E237: The $150 Trillion Revolution in Private Markets

0:00Today we're talking about the new finance economy that sits at the intersection of retail and private markets. Today my guest is Kendrick Nguyen, founder and CEO of Republic, which has facilitated over$2.6 billion via transactions and over 3 million community members across 150 countries. Kendrick, welcome to the podcast. Thank you so much for having me, David. Our listeners have been hearing about tokenizations for many years. What are the practical benefits to tokenizations in the private markets? I look at tokenization and particularly blockchain as an infrastructure that's going to on-ramp the next generation of financial markets.

0:44What do I mean by that? Automation, factualization, and efficiency. How do you get more people to transact, invest, trade, own, buy, and sell in a speedier, cheaper, and on a cross-border basis at scale? So let me use the internet as an example. The internet is an infrastructure that took commerce towards e-commerce. What did it do? made it a lot more cheaper, faster on a cross-border basis for people to buy things. Tokenization is the same rail when it comes to investing, trading, and transacting in the capital markets. So it solves this issue of access, liquidity. How do you know that that's a big pain point?

1:38and what makes you think that this is important and this is an order of magnitude improvement on the market today? David, there's a pain point when I'm an immigrant and last one of five, all of my siblings, are either physicians or very established professionals. None of them ever invested in private equity. None of them know what a SAFT or even a convertible note is. Like the level of retail public participation in the markets, public and private, is shockingly low, even in the wealthiest country in the world, that is the United States of America. So there's no doubt that retail capital at large and the desire of people wanting to own and invest more, we already are seeing that trend with the next generation.

2:32There's a lot of technical and legal barriers, and they've been taken down one by one. And I think 2025 and the few years forward will be a transformational phase for that next version of capital markets, 2.0 or 3.0. Said another way, we live in this bubble, me, you, our listeners, where everybody knows you have private equity here, venture capital. They know how to access it. They know who to call. It's not necessarily because they're higher IQ than, say, doctors or lawyers. It's because they're well versed in it. They have the access. Maybe they meet the minimums. Tokenization allows similarly intelligent people to learn and be able to access these private assets that they previously have not had.

3:21David, the fact that we're sitting here at the New York Stock Exchange, definitely we're in a bubble. But even very sophisticated individuals, works like liquidity or yield, these terms are like second nature for people in this building. Just one or two blocks from here, I would be shocked if more than 50 % of people on the street can give you a definition of liquidity. That's how low financial sophistication is. And indeed, by getting people in and enabling them to participate in a small amount is the best way to increase and improve financial know-how. Me and my business partner, Curtis, we try to test our own understanding of the market and people's understanding.

4:12And we recently learned that some small percentage of people not only know who the Treasury Secretary is, but know that there's even such a position. something like 20 % of the population actually know that there is a Treasury Secretary. And I think even the question of who's the vice president is a shocking percentage of Americans who don't know or can't answer that question. But yes, I do think that when we talk about tokenization and the transformation of capital markets, there is a social good element to it, which is how do you lower the wealth disparity? And I think the easiest, the most obvious one is to fix financial lack of or lack of financial sophistication.

4:59And that is by enabling more people to get in. There's a longer conversation on how to do so in a sensible way. but access or accessibility, that is exactly what tokenization promises to deliver. There's a famous pension fund study that showed that 90 % of a return in portfolio was based on the asset allocation. So just being in private equity, just having exposure to venture capital predicted 90 % of the returns. When it comes to tokenizations in private markets, what's the gateway drug? What's the product that you believe will lead to retail's adoption of this investment instrument? There are two answers to your question.

5:49One is what I believe will drive adoption. And the second one is what I think is actually good for mass adoption. I think things that resonate with people because they are, you know, hypey, because these are brands or companies that people understand, it grabs people's attention at a time whereby someone's attention, I think on average, is seven or eight seconds. So names like Taylor Swift, Drake, The Patriot, SpaceX, TikTok, these are things that people are like, wow, I get to invest and own it? It's going to get their attention and I think that's going to drive adoption. Do I necessarily think that that's the best product for someone who's brand new?

6:39No, I think products that are consistent in yield, that is how much, what percentage of return that investment is going to yield with low volatility on an ongoing basis and with liquidity, that's best. And I think both of them are now, beginning as of 2025, are being introduced to the retail public here in the U.S. That's the paradox. Probably the best instrument for the retail investor might be a fund-to-fund of venture capital funds. Maybe they get exposure to 10 ,000 underlying portfolio companies, but they want that SpaceX. They want that OpenAI. And we've seen that. Robinhood just did SpaceX and OpenAI tokens.

7:24Tell me about that. And what was Republic's role in that? Yes, I think in the news in June, there was a big announcement on Robinhood giving away a Robinhood token that represents SpaceX and another token that represented OpenAI. And they basically gave it away. They didn't sell it. They didn't do it in the U.S. They only gave it away to new Robinhood users in Europe. So that effort did exceptionally well for Robinhood in terms of the reflection on how well the stock performed that particular day. Our role as a technical partner, I can't go too in-depth into it, but we did work with our partner in structuring that effort for them in Europe in June of 2025 this year.

8:19And I was watching the stock that day. Tell me about what happened in the stock. I think the stock jumped something like 13 % and managed to sustain with some volatility. But it wasn't just a peak and then it went back down. I think the stock now continued to rise in that framework. And I think the prediction or the estimation is that the public, the market, looked at that token giveaway as a reflection on Robinhood's willingness to embrace tokenization and penetrate the world of private equity, which is an expansion from what Robinhood has been known for, public equity, public stock. So I think that it speaks to both market expectation and how they embrace all of these major financial companies' foray in towards tokenization for retail access of things that previously had been completely out of reach.

9:26The market's pricing in, potential doubling of Robinhood's business. The reason I say that is endowments, arguably the best investors in the world, some of them, the most elite ones will have up to 50 % of their assets in privates, 50 % in publics. Some do 60 % in publics, 40 % in privates. But Robinhood essentially showed their willingness to potentially double their market size in the time of their business overnight. And the monetization, the revenue for private equities, always much higher for public. To give you an example, say Robinhood enabling people to trade public equity. Even if you were to tokenize it and charge a fee, obviously it's free on Robinhood.

10:11If you allow tokenized public equity and you permit Europeans to trade it, the fees that are chargeable on that are bound to be somewhat limiting. what would be the fees when in Q1 of 2026 did Robinhood enable retail public to trade and buy Robinhood SpaceX tokens? Obviously, people are going to be willing to pay much more to access something that they will not be able to find anywhere else. that's the allure of private equity. On the one hand is the demand from the public. And on the other hand is because of that lack of demand and accessibility, the revenue potential for the first movers in the sector.

11:08How do these mirror tokens work? Maybe you could break down how are you able to give investors exposure to open AI and SpaceX? Technically, someone can go on a betting market like Polymarket and simply bet on when SpaceX is going to go public. You don't actually need to own any shares of SpaceX in order for you to enter into a bet with me. That function is not even a financial product and that will be governed by the CFTC. Now, a forward contract, whereby I'm paying for something that you currently own and hold on to it, and then you're going to deliver that to me later on in the future time, when the value is higher and I reap the benefit, that's also very commonly done.

12:00A four-word contract can be naked. That is, just because we enter into a four-word contract, it doesn't necessarily mean that you, David, has to hold on to the asset underneath. And so taking the step further and navigating within the regulatory environment, you allow for an issuer like Robinhood, that is not SpaceX, to have a financial product that enable them to deliver to buyers an IOU. Essentially, if Curtis or you purchase or receive a Robinhood mirror token for OpenAI, it simply means that when OpenAI goes public, you're going to go to Robinhood and they're going to deliver for you the market value of OpenAI share at the time.

12:55And that's regulated by the FTC? No, no. Which regulatory framework applies depends on how you structure the product and how you describe it. In the scenario that I had just described, in our view, it is squarely a securities and investment contract, and that should be governed by the SEC. You've also partnered with one of our previous guests, co-CEO of Hamilton Lane, Eric Hirsch. And Hamilton Lane, if they haven't passed a trillion dollars, are going to pass it shortly. What's your partnership with Hamilton Lane and how does this tokenization apply to private equity firms? Hamilton Lane is probably the firm that I most respect when it comes to asset managers.

13:44They stay very low key. with the track record, how low volatility is, the fact that they are NASDAQ-listed firms for a couple decades now. But what people don't realize is that a firm like that and within their organization, they are asked for work advance in ideating and embracing new technology as a Silicon Valley startup. So they have been thinking about how they can apply tokenization to make their funds, multi-manager funds, more accessible to the general public. That is, how do you tokenize an infrastructure fund of Hamilton Lane and over a sudden be able to take in investors well below the standard$5 million minimum investment?

14:37And that's exactly what we worked with them for a year, year and a half to execute on it earlier this year. There's a repertory restructuring. It's about building out new vendors and from fund admin to custodians. It's about leveraging the Republic interface to deal with small checks, but at a greater volume that a firm like Hamilton Lane is familiar with. So it's a multifaceted effort. But yes, these things like building a whole new hotel, it takes time. It's still not yet a commoditized service. And it really is only for partners who are very, you know, all in on the future of retailization and accessibility.

15:27it's interesting because you look at somebody like hamilton lane that has roughly a trillion dollars in assets and you think why do they care about tokenization is it they're trying to get some pr or some good press and then you take a step back i had the ceo of icapital lawrence calcano and he estimates 150 trillion with a t 150 times the size of hamilton lane in retail going into private equity and private markets in the next five to 10 years. So Hamilton Lane, though today, maybe it doesn't have a big impact on their business over the next five to 10 years, could potentially double, triple, 10x that business through retail.

16:09100%. David, let me use an analogy. Uber. When Uber first launched, the year that it went to market, the entire TAM, the addressable market of all taxi companies in the world was somewhere in the range of 30 to 50 billion dollars. That company enabling more people to use something that everyone knew about, but not everyone use a taxi, is such that a single company now, some 15 years later, its valuation is five times what used to be the total size of an entire global market. You're going to see that at a magnitude order larger when it comes to financial products, whether it's venture funds, whether it's a multi-manager of funds, and yes, including the Hamilton Lane, the BlackRock, the Apollo of the world.

17:14And headline news, you see the CEOs of these companies are all at least not chasing but embracing it. Executing on that is still work in progress for many of us at the forefront of doing this. Just to double click on that, I know several of the investors that either passed or invested in Uber. Of course, the most famous one, Jason Galacanis, invested$25 ,000 into Uber and returned, I think,$100 million for Sequoia. I know other investors that will remain nameless that did not invest. And the reason they didn't invest is not because there weren't great investors. It's because Uber in their deck was going around saying they were going to capture something like 50 % of the market share of taxis.

18:00And they were sitting around saying, how could they disrupt this incumbent industry with 100 years? How could they get 50 % market share? lo and behold they were wrong but to the outside by an order of magnitude of 10x they ended up being five times larger than an entire industry why because bringing down the cost bringing down the friction actually increased the total addressable market the size of the market and you're arguing that that might happen in private equity where it might be 150 trillion right now institutionally, roughly the same as retail, but that's people that are putting in $5,$10,$20 million.

18:39And if you bring that down and if you create liquidity in it, that might actually increase the size of the town. I think the$100 bills underneath mattresses across the world from Ecuador to Malaysia to Vietnam, where I was born, even though I grew up in the US, That kind of retail capital globally that earns almost zero yield when productively redeployed into the capital markets, yes, you're going to see a more transformative shift to the capital markets as it exists today than commerce in the early 90s before the internet and the world we're living in today. And it's not just Uber, David. There is no question.

19:30I wonder if anyone would disagree with this statement that all of us in 2025 buy many, many more things on a regular basis compared to our parents and our grandparents just because it's that much more accessible. in the very much in the same way that I think the word of capital market investing and owning things, the inaccessibility is comparable to commerce. Back in like the 60s and the 50s, you bought things that were available to you in your village and nowhere else, and now you buy things produced globally. Yes, that should be enough to shockproof in the most optimistic way the next generation.

20:18Me and you met before you started Republic when you were at AngelList. I remember we were whiteboarding the idea for Republic. What was your thesis then? How has that evolved since growing the business? For those who know AngelList know well that one of the things they do was to bring accredited capital into venture capital through syndications. But That model we're limiting in two ways. You got to be an accredited investor. And really, it only focused on early stage venture investing, meaning two things. Very, very high risk if you look at any one investment and very, very illiquid. But the regulatory framework underneath for us at Republic from day one is like, how do you bring private inaccessible opportunities?

21:13to the general public, because I really think that someone like Jake Paul or Beyonce, can you imagine how they can change venture capital as it exists today? If they, every time they make a$1 ,000 investment in an early stage company, that they also have a framework to allow all of their fans to put in up to$20 or$50 each. Imagine the size in total investment volume, the number of deals that they can broadly diversify, and the kind of leveling up in people's experience with venture that they would do to hundreds of millions of fans. I would dare say that in five to 10 years, I have to make a bet that the Jake Pauls of the world will be the new Sequoia and A16Z in a way, no different than Uber and Lyft compared to Yellow Caps in New York City.

22:25Today they can coexist, but there'll be a massive evolution that is to come. So, you know, Jake Paul's a friend. So if Jake Paul came to Republic and said, I want to partner with you guys, how would he leverage his crowd? Like, give me the blocking and tackling of how that would actually operationalize into investment. Very specifically, logistically, leveraging a platform like Republic is like a turnkey thing for him. We set up a profile and we take care of the legal structuring so that a million fans, each putting in$10, which is$10 million, can whenever Jake recommend and say that I invest in Company A.

23:13Company A sets up a campaign with Republic and all of a sudden all of his fans through TikTok and Instagram and email list can go to that link and there's a single$10 million investment in the aggregate that goes into the company. And so Jake essentially is leading a$10 million investment into an early stage company. And he can do that a thousand times because he's leveraging a very large community base and each person is only putting in 10, 20 bucks. So they are able, capable of doing so rinse and repeat in a way that no venture fund is equipped very few to deploy a billion dollars in a year or two.

24:10We were talking before this podcast started about our mutual friend Naval. And this is like a Navalism, which is what are the things that scale brand and reputation? So taken to the extreme, if Jake Paul starts representing or investing into companies that go to zero or that are not credible, his brand reputation will go down, his followers will stop listening to him. But if the opposite, if he gets access to the open AI, the SpaceX's, his actually reputation could increase. So it's going to each deal kind of increases. And then these influencers could actually start to monetize their credibility with their fan base.

24:46A hundred percent. But David, I want to introduce the concept called return on experience as well. We all know the ROI, return on investment. When someone puts in$1 ,000 or more, certainly$10, certainly$50, that getting a return and profitability on that is 100 % of their consideration. When someone is making a$10 investment into a company or into an artist that they love, even 100 % return or 5x return, that is not a material financial return. It is the ability to do it to begin with and thereby the newness, the novelty in human investor psychology. when you have someone like Jake with 100 million fans and a million of them investing$10 into three different companies, even if they lose all three,$30, just the experience, learning, being able to go to an event, be able to go on a podcast or a stream that's exclusive to investors, that is already the experience, the process of learning.

26:07And David, can you think of any more effective way at scale to get young Americans to learn a financial concept than getting one of the celebrities that they love? And that by making an investment, they learn for the first time what a SAFT is, what a convertible no is, what revenue sharing is. So I would dare say that at smaller amounts, return ROI is less important than ROE. And because of that, the ability to broadly diversify and bring the rest of the population on board will give the first movers, the first celebrity's mover, an extremely advantageous position. And they may very well be the next Uber of share riding.

27:02It's so interesting because investing like poker cannot be played with play money. Yes, you could open up an account and try to simulate, but you need to use real money. Psychologically, we can't learn to do something like investing without real money. And oftentimes when somebody has a big liquidity event, they sell their company for$100 million, they come to me and they ask me for my advice. I tell them some principles, but I also say, make some very small investments. Make your mistakes with small chip stacks. And as you gain experience, really over 10 years, ideally, but at least over three to five years, then start increasing the size of your bets.

27:41A lot of people do the exact opposite. They have$20 million in the bank. They're like, oh man, I'm like, I can't have it in a treasury. I need to go and spend it. And they start, they make the worst possible investments with a lot of money. I would suggest the exact opposite, which is take that$20 million, put it in a diversified liquid portfolio, and start making very small bets in order to learn your mistakes on a small chip stack. I agree entirely. And better yet, if it is feasible to make investments with$5,$10,$20, people should do it now. High school kids. David, I went to East Palo Alto High School.

28:22That is definitely not wealthy on the wrong side of the highway. And our high school got like donation from, you know, HP of like, oh, laptops and computers or whatever. That's how you, you know, you get less economically advantaged high school kids to be more familiar with math and sciences. Can you imagine giving inner city high school children$50 each? You got to make 10 investments and you got to write a paragraph and decide why you deploy$5 into this company. It may very well be out of 100 kids, 20 was like, whoa, I actually kind of like accounting and concept. And I didn't know this is how you make money.

29:10And out of those 20, maybe five would go on to become accountants and financial analysts that otherwise they would never be. So I do think that the ability, going back to your question at the beginning on tokenization accessibility, that add a small enough of an amount that you can get people in to participate, similar to commerce, there is no better way to change the sophistication, knowledge, learning, know-how of the public at large. You imagine instead of getting a credit card and be able to buy anything, You got to wait until you're accredited to go to an Amazon and purchase things. How limiting would that be?

29:56But that is currently the construct of securities law. And I think that's changing very fast. We're in the capital of the world when it comes to finance. We're literally in the New York Stock Exchange. And being in New York City, we see politically a lot of younger people have started to go towards the socialist side. and you could criticize that and you could say why that's wrong why that hasn't worked for last hundred experiments but if you were a little bit more self-critical at a society and looked at what's driving that you would see that this inability to participate in the economy you look at gen z where their parents were able to have a normal job and to have a house in the suburbs Their retirement went up, their house went up, and that American dream has fundamentally been lost on the Gen Z.

30:49And that's why so many of them have turned to socialism. One way to counteract that, Brad Gerstner popularized this idea of giving every person born$1 ,000 in order to invest in the stock market to make sure that more people participate. and this the tokenization could be another path in order to make sure that individuals feel like they're part of the economy and part of the future and instead of learning to instead of having a negative affiliation with ai and driving electricity costs and all that they could actually be on the cap table of these companies it's a powerful thing managing risk for your business may be complicated but your relationship with your insurance broker doesn't have to be nfp and aon company can help you navigate insurance markets and negotiate with carriers to build the right coverage for your business, helping you turn your risks into leverage.

31:40NFP's advisors are total business partners who help you protect your business and connect you with solutions to your toughest financial and workforce challenges. Whether your goal is to manage risk more effectively, attract top talent, empower your workforce, or grow your legacy, NFP is ready to help you succeed. Visit nfp.com slash how I invest today to unlock your full potential. Agree. And David, I think for us, right, to be able to buy a home, that is the ultimate American dream. That's like, you know, American middle class. You go, you work hard, you go and buy a home, much less buying a home for your parents.

32:15I think that is, just like you said, completely out of reach for 90 % or so. Certainly, if you live in New York or California. But now to be able to deploy a couple hundred dollars into a factional interest of a luxury building in midtown Manhattan, even though you live in, you know, northern Oregon, and be able to get some rent, a factional component of a rent coming out of it. This is something that wasn't feasible 10 years ago. And I think just like you said, is another example of making the American dream of owning real estate in a home feasible through fractionalization and accessibility.

33:02And real estate, you know, less liquid than public equity. But I'm actually very, very optimistic about the trend overall towards, you know, the young generation embracing and actually trying from crypto to trading on Robinhood to things like factional real estate. I think the arc of history typically poised towards capitalism. it's such an underrated thing being excited about your investments my mom calls me she'll watch a podcast with travis kalanick or pal alex carp and she'll say do i buy uber do i buy palantir my answer is always yes because if you believe in the mostly efficient hypothesis i believe the public markets are mostly efficient investing in anything is good taken to the extreme you could invest in just companies with the letter k my name's kendrick i'm just going to invest in all listed.