best describe Egor is [sic] he’s an extremely creative mind, umm, but on top of that, he’s great at blending strategy with actual operations, and taking ideas and turning them into an actual direction, which is…
H: which is exactly what he did here. It was my idea, my thoughts, my dreams, and Egor just basically made it happen.
N: I’ve got a question around your biz dev hires, then I’m off the subject of team.
H: That’s OK
N: Umm, so, in your white paper, it states that you’re gonna focus your biz dev hires on building business partnerships inside EMEA, which if anyone doesn’t know, means Europe, Middle East, Africa. But Paragon are U.S.A. focused, so I’m trying to work out what your biz dev people are going to be doing in Europe, Middle East, Africa?
H: Yeah, so when building my core team, I had no idea where we would headquarter, because we wanted the community to decide. Since this is a passion project of mine, I wanted to leave it up to the people that were going to be a part of this to decide where they want everything. Ah, to be honest, we could be headquartered on Mars and it wouldn’t make a difference. Ah, thanks to the internet, we’re all able to work remotely. As we told you earlier before this call, we’re travelling constantly. Umm, and like right now, we do link up in person quite frequently, but it’s not always in the same place at the same time. So, I created a team based on who I felt was best and not necessarily on where they were located. Ahmm…
N: OK, but it says your biz dev people were building partnerships in Europe, Middle East, Africa, and you’re headquartered in the U.S., your first workspace is in LA, so I’m trying to work out what sort of partnerships your biz dev people are building in the Middle East, or in Africa.
G: Sure. Well, we are definitely focusing a lot on Africa, Europe, and of course, the States. So just to, just to clarify, we also hired a new biz dev agent on top of the existing one in the States as soon as we found out that the voted location was Los Angeles. So we are expanding operations there. In addition to that the EMEA reps also work globally; they’re not limited to EMEA. Umm, however, we are seeing that there’s a trend towards cultivating cannabis in Europe as well as Africa, surprisingly, and we’re working with large partners there because we’re seeing now that countries where cannabis has been semi-legal like The Netherlands, for a long time now, it’s still not regulated properly. So we do see a lot of opportunity there and we’re definitely reaching out in these regions as much as possible.
N: OK, Can I ask you some questions around data privacy, yeah?
N: In your white paper, Paragon talks about creating a trust and reputation system, where everything across the cannabis industry is captured and stored on an immutable ledger. You guys are building on Ethereum, which is a public blockchain. And I assume that the sort of data that you’re planning to capture will be visible on the chain. So I have a few questions around the privacy of that. Won’t this cause problems for Paragon’s partners in countries where cannabis is still criminalized?
H: No, umm, a lab will not have access to patient data. A patient won’t be able to find the address of a farmer. None of this stuff is going to affect anyone in any way, creating any criminal activity in terms of where it is criminalized, if you think that the country themselves is going to cause problems. If cannabis is still criminalized I would guess no one involved would care to track and trace it there, unless, they wanted to use this transparency to prove to the government that it can be tracked, and it can be traced, and taxed efficiently with Paragon’s solution, which would be amazing.
N: You guys are planning to track cannabis shipments and delivery on the blockchain, according to the white paper. So, I’m just wondering – would your partners become more vulnerable to crime because of this?
H: Oh, no. No, on our blockchain, so - our blockchain is not tracking the delivery in real time. Smart contracts are signed when the package has finally been delivered and at its final destination. Because, honestly, it would be silly to add a million entry points to our blockchain, because it would not only be slow, useless, or expensive, but, it would also be spamming our own blockchain, so it’s not going to track anything live.
N: What about patients buying medicinal cannabis, how will they be identified on the blockchain?
H: Ahh, well, we follow this HIPA compliant, so patients, patients aren’t on our blockchain. You have an ID that patients will have, but their information, their private information will not be on the blockchain.
N: That’s great. That kind’uv answers my question, actually.
N: Umm, I want to talk about funding. So, Paragon stated in its white paper that it was planning to use the bulk of its funding to buy property, and you guys explained that the reason you needed to buy property was that real estate landlords won’t rent to the cannabis industry due to federal law. My question is: You’re going to spend the bulk of your 70 million raised on buying property because of federal law in the U.S.A. But why don’t you move your business to a country where cannabis is legal, like The Netherlands or Australia, then you could rent space instead of buying it and sponsor startups in other parts of the world to relocate, and this would sure be cheaper than having to buy up a large property portfolio.
H: Ahhh, gosh. Well, there’s a few things, so let me know if I miss something. Well, The Netherlands and Australia, are… they’re not fully legalized. Same as the U.S. So we’d be facing similar issues.
N: Well, then a country that’s fully legalized, say.
H: If you move this to a country that’s fully legalized, I don’t… that can’t be cost effective to us. We can’t afford just [sic] bring all startups that decide they want to work at our co-working space to another country. I mean, you’re relocating families, you’re relocating businesses, you’re relocating products, I mean warehouses. This is, this is very expensive for these companies - that would cost us way too much. So, it would not work.
N: OK, so what you’re saying is the only way to do this is to buy property in the U.S…
H: No, it’s to buy property wherever the community decides. So, in this instance, the community chose the U.S. Ahhm, and the reason that we need to buy property is if we’re renting, then we’re creating the same exact problems that people are facing now. Right now, some of those problems I know firsthand because I was in this place when I owned my cannabis startup. You go somewhere, you have to legally let them know that you’re a cannabis company, startup or not. They instantly turn you down, because if you do anything illegal, they don’t only lose that one unit in that building that you’re renting, unit 250; they could lose the whole building, because that’s the federal law. They don’t want to rent to us. Another thing is if you do find a place that [sic] is willing to rent to you, it’s usually in a really dodgy neighborhood and ten times more expensive than the guy across the street or down the hall. Most startups can’t afford that. I couldn’t when I had AuBox. So, by owning this, we don’t have any obligations to listen to a landlord. It’s not like we’re growing weed in there, we’re not selling weed. It’s just for people to have a simple place to work, have an office meeting, chat with like-minded people, maybe let somebody smell this new crop that they grew. Ahm, different things like that. So if we own it, we aren’t going to charge a crazy amount of rent and we’ll be in a safe environment.
- I think that’s a really good answer, ‘cause I know a lot of people have had questions around why you’re actually buying. I want to talk a little about your business model. There’s a little bit of confusion when going through your white paper. For example, in the white paper, you said 2016, the U.S.A. spent 53 billion on cannabis, and this gives the impression that you guys have got a huge global market, potentially. But I kind’uv went and had a look at this, and actually only seven billion was generated globally in cannabis through legal channels. Now, my understanding is that it’s the legal channel space that you’re going to be playing in. So I’m trying to work out of the seven billion globally generated in revenue through legal channels, how much of that comes from renting work space, because that’s your core business model.
H: So, when it comes to renting workspace, that seven billion has nothing to do with - that. That’s the number from sales of weed…
G: That’s the number of cannabis sales through legal channels. And albeit the market size is estimated anywhere from between 30-60 billion if you include all the illicit sales that are happening. We’re not going to be targeting that specific group in terms of cannabis turnover since we will not use our coin as a payment means for cannabis until it becomes legal to do so in all the jurisdictions that we operate. To put an exact size on how much of the coworking space industry we could take in a percentage is difficult at this point, ‘cause we’re gonna open up our spaces based on the needs of the community, and it’s difficult to put an exact number of how many spaces that will be in future years as locations obviously determine the cost and based on the cost we can only we can determine the seating plan and how much revenue we can derive from each unit.
N: Sure, but in your white paper, OK, you quote WeWorks’ 532 million revenue, as an example of how big your turnover could be. But WeWork operates across 110 locations in order to achieve that kind of revenue. To my mind, you can’t operate across that many locations. Your partners need to be in jurisdictions where cannabis is legal/semi-legal. At last count, that was eight countries. So, I’m just trying to work out, you know, how you guys are going to scale, in terms of your core business model, which is renting workspace.
H: Yeah, so, we gave that number to show how much of a role coworking spaces have played in our community. WeWork is focused on all companies, all startups, all over, versus Paragon is just focused on this niche mark, which is cannabis. So we don’t plan to be as big as WeWork, and we obviously will start with coworking spaces in countries where cannabis is legal, because, you know, well, that’s where they need it the most. Ummm
N: Is it… because it…if you’re gonna start in countries where it’s legal, then surely they don’t have any problems renting workspace.
H: Well look, it’s legal in the U.S., and I couldn’t even rent an office space. It’s like I told you it’s extremely
N: That point
H: An, OK, your platform is.also, ahhh, another revenue stream is gonna be payment processing and you guys said that you’re gonna take nought point hundred millionth of a transaction on your platform, and I think Visa’s best rate is nought point seven, so you’re millions of zeros cheaper than them. I’ve – why have you set the figure so low?
G: That’s because we ultimately don’t plan to be a complete for-profit when it comes to providing our white label solutions, or providing access. What we really want to do is give everyone access to this newly transparent market and help the industry sort of regulate itself. We’re going to provide them with the tools, and they’re going to be able to use them. And we want that to be as affordable and cheap as possible for everyone involved.
N: OK. When I thought about your rental model, guys, it reminded me, this is – might sound a bit strange, but it reminded me a bit of McDonald’s, because McDonald’s as a franchiser would buy up land, and lease this to the franchisee to build a McDonald’s and as a result over the years, McDonald’s has ended up being the largest commercial real estate developer in the world. Is this your end-game? Are you planning to do a Ronald McDonald?
H: I do love McDonald’s French fries, but no, our model is only particularly based on the co-working spaces. We’re focused on our blockchain, or it’s not only based on our co-working spaces, it’s based on our blockchain solution. So, the co-working spaces are a hub of innovation and allow like-minded groups to cross paths, but it’s not something that we’re focused on buying up tons of them, you know, it’s – it’s just something small here, it’s not our goal to buy every real estate office that there is for co-working.
N: Understood. And you won’t be serving French fries.
- Maybe. Maybe we’ll be doing something with McDonald’s.
N: And I have a kind’uv left-field question, here, around your coin, actually, nothing too contentious. But, your coin has been trading pretty consistently at around 70 cents since launch, and then I noticed in December it suddenly spiked to $1.57, and when I went to look, I couldn’t see any press announcements around that time, so I’m wondering why it spiked.
H: I know, I go so many calls and texts for the same thing. It actually, at one point even did something crazier and higher, forget when it was. But we don’t control that, so I honestly can’t tell you what spiked it. I do see sometimes when I give an interview or some news comes out, more kind of is being talked about or moved around in there. But, I mean, there’s so many factors that could’ve contributed to this, however I honestly can’t tell you. I have no idea what happened.
N: Glitch in the Matrix, eh?
H: Yeah, there, you know, there’s people doing
G: Yeah, it’s the free market, so it could be a lot of things, right. You can’t control it, but it could’ve been, hypothetically, someone who just bought up the whole order book, for example, and just spiked the price up.
N: I’ve got a question around your accelerator. So, Paragon says 10 million Paragon coins will be set aside to fund startups building on top of your open source platform, and startups will get funded based on your community voting for them. Are you guys going to build a Kickstarter-type site for startups to list and pitch their white papers?
H: Umm, I’d say it’s, it’s like a mixture of Steema and Y Combinator. Applicants will pitch their idea to the community to get votes. In exchange – umm, in a similar manner where Steema posters earn crypto for creating content. Top ideas on our platform will not only earn PRG during such voting procedures, but will – well, us as a company, we will hand pick out of those and help grow their business one-on-one.
N: Cool! Last question, guys. What’s been your biggest learning curve since your ICO? What advice do you have for other crypto startups?
G: Do you want to go first?
H Yeah, I’ll go. So, we can both answer this. We were trying to take turns, back and forth, but I think it’d be cool - we can both. Umm, so for me, coming into this, I already knew a lot about blockchain, cryptocurrency and cannabis, but I would say I’ve definitely grown from someone with just a general level of knowledge to a much deeper and technical understanding of the blockchain, which is this amazing thing that’s coming up. Umm, I’ve come to see a pattern with regulations in regards to cryptocurrency around the world that I didn’t really see before because I was just focused on my coins that I had. And I’ve learned a lot more ever changing regulations, but, with this cannabis industry in different countries around the world then I’ve seen so many people that are so passionate about it. Ahh, I’ve just learned so many different types of people that use it, and gosh. The advice I would give to any crypto startup? I would say for those people to ask themselves if this is something that’s needed. For Paragon, I created this because it was something I needed when running AuBox, the monthly subscription for medical marijuana in San Francisco. Since it didn’t exist and I needed it, I decided to create it. So, only create something that’s genuinely needed, and if it’s something that you need, then others probably do, too.
G: I’ve got maybe a bit of advice to add on to that, I guess, from my experience. What I would advise any startup is to take security extremely, extremely serious. Because there are a lot of people out there that have the worst intentions and are going to try and extort money from any kind of project that’s in its early stages. So I would advise everyone to make sure that they’re fully locked up with two factor, and ensure that no one else has access to any of their units. That’s something that I would absolutely advise, as well as to take into consideration before paying anything to any members or third-parties, because people like to throw a big markup on as soon as they hear the word ‘blockchain startup’. So there’s a lot more negotiation involved.
N: I think there’s a really juicy story behind that two-factor security thing, you just said, Gareth. Maybe that’s a topic for another interview.
G: Maybe, yeah, that could be a good follow-up. It’s a really big deal, sometimes.
N: Well, guys, that’s, ah, that’s our post-ICO review finished, and I really want to genuinely wish you guys the best of luck in pulling this off. I think you’ve clearly identified a business need, and if you can do it, fantastic.
H: Thanks for taking the time to chat with us.
N: Thanks, guys!