Welcome.
Patrick, I need to read a short Safe Harbor Statement to you before we jump in.
I forgot we had people on the phone.
Yeah.
Go ahead.
Great. This is Greg Iverson, and I'm the company's Chief Financial Officer. As I mentioned, I need to read a quick safe harbor statement, and then I'll hand the meeting over to Patrick. The following discussion and our responses to your questions reflect management's view as of today, November 13, 2018, and may include forward-looking statements. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in our 2017 Form 10-K and subsequent SEC filings. Please review the safe harbor statement on slide two of the presentation from our November 8, 2018, earnings call. Patrick?
Thank you, Greg. Welcome, and welcome those on the phone. I'm going to be very short up front so we can go to questions. Interesting. I don't know if you know it, but I used to work for Sandy Gottesman at First Manhattan being an equity analyst. So, it's always kind of funny to be on this side of the table for those on those rare occasions folks come. Let me—I'm going to stand up. Sorry, projector. I'd like to introduce my senior colleagues. There's a—at the—what we now think of as the holding company level or the Inc. level, there's Seth, who's Chief Strategy Officer. Greg is CFO, Greg Iverson. And Carter is—Carter's not here.
Carter's not here.
Okay. So then underneath that, the two businesses are the retail business and the blockchain business. The retail business, I want to introduce somebody new that you've not—I don't think we've spoken about it publicly. Chris Donnelly is my Chief of Staff in the retail business. Chris comes from Bain, Nike, Oakley. He built some companies after Bain and sold them, and they turned into big pieces of Nike and big pieces of Oakley. We also—and keeping with—I hear that there's been some question, "Why are we staffing up our retail executive team?" Well, I view executive teams often come almost in generations, and there has been a generational change, and we are really bringing in some heavy hitters from industry onto the retail executive team.
And one of the things we've done is followed an industry convention we've never done before but break out our own, have our own Chief Customer Officer, have it not just be part of marketing before. This was actually JP's idea. So we broke this out and a dedicated customer function and hired Catherine Borda from AT&T, neuroscience background. I love it. I could tell yesterday, by the way you're speaking, that I was listening to a neuroscientist doing marketing. JP is the best marketing guy in digital marketing I've seen in the industry, and you've known him for years. We don't have a name on the Chief Digital Officer. Chris is really filling that role for now. Dave Nielsen, where's Dave? Here he is. Dave was our greatest head of sourcing and supply chain ever.
He went off to be CEO of another company, and we crossed paths some months ago, and I lured him back, and then also, we've done something again that a couple of other companies have done in retail, and that is we've taken all of business reporting and analytics and AI and merged it into one team, and we have a Chief Algorithms Officer now. This is Kamelia, PhD in artificial intelligence from.
Drexel.
Drexel, formerly of Etsy. And so how would you describe this move, Seth?
Yeah. So really, thematically, what we tried to do is we wanted to place a renewed focus on customer experience and customer targeting and really improve the customer centricity of the company. And so to do that, we took three roles essentially that have already existed, those held by Catherine, Kamelia, and Chris, elevated them to a more senior position with the company, and then brought in very heavy hitter principals from the industry in order to fill those spots, in order to help us move as an institution in that direction. And so that's really what we've done is placed that emphasis on customer experience and customer targeting and added several key players in order to help us move in that direction as an institution.
I'd say there have been sort of we've lived through kind of five generations of internet marketing. And going back to the early days of just arbitrage, people weren't even doing arbitrage. And we took Wall Street arbitrage techniques and brought them to digital marketing, and it was magic. And then affiliate marketing and SEO. Anyway, what's happening in the last two, three years is machine learning has reached the point for us. And as far as I know for the industry, it's now at the point where it's really working better than just about anything else you can do. And we're very early on the machine learning revolution. Even before Kamelia got here, we were on it.
But we have wonderful partnerships, as I've indicated in previous earnings call, with some of the leading firms in Silicon Valley who are quite consistently telling me the stuff we're doing together is six months to a couple of years in front of the other leading people in the industry. So we're big on machine learning, and it turns out to be a wonderful way to solve problems we've been trying to solve through all kinds of other techniques over the years. So that's on the retail side. Did you have something else?
I was just going to say, do you want to introduce the non-retail folks we have here as well?
The non-retail folks we have here on the blockchain side. Jonathan is not here. We have Steve Hopkins here from Medici. Steve is Chicago Law. Is your official title president of Medici? Or no, no.
My title is Chief Operating Officer and General Counsel.
Okay. But when Jonathan's on the road, he's the guy who makes it work. We have 19 investments under Medici now. And three or four years ago, I was trying to sell or explain to shareholders why we were doing this blockchain thing and why I went back and looked four years ago. It was like $3.5 million I spent. I was defending it at the end of the year to the, yeah, this was worth us getting our feet wet in. I hope we're not still there. Or to anyone who's still there on the question of blockchain, then it's probably and anyway, I'm assuming I'm talking to people who understand that this blockchain thing is not a figment of my imagination. And if you get that, I can tell you that it's kind of interesting.
People have not put together how a significant fraction of the stuff you're hearing about at the leading edge in the field of things really percolating in the world where blockchain is starting to percolate up. We're involved in either by owning a tiny percent of the company, a couple few percent, or in many cases, really significant chunks of the companies that are at the very leading edge of this blockchain revolution. Nobody seems to have gotten that yet or even haven't seen anyone analyze how these 19 companies, how it really all fits, but it does. So that is the 10-minute introduction.
[audio distortion] Nariman.
Nariman. Well, okay. So under Medici, among the leading companies are, of course, people know about tZERO, which is blockchain meets capital markets. There's blockchain meets land governance, which, by the way, I think has just unbelievable potential. And Rob Hughes was CFO of the overall corporation. As you know, he left and became president of Medici Land Governance. Nariman, younger and wiser brother Nariman Noursalehi, younger and smarter brother of Saum Noursalehi, is a former securities lawyer from New York, actually, fr om what firm?
I was at Dewey & LeBoeuf.
Okay. Well, before we got him out to e-commerce some eight years ago or something, he's back within tZERO and is a key part of tZERO. Since Saum is in New York today, he'll be answering tZERO questions. Who else did I miss? Anyone?
I think that's it.
I'm [audio distortion] , adult supervision. Okay. Is there no analyst running the show, or are we running the show?
I think we're going to kick over and let analysts lead with the first set of questions, and then we'll go to sort of the room at large.
Okay.
Does anybody want to lead off?
Donnelly.
You got a first question?
So my first question is like a 10-part.
Let's not do that. Let's do that. Do you want to do it? Okay. Do a 10-part question.
I feel like you answer this question, and everyone leaves with what they want.
Okay.
That's why some have to indulge me. So as you know, I've been following this company for a while. And what intrigued me about Overstock is how you have basically two businesses that are wildly mispriced by the market. So hopefully, by answering this question, I think you'll help framework the valuation for those two businesses. So starting point, following your issuance in the third quarter, what is your cash balance, including your cash balance per share? How many shares do you have outstanding? When we think about the retail business, there have been some oscillations in both sales and profitability. When you're thinking about potentially selling it, are you pegging the valuation more on sales or on profitability?
And then as it pertains to GSR, it seems like the equity issues you did as close to the 33 and three-quarters valuation for GSR may have de-risked GSR to the extent that you may not have to sell 3.1 million shares at 33 and three-quarters. Is that the right way of thinking about it? And then second, do you still need to issue shares to GSR? And then lastly, how should we think about the prospects of holding that 1.5 billion valuations for tZERO? And then what would your ownership—what's your ownership stake today of tZERO before and after the transaction?
Great. So we'll take those sort of in the order they came. Greg, do you want to lead first with the cash and the?
Actually, he's spoken to two businesses first. So we'll come to the two businesses. I think the first question is the cash, and then we'll get into the businesses and how they're valued.
Yeah. I think that makes sense. Cash is an easy one. So we finished the quarter, September 30th, and reported $182 million of cash on our balance sheet. So obviously strong from a capitalization liquidity perspective. If you go back and you look at the front cover of our 10-Q, we reported we had 32 million shares outstanding. So just the quick arithmetic there, it's about between $5 and $6, $5.68 in terms of cash per share outstanding.
Great. In terms of the sale of retail and whether we think of that in terms of a sales or a profitability-based multiple, I think either sales or a profitability multiple are the classic way that we would value a retailer in the public markets. I think the way that most people who are looking at the company view it is actually in terms of its strategic value. That realistically, when you look at the base of what we own in terms of assets, we have an engine that makes consumer experience really, really positive. Our web pages load faster and cause you to waste less time waiting on web response. We have search engines and personalization engines that help you find the products you need without needing to waste a lot of time, even when they're stylized products.
And often, style is more difficult to hone in on than things like, say, commodity electronics, where you're searching by specs. We have a back-end supply chain engine that lets us bring massive assortments online and then maintain competitive prices with relatively little G&A to support that. If you look at the revenue per merchandising head in Overstock.com versus in virtually any other retailer, they are a multiple of, or we are a multiple of what they are in terms of revenue per merchant head. And Dave was key in building that, and it's really happened through automation and through machine learning, frankly, that lets us replace roles that would normally be played by merchants with machines that can help guide and differentiate and improve assortment.
And so the way we believe this is properly valued is through that strategic lens of the fact that most of those assets are not limited to the name Overstock.com. Most of them have value deployed across virtually any retail brand but have very special value with a handful of retail brands. And so ultimately, the way that it's valued in a sale will be through the competitive process. And that's really what our answer is to everybody. A lot of people ask, "What's your price? What's your thoughts? Where do you value it?" The truth is the market sets a value, and that's why we have a competitive process where multiple potential buyers explore it, put in their indications together, and tell us where they're at, and then let the market dictate the value.
Can I just follow up on that question?
Yeah. Absolutely.
My view is if investors perceive that this business can move to profitability or close to it, much higher valuation can be assigned to it than what it is today.
Absolutely.
How do you feel about the potential for the retail business to get profitable in two years or something like that?
You start, and I'll follow. I know you want to answer that first.
Yeah. I think if you look at the trajectory, and this will take us into a lengthy discussion on retail, but if you look at the numbers we talked about on the earnings call and look at that contribution change, contribution is what's left over to pay for the business after marketing, after cost of goods, after shipping, after customer service. And if you look at where that contribution number went, given that we weren't even optimizing the contribution in the first half of the quarter, it tells you the trajectory that we're on and the speed of recovery that we're seeing in terms of profitability. And we're able to do it without deteriorating into negative revenue growth.
Yeah. The.
I would add to that, more than half of—or at least half of the EBITDA losses that we had were in the month of July before we had made the adjustments into the model. And so, we are on a great trajectory in terms of contribution. The improvements are moving the right direction. All of that was before we started to see the real signs of life in SEO that we talked about. That was purely on the back of blocking and tackling in terms of improved work from JP and team in terms of digital advertising efficiency for acquisition and Club O for retention. And so we are quite confident in our ability to return to profitability over the coming period. We want to manage that and don't want to knee-jerk into it. We could make big cuts and move there immediately.
That would likely not be the healthiest long-term thing for the business. But we're on a very good trajectory and headed in that path back towards profitability already. And I think if you look at the trend in the numbers that we presented on the last call, you can see the path laid out and where that trajectory is leading us.
Yeah. That contribution graph or that contribution number in hard dollars is really what drives the economics of all these businesses. In fact, I think it's an underutilized metric in the world of e-commerce because it's the great equalizer across different business models. You get the contribution, the gross profit minus marketing, and you have to adjust. People have different definitions of gross profit. That number drives, is basically that drives the economics. Everything else is managing G&A to that. We did. It was my decision. I hit the afterburners. Maybe it was frustration at watching the, we clearly have, well, I hit the afterburners to see, I mean, I've been shocked, frankly, at the valuations that occur in our industry for companies that lose fortunes, and so I announced to the world at the beginning of the year that we were going to accelerate, and we did. Truth is, I thought we could accelerate.
Truth is, it was a bad decision because, A, it was probably not a good decision to do until we had Club O and SEO fixed. Now that they've come around, it wouldn't be so bad economically. But secondly, even if I realized what's the point of showing, okay, what a competitor can do for a $500 million loss, we can do for a $200 million loss. I realized I don't want to be in that business anymore, especially since they have shown that they are—that they're responding in kind. So that was.
In particular, because we don't want to be diluting the other half of our business.
Right. As we realized how clearly valuable that other half is. So we don't want any dilution on the other side. So we pivoted. And as Seth said, the pivot really occurred in the third week of July, fourth week. And even given that, you saw these radically different numbers where the operating loss basically fell beneath all the noise from $58 million to $29 million in one quarter. And that isn't easy to do, but I think that that's not a fluke. And we were there. We had seven years of GAAP net income profitability. I think we're the only guys who did. We have, for the last two or three years, been facing this competitor and tried to respond in kind. Now we're back to sort of our roots of how we're going to run the business. And I think it can happen faster than two years.
I think.
Chris.
I can tell Chris is jumping out of his seat. Go ahead, Chris.
Let me give you a perspective. I know that between Seth and Patrick, you guys have heard a phenomenal amount about the core business from the retail perspective, and I hope I represent not only the existing teams of JP, returning teams of Dave, and some of the new players that are going to be on the retail side. We look at it in a very simple manner, bringing external perspectives as well as capability. It's an equation of you got to pay a certain amount to acquire the customer. You want to be able to have in the relationship with the customer a lot of value. You got to put the money upfront to get that money in the back end.
I might have advised Patrick at the time that it might be good to work on the back end, his comments about Club O, his comments about being able to get multiple transactions and create an experience for that customer. Probably work on that a little first, and then we'll go ahead and invest in that front end and turn up the engine. I think that the people that we've brought in to be part of this team are totally immersed in that idea, not only from their backgrounds, but as well as how we look at the future. Two years, given the trajectory that we're on, gives us enough time to be able to lay the groundwork for something like an organization that needs to shift itself to be more customer-focused.
That will allow us the time to develop a team, the time to develop the metrics, the time to be able to be monitoring a business that's focused completely on the idea of that customer. I guess if I were leading into that from our teams, I might ask our PhD in customer and thought process, Catherine, just a few thoughts. Gives you a little bit of color, and then maybe we can actually jump around to each of our leadership, and they can give you some of those ideas.
Yeah. Happy to, Chris. So I think, as Patrick alluded to, my background is particularly in CPG and then most recently in telecommunications. So I think that's what really afforded me is kind of a front-row view of how technology and telecommunications in particular have really changed behavior, right, and how that's changed consumer behavior, particularly for younger generations, right?
And so what we're really kind of looking to do is absolutely focus on who are going to be the right customers that are going to have kind of the greatest affinity for what we can offer and really design an entire experience from beginning to end, right, where we're helping JP's organization better target them, find them, entice them, and then throughout the entire journey, right, working with Dave's team in terms of just delivering kind of that perfect experience, helping through Club O and as well customer service, just making sure that at every touchpoint, we're just delivering a delightful experience. So I think, as Chris said, it's going to take that some time. We don't do that overnight. But I think that we have definitely the team in place. I feel like I have been given absolutely the support to do that.
There's nothing that I have asked for that hasn't come through. So we definitely have the infrastructure in place.
Before we go too much further into the retail side of it, that's the focal point, right? Customer acquisition, customer lifetime value. We're going to find the customer. We're going to speak to them in a voice, a consistency of voice, a content, an ability to create a consistent view from that consumer about who we are. But let's make sure that we get the final eight parts of the initial question. And then as we go into detail, we can kind of evolve the retail thinking.
Let me just hit them briefly then. Let me just hit the answers briefly. On the GSR, good for you to notice, Tom. I don't know if anyone had figured this out, but yes, what we ended up doing with the ATM, de-risk the GSR deal between the turnaround in retail and the compression of losses, which I have said publicly you're going to see continue. And Seth, why don't you walk me through what the numbers were on the ATM versus the GSR deal?
Yeah. Ultimately, when we structured the GSR deal, we had $100 million coming in at the OSTK level. And that was deliberate. That's really what we wanted in order to do what we needed to do at the OSTK level, cover the Medici investments we wanted to make. And so that's what we wanted to bring in as a strategic interest at that top co-level. And we said we would bring it in at $33.72. We brought in $96 million at $33.71. And so that's really in line with where we said we were going to be. The way that played out, we actually brought in. We announced the deal the next day in the market. We sat out the market while the price was moving. When it stabilized, we did an initial block in the market that day.
And just to bring in some base amount of capital as sort of a safety stock, we then sat out for a while. And as the price stabilized below the original GSR price, rather than asking GSR to come in and buy stock at a premium, we took in another block of capital at sort of that stabilized price that averaged out to roughly the price that we had originally said we were going to take capital from GSR. Our goal now, because we have the capital we need at the OSTK level, is not to sell GSR 3.1 million shares. That wasn't our objective to begin with. We had some base amount of capital that we wanted at the OSTK level. At this point, we're working with GSR to accommodate their strategic ownership interest.
Like we said on the call, we think they're going to be phenomenal partners, much deeper than the capital. We think the business we can build together is going to be fabulous in tZERO.
They're thinking of it. They have the same global ambition we did. They think of it big like we're thinking of it.
And so really, our goal now is to accommodate their strategic ownership interest, but also minimize dilution.
And accommodate it in a way that does not trip any CFIUS and any of that stuff. So we've been very cognizant of that from the beginning, and we're good.
Yeah. And that question had come up as well. Do you have CFIUS concerns? Do you have HSR concerns? We worked very carefully around structure with that in mind to avoid the kind of control risks and things that might cause an issue there.
Oh, but because I did see a journalist called me. I don't know if they published, but was bringing up that there was some going through the 10-Q or something. They see a possible slide in date into February, and I pointed out to them that's specifically HSR.
Yeah. No, the close date is contingent on an HSR filing. HSR has a standard waiting period on it. It's conceivable it can be delayed. But no, the close on the deal, we expect to be on schedule, and it's just going to be subject to HSR as our anticipation.
Yeah. And if the federal government steps in and says, "No, you Hart-Scott-Rodino if you're".
Thank you.
Yeah, antitrust stuff. It shouldn't be. It shouldn't be anywhere close to tripping any such concerns. So that was so do you want to say anything on valuation?
This is just for the group, just the acronym HSR.
Hart-Scott-Rodino. It's the government's process for reviewing antitrust concerns, which is an issue if you're acquiring a company. It's rarely an interest when you're taking a modest minority stake.
So the deal is still scheduled for December 15th. It is subject to Hart-Scott-Rodino review. If the feds come in and want to delay it, it can slide 30 and then maybe another 30 days or something. But we do not expect that at all. In fact, we do not expect that at all.
Yeah. The standard HSR delay, if there's a delay, is 30 days.
But even that, we don't expect the delay. And we don't even expect maybe to wait until December 15th for this.
Yeah. Like we said on the call, we're actively working on the definitive docs there. And so we feel very good about where that's going. That's coincidentally where we said in the Q that there might be fewer shares bought from Overstock and at a lower price. It's because we're trying to minimize dilution. We're not trying to get them to buy a bunch of stock at a premium to capitalize up OSTK. We feel good about the capital we have in OSTK now.
In fact, one of the points of I mean, this is a bigger deal than would be ideal for us, in our view. We don't need all this capital and don't want all this dilution. They have been pushing for a larger deal than we wanted to take, in fact. Taking the whole deal is much, much more capital than we actually need. Truth is, I think we have between retail plateauing out and the losses compressing like this and $184 million in the bank, I think we're good for even the tZERO and the Medici interest, which is why taking this $95 million, taking that extra $40 million or $50 million, would, I think, change things strategically for us. We actually don't need any more capital. We can stretch this and make this work for everything. It'd be nice to have this other capital for the business.
Yeah. We should say what we want to do with GSR is really supercharge global expansion. And the capital is really dedicated to that. We have the capital we need for the operations we've all discussed in tZERO. But with GSR as a partner, as well as with the capital investment, we can really supercharge international expansion.
They just open up so many doors for us in Asian markets that if we do partner with them, the opportunities they create are where we would need additional capital. For our current plans, I think we're completely fine. If we want to be more ambitious with GSR, which we definitely want to be, that's where we need the capital.
Asia and Europe, actually.
Yeah, Asia and Europe. Yeah.
They have a bank.
We're very excited to get those definitive documents completed.
Valuation? Do you want to? He said Tom said something about valuation.
Valuation for tZERO.
Valuation for tZERO. We think tZERO is going to have an attractive valuation. We don't have definitive docs completed yet, but we're not concerned about tZERO valuation or excessive dilution there. We think it's going to be a big positive.
Yeah, and don't forget to repeat the question.
Oh, that was Paul. That question was about valuation of tZERO. And lastly, to your opening point, Tom, about we fundamentally have two different businesses within here, within this publicly traded company. I agree. And I agree that the way to maximize shareholder value is to separate them. I do want to point out. I hesitate to say this because I've learned how people read into things that aren't there. But as an outsider, I do note so this is an outsider. I'm emphasizing outsider. In 13 months, tZERO reaches five years of history. And our understanding at the moment is we will, at that point, be able to do a tax-free dividend. So we'd be able to tax-free dividend out to all of our OSTK holders, their ownership in tZERO. Now, that's 13 months out.
I think we can separate these values much more quickly than that. But to me, that's sort of an outside bookend on the process. I hope we can do it in many fewer months than that. But if nothing else works, we can always separate the values that way.
That's actually an interesting point of the people in the room. How many are predominantly retail investors?
How many are predominantly blockchain investors? Three, four, five.
It's really a rare thing to find somebody who is truly an e-commerce specialist. It's an even rarer thing to find somebody who is truly a blockchain specialist. And I've literally never met one who was both. And so we get it. The story is difficult for people to understand because the components are hard to understand, let alone understanding both in a single package. And so when Patrick brings up the option of a tax-free dividend, it simply is a means of saying, "We understand that strategically, these two things should be separated. And we're going to pursue the quickest way to do that that optimizes shareholder value.
Well, what he said.
The last part that I caught from the eight-part question was, "What's the ownership in tZERO post-GSR?
The agreements, if you look back to what we had after we announced the deal at the end of Q2, was that they could buy up to 18%. Bear in mind, when you're talking about a post-money value, the size of the buy also plays into the post-money valuation versus the pre-money valuation. GSR has the right to buy up to.
What would they know?
GSR has the right to buy up to 18%. If they buy that full 18%, our ownership would be diluted from the current 80% to, I believe, if you do the math, 67%-ish. Doing the math off the top of my head. Someone with a calculator may be able to do it more accurately than that, but.
83.6.
Yeah. We'll go roughly to 67% if they take a full 18%.
Okay. Yes. And the terms on that deal were to get that, they would spend $270 million at a $1.5 billion post. So that would imply a $1.23 billion pre. Okay. Go ahead. So now we're to the point. Tom, have we taken in the last part?
You said that if they go to 18%, that takes you to 67. I thought you were at 80% before.
We're at 80% now. If we sell treasury stock and we sell 18%, we get diluted 80% of 18%, which is 14.4. 14.4 off 80 takes us down to 64.6 or 63.
64.6.
65.
Somebody with a calculator can do this better.
The answer though is basically on the math you provided, and thank you for indulging me. You're looking at $5-$6 a share of cash. You're looking at $30 a share plus tZERO. They take the full stake at the $1.5 billion. And you're looking at some amount for retail. So you're looking at $5-$6 cash, $30, tZERO, not giving you any credit for your other 18 holdings and some valuation for retail.
Yeah.
Okay?
Yeah.
Thank you.
Did you net the actual cash investment, the incremental cash investment coming through the deal?
He said some value for retail.
Yeah.
Some value for retail.
Yeah. Okay. Alan?
For the tZERO short locate product that's in beta now, can you talk about the status of that and what you're thinking about when that can go live and kind of how that actually works so people can understand that?
I want to preface this. I'll turn it over to you guys, to you, to Nariman Noursalehi especially. But as I indicated on the earnings call, there are other people who have called asking in on that GSR deal to take a slice of that. And interestingly, the most sophisticated investors who have called have been the ones who want to ask just that question. It's kind of funny. They all understand that the security tokens are great, blah, blah. Tell us about that DLR product. And we know how much money there is to be. It's kind of funny that people who really understand the plumbing always seem to know how much is really being made out of securities lending. With that said, you dig it. So I don't get in trouble.
So right now, we're in a live alpha with StockCross, as you probably read and know. That's really to just test out the platform, especially because of the volumes that we want to have. We have to make sure that it can handle the high volumes that we need. There's a few things that we'd like to tighten up on it on the technology side. So we have a fully staffed team. We have a product manager in place who is a real workhorse. So we're very excited to have him. He's going to really push this along. And for us, there's really two sides to this. There's the retail customers for it. So we'll be able to start onboarding them March at the latest, probably sooner than that. The second half of that is getting additional inventory.
And as Patrick alluded to, we've talked to some parties that are very, very interested in having their inventory on our platform. I mean, it's a huge win for anyone who holds a significant sum of capital to get a larger return on their stock lending. I mean, it's just a no-brainer. It's essentially free money if you're holding long-term investments. So we've had a lot of very, very interested parties on that side. So there's a few tweaks we want to make to the platform to make sure that we can handle the types of volumes that we expect to see and then go live. So it's definitely 100% 2019. You should see pretty significant expansion in this.
If you look at the actual, what is it called, the revenue that we have coming from this product since it's been live in just an alpha state, it's, I mean, quintupled.
Yeah. It's more than quintupled since.
Yeah. September versus January. I think September was like 6X.
Yeah.
Can you just help us understand? So the status quo doesn't want this to happen.
Oh, absolutely.
Can they do something to thwart your going forward or?
The advantage in this market is you can kind of think of it as the people who are profiting from the status quo are not the primary customers of the market. They're the market makers. And so right now, the reason we think it's ripe for disruption right now is because you have the primary source of securities for lending. It's actually predominantly from pension funds. When you think of who the largest beneficial owners of long-term securities are in the U.S. capital markets, it's pension funds. And right now, you have an active lawsuit from the pension funds against the prime brokers for essentially conspiring to prevent a more efficient, transparent market from emerging.
Who knew?
Yeah.
Who knew?
It makes it very difficult when you're facing an active lawsuit from your largest customer for being non-transparent and suppressing competition to go out and suppress competition.
However, we have heard, I'll tell you, we have heard that one very large bank whom I promised that I'm trying to avoid mentioning their name these days, but we have heard that they've told their customers, "If you do any business with tZERO on this, we won't be your front end of the prime.
Yeah.
So yeah, they definitely are against it. But the fact that their customers are in such an open and public fight with them over the lack of transparent competitiveness in the market really makes it the opportune time. And I think it's part of what's driving such interest coming in to the platform, particularly from these parties that Patrick is talking about, that most of those parties who have taken an interest are large beneficial owners of securities.
I should also mention, it may seem like it's taken more time than it should have, but I'll point out that tZERO is really built on a Wall Street routing company called SpeedRoute. And we've had some additional resources and such. But people were spread pretty thin until we got into the STO last year. As soon as we started raising money in the STO, we started really building out the company. Until then, a lot of the blockchain work was actually being done back here. Anyway, they have now, thanks to Saum, Nariman, Seth was involved. They have product teams and roadmaps and people turning away. And we've shown you our product. And Nariman can tell you what.
Yeah. Excuse me. I really think that right now, tZERO is in a place where it's very product-centered. It's about building things that solve a need for customers, investors, and issuers and lenders and borrowers on the DLR platform. And the way that we see that we're going to win, obviously, there's some very, very big entrenched interests who want to maintain status quo. But the way you win, and I think this is all technology has shown this, if you have a product that's better, that's cheaper, that's just naturally attractive to investors and lenders, then all you have to do is market it and get it out there. I think you've watched companies like Sears, these dinosaurs who seem like they were impossible to disrupt. They go down because when it's cheap and efficient, then people just naturally migrate to it.
I don't think that the big entrenched parties in the DLR space. I do not think they're going to be able to disrupt themselves on it. It's just going to be too big of a hit. You're going to have some guy in an executive room.
In the executive room.
Yeah, who looks at their balance sheet and they're saying, "You want us to cut prices on this by 80%?" An idea like that is outrageous. And the way that they'll try to protect their interest is these nefarious things that we've heard already that they said they'll cut off our business if we do business with you on that. But those types of fear-mongering tactics only work for so long when there's an efficient market. I think we're all capitalists in this room. If there's an efficient market, it tends to win.
But we are law-following capital.
Yeah. So when we hear things like that, we do make sure that the right office at the Department of Justice is informed.
When do you think that institutional customers might be able to sign?
I think it's going to be 2019. We're really.
March, you said?
Yeah. March is when we're going to start doing a serious push to onboard. But I think around mid-2019 is when you'll see some really exciting movement on this. I mean, I wish I could share all of the details. Obviously, I can't. But there's just so many things that are just right on the horizon. It's just about us plucking the fruits from the tree, so to speak, to mix metaphors.
You know what? In our earnings call, we put up a Gantt chart kind of thing that tells you where these products was. DLR was not.
DLR was not.
Yeah. DLR was not on there because there's a few external dependencies on it that we don't, yeah. Because again, it's about getting lenders, really. That's the focus right now. Who are the big institutional?
However, that's where we've gotten some of the.
The biggest calls.
Calls wanting to step in front of the GSR deal or take part in the GSR structure.
Real quick follow-up. Does the live alpha have the multi-day or the less than one-day capability?
Yes, it does.
Less than one day?
Not less than one day. Multi-day.
Multi-day. It does. Yeah. And it really is the big issues we've run into, and this is kind of across the board for tZERO, is that the partners that we have in this space, the established Wall Street brokers, they all really use some antiquated technology that really I mean, as a technologist, I'm horrified to find out how many processes run on a batch file where it's essentially an Excel spreadsheet that's dropped at the end of the day. And that's what's keeping our financial markets alive is if someone's posting an Excel spreadsheet at the end of the day. So I mean, to me, it's terrible.
I think someone who works in the Federal Reserve is doing her job getting those 12 of them every morning.
Yeah. 12 spreadsheets and then, yeah, doing a VLOOKUP and then pasting it together. And that's how it runs. So we need, I mean, for the technology to succeed, we need things to run intraday and asynchronously. And that means a lot of times we're building things for our partners. And we're happy to do that, especially now that, I mean, the number of technologists we have in the last three months since just the last quarter, I think, has doubled. And if we go back to the beginning of the year, I mean, it's exponential growth.
When you walk through here, on both sides of this room, there are rows after rows. These are all on this side, they're all tZERO. Actually, and on both sides of the room we're in are the blockchain companies. So pretty much every row you go past is a Medici Land Governance or a Bitsy or a Ravencoin or, well, Raven's not a coin, but we have people contribute. I mean, it's not a company.
Yeah. The pivot that tZERO has really made is if we look back one year, it was a company that had primarily business legal employees and then a small cadre of engineers. And now I think we've flipped that on its head. Now it's a large group of engineers with some business people trying to give them direction. But we've had no shortage of ideas, and we have a very, very clear roadmap on our side. So I'm of the view that give us more. As many engineers as we can hire, and we're actively recruiting. We have work for them to do to push these things to the finish line. And we are a small enough shop.
The ones that we do get from the more established players, they're astounded by how fast we're able to move because we've learned all the lessons we need to on how to run an effective engineering and development shop from Overstock. We have this amazing big brother that has showed us how to do it efficiently. In e-commerce, you're working on one-week sprints, and it's about a race to get features live. You look at how it's run on Wall Street. So many companies we talk to have yearly annual releases. They do one release a year.
They run on Fortran. We've talked to people who have Fortran and COBOL. I want to jump on this for a second. One could argue about what my record is as an e-commerce guy. I've made mistakes like hitting the afterburner button this year for six months and such. But at the end of the day, I always go back to what we did against who we have been competing for 19 years on a tiny amount of capital. The reason, and if you give that credit, if you look back, it makes a huge difference to have investors come in one after the next, losing $500 million, $1 billion, and go to business. But we've survived all this. It is because of our agility and tech. And I think that our tech resources are exquisite.
And we did get a little fat on tech in retail, got a little fat on G&A. And we did that on purpose. Well, for one thing, I thought we would be accelerating to 30%, and so it wouldn't have been too fat for that. And then when I saw that that was going to cost $250 million, I pulled back. But in addition, I pretty much have been anticipating this day coming for over a year. And we have, by having hired in the developers and staff, that we can populate these businesses like tZERO with and Medici Land Governance. It's let us balance out nicely and given a huge kick to folks like tZERO that can they have been able to expand much more quickly than most companies would be able to.
Yeah. It's really amazing. We do a monthly stand-up with just the whole team, and we introduce new people, and every month, I sit in there, and I'm astounded at how many new employees we have.
And good ones. I mean, we're getting fantastic. It isn't like we're skimming the cream, but we are picking out the right people and the people who want to be there. It's also created, to me, it's given me the chance to take the retail business and, the truth is, bring in some I love the last generation of executives I've worked with in retail, but as some of them have moved on, it's given us the ability to bring in some people like Catherine and Chris. And, well, JP has always been a rock star. And Dave Nielsen back.
Yeah.
Quick question. On one hand, it seems like with tZERO, you're trying to eliminate the role of financial institutions as a middleman. But then, on the other hand, it also seems like you kind of need them to provide liquidity on the tZERO platform. So I guess my question is, it seems a little paradoxical almost, and what do you make of this?
Yeah.
Sure. So what I was going to say, I think in terms of what we're trying to do with the tZERO platform, the biggest inefficiency in the system as it sits today is actually in the settlement system, and I don't think there's anybody who thinks the settlement system is good. The time it took us to get from T+3 to T+2, three-day settlement to two-day settlement, when the technology is readily available and relatively simple to have immediate settlement, and when we've already faced the enormous, I mean, in the 2008 recession, we all saw the danger of counterparty risk, and counterparty risk goes away with fast settlement, but even in the face of that, we didn't deal with the primary problem. That's the biggest thing that we're disrupting is we're eliminating counterparty risk, bringing speed of settlement, and disrupting that ecosystem.
In terms of institutions, there's still definitely a role of institutions doing the analysis, providing the access. Investors still need to understand the issuers that are trying to raise capital in the markets. People still want their money managed by and large. There are those who want to have their security token sitting in their own Ethereum wallet they control the keys to. There're others who just want to log into a brokerage account. And we want to accommodate them, whether they want it in their own Ethereum wallet or whether they want it in their brokerage account. And so when you look at the real value-add institutions, we're probably not going to disrupt them. In fact, we're going to facilitate them. What we're going to disrupt is sort of the dinosaur settlement system that sits behind it and the institutions that are built on top of that.
Which, incidentally, the industry wanted in 1971, your industry wanted to go to a peer-to-peer electronic settlement system. A bunch of security brokers organized into the NASD in order to lobby for that. But the SEC adopted central security party central counterparty clearing with immobilization as the answer for what they said was going to be a temporary solution. But as Milton Friedman said, "Nothing is more permanent than a temporary government solution." In 1978, the government said, "This is now the solution." But what your industry actually wanted, what the brokerage industry wanted in 1971, was peer-to-peer electronic settlement. It was decided the tech wasn't ready yet. What's really happened is the tech has become ready for peer-to-peer electronic settlement.
Yeah. I think rumors of our desire to disrupt are a little exaggerated too. I mean, we want to play in a lot of the existing ecosystems. Our goal is to grind out a lot of the efficiencies. I mean, I think of it truly from I guess it's kind of a Silicon Valley mentality, but the goals that we should have are the things that benefit the investors, the things that benefit the issuers, and the things that benefit the lenders. I don't think for a second when I'm ready to retire, I don't want to go in and manually lend my own stock out. I don't for a second think that's something I want to do. I definitely want an institution to manage that for me, and tZERO is not in the business of creating a closed ecosystem.
We want to make it open so any institution that wants to can plug into it. We're not trying to create an ecosystem that we completely control. We'll have services in a lot of different areas, but we're going to allow and I would guide you to the security token ecosystem slide where we have multiple issuance platforms. So, these are going to be investment banks that want to plug in and raise money on our platform. They're more than welcome to. We don't have to do the issuance themselves. We want to create the exchange that allows them to trade. And then on the other side of that, the trading platform, any broker dealer, any retail broker dealer is welcome to plug into our system, and we'll help them onboard. So, I think people hear that we're doing blockchain securities.
Our goal isn't to completely burn the industry to the ground. Our goal is to grind out a lot of the inefficiencies that are there. And I don't think anyone thinks that the system is perfect as it is. So where are the places that are the most ripe for disruption and focus on those areas? We're doing everything. I mean, if you could sit in some of the meetings we have with the SEC and FINRA, I mean, we are really, really taking a very, very delicate approach to this. We're not trying to push the boundaries too aggressively, but there are some key areas that are very, very simple to disrupt, and those are the places that we're focusing.
We're very incrementalist, and that is, and although we shouldn't speak for the government, but in general, you can assume that the government wants to see a more incremental approach than a burn it to the ground approach, and we're good with that. Go ahead, Seth. You've been.
No, that's great. I was just going to kick it back to see if people had more questions.
So with this GSR deal coming in, you have the Tesla analyst who gave it with the valuation that might be there at $30 a share. So with that number, is there a question towards Patrick? Why did you sell $20 million worth of stock?
I didn't want to, but I had to because I earned a bunch of money, and I'm co-investing with a company. As you know, for years, I didn't take a salary. Then just because that started sounding like a schmuck, I started taking 100 grand a year. As a result of that, I both accumulated some personal debt. Then I also the board, when I believe it or not, it wasn't even a year or two ago when I was trying to get us to invest more in blockchain, and there was some opposition within the company. I started sweetening and saying, "Well, I want to. I'm so sure of these deals. I'll put my own money in." So I've put $6.7 million into the Medici Land Governance.
I've put $2.5 million into Elio Motors, and I'm working on another $5 million co-investment in something in the near future.
And we announced Patrick's need to do those co-investments as well as to sell, clear back in March. And the time came up where the contract was due. We had to put the funding in.
But let me point out, after 19 years here, I think that was my first sale other than a little test sale I did back in the days of my mission about the settlement system. So I still own, I think, about 92% of the shares I ever owned after 19 years. By the way, Alan. I understand there are four sell-side analysts here today? Alan and Tom, and who else?
Bill.
Oppenheimer.
Bill from Oppenheimer?
Matt Wilson from Oppenheimer.
What's your name?
Matt Wilson.
Kirk Woodley.
Kirk also from Oppenheimer?
Yep.
Great firm. I have great respect for Oppenheimer.
And Bill.
Bill.
Welcome.
Thank you.
Are you the gentleman who kind of organized this, or?
We organized it.
We organized it, okay.
Yeah.
Let the record show.
The gentleman that organized this is sitting right over there.
That's right.
Go ahead, Alan.
So for the other Medici investments, the feedback I've received from investors is, if the management can't articulate a value for these, how can we assign value to them? And I actually kind of agree with that. And I know it's early stage, but a lot of people make venture investments, and they make projection. And I think you would clearly help shareholders in the value of your stock if, to some degree, for some of the ones that are larger and closer, if you could potentially articulate something financially around them, I think it would be beneficial to your stock.
Yeah. So what I would say to that, I agree, and it's the reason you generally don't have public entities invested in private entities. A big piece of the challenge in providing those kinds of updates is that these are not public reporting companies, and they're not in a mode of reporting every quarter on progress and revenues and growth and user counts and so forth. And that's not the nature of these types of early-stage companies. What we can tell you is, on each of these, we do what I think any venture fund does, which is look at the market that they're looking to engage in and say, "Okay, if they win the market, what is the market worth?" And those markets are all enormous. We're not getting involved unless there is a very big market to be had in terms of the disruption.
And so then the real question is, and then the second test is, do we believe blockchain is going to disrupt this market? Is blockchain better than everything that's available there right now? And we don't get involved unless the answer is yes. And so then the question that remains is, is this company the blockchain company that's going to do it? And we can't tell you. Obviously, there's no quantitative way to prove in the early startup stage that that answer is yes. We do our diligence. Steve and team do their best to review, and Steve can comment on that. But the rest of the financial model wrapped around that is very difficult to articulate, particularly in the way that we would normally project out a public company. And that's always going to be somewhat difficult to cover.
Can I call on Rob on one of these?
Yeah.
For example, tZERO is tZERO. Set that aside. You all have your own ideas about what that could be. Can you talk anything about land governance and the potential size of this market?
Sure. I think we've seen, and you mentioned this on the earnings call, Patrick, that there are significant revenue potential, but caution that we're just getting started, and you won't see that in the near term, and I don't mean revenue, by the way, just to be clear, from the property or landholders. That's not what we're talking about, but for example, in the donor community, there's tremendous sums available there looking for opportunities to do great land governance, and then there also are on the commercial side of things, there are businesses that would benefit greatly from credible, reputable land governance records for mining and other things like that, where today they spend enormous amounts of time and are at great risk of finding the right land and property owners, so we believe there's great potential there as well.
We have, just to give you an idea, there's one project of a certain and I won't say the country and who was paying or so, but somebody was engaged to do a project for $125 million that we found we could do for about $500,000. But the kinds of money that are in this field just to get the world titled up are enormous. However, the real, I mean, in the hundreds of millions and billions and such, but in the real value that gets unleashed by land governance is in the trillions and many trillions.
And so the theory is that by being a key part of that process and having developed a system, just to put it in perspective, I think other people are sort of charging about 10x what we think we can charge in order or what it costs us to get it titled down. And we think that that's on the way down substantially. So we have a very disruptive product to bring into this field. And just the theory is that when you're liberating trillions of dollars in value, there's some way to make a shekel out of that. Then I'd like to hit a couple of the other oh, see, one of your.
Let me just respond directly to the question, and then if you want to add some color. You can see what we have, Alan, is you have very early-stage startups, as Seth noted, to look at them and say, "What's their potential versus what are they actually worth at this moment?" It's very difficult. But we do do a quarterly analysis of the value of each company. If they do a new round of fundraising at a higher value, we'll market our investments accordingly. The problem is to really do that justice is impossible, and that's what Seth is talking about. So that's just, I think, the direct answer to the question. And then the longer answer is, in each of these industries, we see a very disruptive potential. We're not investing in blockchain as an excuse. We look at the very specific places where it could come about.
If you look at Broward County right now, boy, do they wish they were voting on a blockchain! West Virginia did, though. All the mobile votes and military votes from overseas that everybody's whining about, "Did the post office delay them? Did they not get there in time?" And that's the big fight in Broward County. In West Virginia, they all voted that way. And they can do a recount in probably five minutes. And they can tell you how many people voted. They knew immediately.
It's cryptographically secure.
Yeah. And that's Voatz. And so you can say, "Gee, how much is Voatz worth?" And I'll tell you, "We think it's worth what we put into it for sure and far more." But to really put a number on it. It's going to be really a challenge for me, right? Now, the thing I have to say, I like the story. It is a very likely winner. But to give you a number every quarter and say, "This is what it is," is going to be a real challenge for us. I hope you understand why.
But in that particular case, there's two companies doing blockchain voting. One is Voatz and one is Votem. And we have a major and a minor investment. We have a major in Voatz and a minor in Votem. Other things like that. I want to point out like VinX. Wine is $300 billion a year. At the upper end, the really super premium stuff is $8 billion a year. There was a TV show, 60 Minutes type. I think it was about one of the Koch brothers. He was a big wine lover. And he's got this big cellar full of wine, and he heard that some of it was fake, and he hired some private detectives, and they tracked it on down. And about a third of it was fake. And what they've discovered is at the high end of wine, a third of what you're buying is fake.
And that's the $8 billion slice that's the super premium. That permeates, I understand, much of the whole $300 billion industry of wine. So creating a blockchain is such a perfect solution to solve that. GrainChain, our investment in GrainChain, one of the fellows in Texas. Again, we're talking about this massive multi-hundred billion dollar market. And then tZERO, I'll point out, I love quoting Bob Greifeld of NASDAQ, who said last November that 100% of the stocks and bonds on Wall Street could be tokenized. And in five years, you'll see 100% of the stocks and bonds on Wall Street will be tokenized. That means that the system as it exists gets deprecated. What we have in tZERO is the alternate system. And there's like five companies. We're one of five companies doing it, and we're in the lead. Steve?
Before he leaves, the supply chain, the two that he mentioned of VinX and GrainChain investment, I want to make clear that the other thing we're doing is we're being really deliberate about how we attack these things. If you look at IBM and Maersk have done this really neat pilot with Walmart, three really big players. And they're looking to put blockchain into supply chain and really make it work. One of the challenges they've had is it's such a big you're talking about the whole world now. And the network that's required to be built is really enormous. And so as we analyzed it, we thought, IBM and Maersk, they're the right guys to do it on a global scale. But some little startup that we invest in isn't going to be that company.
What we've done is we've taken really narrow verticals and GrainChain's and existing supply chain solution for grain elevators and in helping farmers get paid promptly within federal regulations and across borders. The thing that's very exciting about is the whole network is all involved right away. With VinX, it's a much more narrow industry rather than having to build a network that's global. We're taking, instead of looking at the whole world all at once and trying to swallow it all, trying to boil the ocean to do another metaphor, we're instead saying we're going to take it in very narrow pieces that they can win. That's what I like about most of ours is we're looking at ways to they're not just sort of casually, "Let's throw one into here.
Let's throw one into there." We're really thinking about the industry and what will make it work. Sorry, I thought because we're mentioning.
Go ahead, Alan.
Oh, sorry.
Yeah.
[audio distortion] You mentioned earlier that you got the infusion of capital, and you hired a lot of engineers to really work as hard to get it to happen. I had been thinking we might see some trading or issuance maybe by this quarter, but now it's first quarter of 2019. Can you give us a little more color or a deeper sense of why that slipped a little bit? What needs to be done to get from here to there? Are you feeling any outside pressures from people who are threatened by this business model? How certain do you feel about 1Q?
Yeah. So.
[audio distortion]
Yeah. Let me take a point on that that I had heard there was some confusion there. On the trading in the tZERO token, it is moving to Q1, not because of any substantive delay in our ability to do Reg S trading, but rather because only about 10% of the token was in the hands of Reg S holders. And so rather than do a bunch of work to get 10% of the tokens trading and then have an illiquid market with very little supply in it, we instead made the focus on a solution that will get Reg S and Reg D trading as early as possible.
We moved the solution and the system that we're going to be using in order to do the initial release and the first trading on the tZERO token to one that will allow the Reg D buyers, which is the overwhelming majority, to start trading in January versus them waiting until October.
So the Reg S buyers are getting it two months later than the earliest case they could have expected they're getting to trade. But the 90% Reg D buyers are getting it eight months earlier than they expected. And it was a way it was a path with no regulatory risk or the least regulatory risk, where we did see a path to get it trading in November, but it had for the Reg S investors, but it had some modest regulatory risk. So we opted to do it this way. And from what we've heard from the international folks, they've actually been appreciative. They're fine with it. And I wrote a letter, a gomennasai letter, an apology letter, and the Asians accepted it. And at least for the 90% of investors who are domestic, this is good news.
What for the non-accredited investors to trade? What exactly are they doing from the SEC and what?
It's really just following the SEC rulebook. That's the only limitation on non-accredited investors. At a minimum, we have to wait 365 days from the day of issuance.
Once it gets trading on our, say, January 10, which we may on that for the Reg S, Reg D, once it trades for one year, it then non-accredited can buy it.
It's actually after issuance for a year, so.
Yeah. So it's one year from issuance, which was in October.
So what we did, I mean, the way you can think about what's happened in tZERO is we accelerated the timeline for issuance. So the thing that we delivered before we were initially planning was the actual issuance. And the reason why is what we just discussed. There's a lot of events that are tied to issuance that allow for secondary trading and allow for liquidity, which is actually the goal. So we kind of pivoted away from a plan that really involved, "Let's just get it to market as fast as possible, even if there's only a handful of people that are able to trade it," to something that's a more holistic approach. So we want to start with a healthy market. So that's really why we've seen the delays.
I'm not concerned about the delays because I think when we go live, it'll be a much healthier market because of regulation. And all of the things that we're doing now, all of the potential delays that we see now, has nothing to do with technology. It has everything to do with regulatory needs. So I mean, again.
The regulators don't like you blaming things on them either.
Yeah, well, no, no. It's not. I don't think it's that we're going to slip. It's just that we have to make them feel 100% comfortable with it. We changed our strategy to do something that is a much, much lower regulatory risk. We don't want to do anything that's kind of outside of the norm with this because it is just the security being traded. Actually, the blockchain part of this is somewhat insignificant to what the market actually looks like. It's just people buying and selling. We're protecting investors the same way they're currently protected. The blockchain part is just a more efficient way to do clearing and settlement.
And by.
I'm sorry? They don't need to be listed.
No, by the regulatory delays, he doesn't mean a human regulator sitting there saying, "This is going to trade later." He means the windows under securities laws, under Reg D and Reg S, and the conditions under which they can trade. The rules which we are following are rules that, one, make it more secure and right down the center of the regulatory fairway, and it's really just following those windows that are laid out in Reg D and Reg S that are setting the timeline.
Yeah. Keep in mind that tZERO itself, even though owned in large part by Overstock, is still a private company. And because we don't do the same reporting that Overstock does, we have a lot more limitations on when and how trading can be done. And it's just rules that have been around, honestly, since 1934 and 1933, the background. And we're just complying with those rules.
But once we get an exchange live, those rules change as well. And we have this deal with BOX that we're quite fond of that because we're quite fond of the people there and BOX and this whole idea because, as you know, I think I said this earlier in the year on an earnings call, we did try to buy an exchange that was in the market. And to be honest, it got away from us in a crazy way. And BOX was a wonderful merger of interests. It's a wonderful merger of interests. So once that gets live and it becomes an exchange, our technology's part of an exchange, there's an even broader set of participants.
So can you talk to them a little bit on the issuers' plate for the tZERO platform? Based on our last conversation, I think you guys were estimating around 60 token offerings for 2019. How has that grown? And what does the timeline look like around those actively trading with the exchange going live and the BOX relationship?
So we have a number of people lining up. Much of the timing in terms of when they trade is going to depend on where they settle with their lawyers in terms of what exemptions they file under. Reg D, Reg S, as well as there's some other exemptions and some other quirks even within Reg D and Reg S that can dictate trading timelines. We feel very good about the pipeline we have coming into 2019, and it's growing. In fact, we have a lot of interested players coming out of Asia who are interested in doing issuance in 2019 as U.S. securities. And so that pipeline is actually growing nicely. The timing of when each of those will trade is going to depend on the decisions they make with their lawyers on the exemptions.
Do you have a sense of the general pipeline for 2019, though? Has that 60 number grown? Are you still seeing demand now that the ICO space has kind of really cooled off for more?
No. I think it's actually growing as the ICO space shifts. That before, when the U.S. first cracked down on ICOs, you saw a lot of fear in the space, but then you saw sort of a mass migration out of the U.S. and into Asia and the Caribbean. From there, however, even within, say, Singapore or Bahamas, where you may be able to do an ICO and there's not a lot of risk in it, they're seeing the value in having those issuances as a registered or exempted security because that adds an extra layer of protection for one. But two, this whole ICO craze was bent around this contortion where you're trying to make a security offering, not a security and more like a utility, when you really wanted to have elements of a security. If you want to pay a dividend, it's a security. And that's fine.
Why contort yourself into trying to call that dividend a utility instead of just registering it as a security and operating within the fairway of securities laws? And the protection that gives companies, as well as the legitimacy that it lends to them, is immense. And so we're starting to see growing interest out of those markets that had become the ICO markets towards migrating those ICOs into registered securities.
Yeah. Yeah. By the way, I should be clear. We've had somewhere between, depending on what you count, 2,000 and 12,000 contacts of people who want to issue security tokens. But when you actually vet them, from 2,000 to 12,000 or some just wacky ideas, 2,000 real companies, but there are 60 that we think and things like the Elio car. But beyond that, there are established companies that we think are, for example, in the real estate industry, who are seeing how a whole bunch of functions of the REIT world can be built into security tokens. So we're not even counting those kinds of streams of issuers.
And those 2,000 inquiries, can you give us a sense of month-over-month? You're seeing stronger demand now, or are some of those more recent? What does September look like for?
It really is like when we started off. It's really since we announced the security token last December, people, it started trickling in.
Yeah. The way to think about this, I don't think you should necessarily focus on the number of issuers. It's the volume of capital that we want to raise, and that's the viewpoint we have. If we just wanted to go after the largest number of issuances, we could do hundreds of them a month, but that's not our intention. We want to really focus on established companies, companies that have strong financial reporting, even though they're not public yet, that they've actually been doing their bookkeeping correctly. We don't want to replicate the ICO market. The ICO market was a little too Wild West. Investors were truly not protected in it. The reason they created a security but didn't call it a security is because they didn't want to protect the investors.
They wanted to be able to call grandma and say, "Give me all your money," even though her total net worth is $200,000. So we're avoiding that. And I think one of the things that we find unacceptable is to have someone do an issuance on our platform that goes belly up within a year, which is what a lot of these companies that are doing ICOs are doing. So we want to focus on due diligence and finding the right companies to do it. The stream of leads that we have, I mean, I'll tell you, it's healthy. The ICO market had zero reflection.
That's what I've been trying to get.
Yeah. I understand you're going to be selective, but the confidence interest is still there.
It's slowed it down, but the number of qualified and actually legitimate leads we have has been consistent, if not improving, from this, and then the second side of it is we don't necessarily want to do issuance for everyone that's trading on our platform, so there's a lot of companies out there that we have strong relationships with that are doing issuances right now. If you just look up security token offerings on Google and you'll see how many of them are happening. There was just a hotel in Aspen that did one. They're going to need a place to do secondary trading, and we plan on supporting those, so that's another path that we have.
Patrick, you had mentioned there's five other major competitors in this space in terms of this STO, probably trading space. Who do you view as those competitors?
Patrick, before you answer, can you repeat the questions so they come in?
Oh, sorry.
Yeah, so the question is, who are the other competitors in the space?
How do you guys stack up, and what's your competitive advantage?
Yeah. And how are we differentiated? I can feel that there's a handful of people out there who have acquired an ATS and are in varying stages of getting them approved or available for trading. How we see ourselves competitively benchmarked against them, I would say there's a couple of them that are highly specialized in terms of chasing specific types of assets. For example, securitizing art, layering up and building essentially an art derivative and then trading the derivative on art or a non-fungible physical asset. There's definitely a market for that. It's definitely a valid application. It's not in the fairway we're chasing.
It's huge, actually.
Yeah. Yeah. It's a great market. But I think when you look at large at how we're differentiated, I would say there's three main axes. One is tZERO is not looking to run a broker-gated market. So in its nature, an ATS is a brokerage with a trading platform sitting behind it. And the people who make money on an ATS make it in brokerage fees. And you can actually think about that in a lot of the traditional crypto markets where, for example, Binance is successful because Binance has 20 million retail clients in their brokerage. And it's not really the exchange that generates the profits for them. It's the 20 million brokerage accounts they have. And anyone who has 20 million brokerage accounts can make a bunch of money. And the exchange is almost a secondary feature to the 20 million brokerage accounts.
We're not looking to be sort of a brokerage-gated or brokerage-exclusive environment. We'll provide brokerage services in order to help get it moving and off the ground. But ultimately, we want to integrate with as many brokerages as are interested in doing so because we want investors to be able to park their capital where they want it parked but still trade in these markets.
And so, to do that, we're doing that by. There's just APIs, and brokers can download a package and integrate. Can you explain how easy we're making?
Yeah. But essentially, SpeedRoute is already acting as an institutional brokerage to help route orders for other major equities traders in the U.S. in the traditional markets. So if you have a Bloomberg or a DESA terminal, you can plug into SpeedRoute and route trades through them, and they'll route to the best source of liquidity. We're trying to keep it as seamless as it is for you to onboard in SpeedRoute for traditional U.S. equities from a technical standpoint to be able to onboard to trade in crypto securities. So the second key point of differentiation is we're not playing strictly in the ATS world. We reached the ATS world and started trading crypto securities on an ATS years ago. And we're really the first ones to do it in both bonds and in OSTKP in the Overstock preferred share.
But we recognize the limitations that exist in an ATS. There's a number of sort of freedoms that come with ATS exemption, but there's also limitations that are placed on you when you're trading through an alternative trading system. You can't publish market data. You can't publish listing standards. There's all these other limitations wrapped around it. And so we're also immediately moved into working towards having a real national exchange for security tokens via our partnership with BOX.
I mean, again, I used to know these numbers off the top of my head, but it's something like stocks around the world, equities are $80 trillion, and bonds are $100 trillion, and real estate assets are $200 trillion. I mean, those numbers, don't quote me on those numbers. A few months ago, I looked them up and found them. But the point is, you get to the better part of a quadrillion dollars' worth of assets can be tokenized. Art, it was amazing. I forget how many tens of but it's like I think it may have been on the order of equities in terms of its total market cap. Anyway, you get to the better part of a quadrillion dollars' worth of that market cap valuation. If Bob Greifeld of NASDAQ is correct, can be and should be tokenized, and I think that he's correct.
It can be and should be tokenized because you're going to find 80%-90% of the friction costs drop out of the way. You'll have better markets that are better policed and everything by regulators with immutable data, atomic-level information and such, and that are not subject to mischief. So you're talking about something that may be on the order of a quadrillion dollars of market cap or should be end up being tokenized, and it's got to trade someplace. There's five places. There's four competitors I was thinking of. Who are they? Circle, Goldman, Coinbase? Say again?
OpenFinance Network.
Yeah. So there's a handful of them. The last axis of differentiation, though, really lies in what we're trying to do with building out a two-sided network that we're really trying to close in on building in, as we were discussing before, a premium issuance pipeline because as you bring in good assets into a market, good assets invite liquidity and invite investment. And so you can think of it the same way as, for example, eBay trying to build out its auctions platform in the early 1990s. If you have the best listings, the people who are bidding are going to come for the best listings. And as the bidders reach a premium level, that means the auctions are going to get bid higher, and so the best listers are going to chase those bidders. And it becomes a virtuous cycle that spins itself up.
Liquidity begets liquidity.
Exactly. And so when you bring in those high-value assets, which is really where we're focused, whether it's in the real estate space, assets that have very concrete and well-understood value, whether it's in things like our own security token that are in a very easy-to-understand preferred share format with dividends attached, these kinds of assets invite investors of a premium quality. And particularly when they're able to move on to a lit national exchange, there is no brokerage gate. Everybody's already plugged in, and it's very easy to get involved in trade. And so liquidity begets liquidity, and it builds out that two-sided network.
I'm going to add one more element of differentiation, which may sound like chest-beating, unless you're in it. But other than having a CEO who does things like hit the afterburners and such from time to time, again, back to my point of the reason we're around and have gone so much farther on so much less is, I think, because of our tech and our science people, our engineers and such, and how we learn to operate. So we've been competing with Amazon for 19 years. They went through $25 billion of capital. And last I checked, their retail business still isn't profitable. And all these other people who came and went. Well, we are taking that very small but elite. I mean, we skew towards senior engineers in this company. We have 300 to 700, depending on what area you're counting. But we skew disproportionately towards senior engineers.
Having taken that experience and that of 19 years of competing in the most hyper-competitive environment there's ever been in business, Silicon Valley e-commerce, and taking the skills that we've acquired over those 19 years and staffing out these different product teams within tZERO to go, pardon me, but don't go compete with people who are dealing in Fortran and Excel spreadsheets. It's just hilarious what they see they can do.
Yeah. To put a point on that, blockchain is a new enough space in the technical world that there are very few blockchain engineers who are also enterprise engineers. And so the real challenge is to take on something like the national securities markets. The fact that, one, we're starting with a broker-dealer that already routes billions of dollars of securities and in a given day may do up to 2% of U.S. equities in routing means we're starting, one, with already existing scale and expertise in capital markets. But two, we added on to that a team of enterprise high-level engineers that also have blockchain expertise. And the reality is there just aren't that many of those in the world. And so bringing those two assets together means we're kind of uniquely qualified to scale.
Particularly as we start hitting the throttle with international expansion together with GSR, that's a very unique asset to have from a technical standpoint so that we can start building out in parallel across three and four markets.
This is what you will see on the way out or on the way in. These rows going out here are a punt, and these rows going out there are a punt. They're all high-end senior blockchain folks. I've never seen the accumulation like this anywhere in the world other than in Shanghai and Wanxiang Labs and in ConsenSys. This accumulation of serious blockchain talent, and anyway, stop there. Did you want to add something, Greg?
No.
Okay. I thought I saw you stirring.
Yeah. Oh, well, going live with BOX and having these high-quality issuers, is that more of a second half of 2019 phenomenon? What is the holdup? Is it more getting a lot of a certain number of these guys?
Getting our token live.
With BOX?
Is that the question? Yeah. So the question is, when does BOX go live and what's that process look like? With BOX, there's a series of steps. There's getting a rulebook published, getting the listing standards set and established with the SEC and FINRA. There's a couple of steps along the way in that process with BOX. We feel really good with it. We have a great cooperative process with FINRA and the SEC. BOX, as an exchange, also has a really spotless regulatory record.
And as an exchange, it gives us such an advantage because a lot of other people who are trying to do this are in something of a black hole. But BOX, because it is an exchange, they have the right to do things like submit a rulebook, and in X number of days, the SEC has to tell them, "Yes or no, they have to rule." And that means that we're not in a black box. We're not in the mist by being a BOX, and everyone else is.
And so that's really the course with BOX, is working through those listing standards and rulebooks and so forth.
I really think the best way to understand our timelines is to really get a good understanding of securities law. You'll find most of our timelines in there. We're not really public with them, but every process that we've outlined has rules created around it, and they have timelines created around it, and we plan on being as tight to those minimum timelines as we can be, so an understanding of administrative law and an understanding of securities law, and you can pretty well write our timelines.
Does BOX need to follow up on 19b-4 to trade these types of securities?
I'm actually not on the BOX team, so I don't know the nuances of that. So I don't feel comfortable answering that. I could get back to you briefly.
The French rule changes are applying to Bitcoin ETF, for example. They need a rule change in the way it's listed.
Yeah. Yeah. We are applying a rulebook change, but I'm not sure of the nuances on that one. Yeah.
The other thing I would say in terms of premium issuers, there are those who are not ready to be public reporting companies yet, but think of them as sort of Series B and Series C kind of venture companies. They are mature. They have real business operations. They have real revenues. They're not ready to go public yet. But for companies in that stage who want to do security tokens, they may do their initial issuance on an ATS, but they also know they're going to be public in relatively short order. And so for those companies, they may issue on the ATS in the first half of 2019.
There are several of them that we're speaking to that are in that kind of scenario but that are interested in, as the company matures, being able to migrate that token into the public markets once their company is at a stage where it's ready to become a public reporting company.
Have you already funded your part of the BOX JV?
Yeah.
Yes, we have.
$10 million.
The question was, have you funded your part of the BOX venture?
Yeah. And we already put the capital in, $10 million.
That was back in Q.
Thank you, Chris.
You too.
Someone's paying attention.
We can turn away.
Did you have a question?
Yeah. I just.
Kirk?
It seems like there's so many little gems in the Overstock and the tZERO, and one of them that we talked about briefly was Bitsy, and I had a chance to look at the app, and it looks great. I know there's points of differentiation with Coinbase, and it occurs to me that one of the things that we don't talk about much in tZERO is the crypto exchange. So it seems like there's four pieces at tZERO, maybe more. If I'm missing one or two, please let me know. But it seems like there's security token offerings, which Patrick has indicated, maybe a couple hundred trillion in size. There's DLRs. There's settlements, and there's crypto. And I'm curious as to when you think about or you arrive at a $1.5 billion post-money, you got there somehow. Were there any numbers put to any of those four areas?
Are there other areas within tZERO that were missing? Because to Tom's point, the question is when you think about all these little gems within the company, it seems like the market just doesn't get it yet. There's a lot of value here.
Yeah. So the question, to repeat it for those on the phone, was, it seems like there's a lot of little gems in tZERO and in Medici in crypto, in issuance, in brokerage, in trading fees. And they were asking about crypto exchange and actual trading of cryptocurrencies and if we were baking in the anticipated revenue there and also if there's any other revenue sources that weren't included in that list.
And just to add to that, because I see numbers around for Coinbase that are maybe an $8 billion post money on the last round and 20 million accounts or something like that. If you have the ability to plug in many broker-dealers in tZERO and really jump-start that, then it would seem to me that the crypto value, which really doesn't get talked about much, that piece of tZERO is likely not valued by the market to the extent or talked about to the extent that it should be.
We have revealed on slide seven and slide nine in the earnings call that we are doing a crypto exchange and even what our timeline is on it. I had an interesting experience this Q2 and Q3 being over in Asia doing this roadshow, really being reminded of how tZERO already has one of the great global brands in the crypto space. It really does. It's kind of amazing to me to be in some place in Seoul, Korea, in some backwater cafe or something, and there's all these crypto heads there that I mean, tZERO has this global reputation. And we've done that without even having the product because we were focusing on all the regulated stuff, and that's slow going.
But yeah, when we introduced this crypto exchange, slide seven, I think that having worked with this e-commerce crew that have moved over into tZERO, I'm highly confident they can develop a customer-oriented set of trading apps and crypto system and provide better customer service and do all those better mobile apps and such that we see in the market already. So I agree. No one's even asked us a question about the crypto exchange, but we've revealed it's coming Q2.
One of the really powerful assets there, when you're routing crypto, there are huge spreads between various pools of liquidity in crypto. If you think, and you come from sort of the classic Wall Street ARB game where you find mispriced between one 10-year bond and another 10-year bond. So you long the underpriced one and short the overpriced one. You can extract basis points in the middle, and it's essentially free and completely de-risked. Those ARB opportunities in crypto are massive, and it's because the routing is so inefficient. The technology at the core of what we built at SpeedRoute is a routing business for major brokerages of America. More than 150 household brokerages do their routing and execution through tZERO and through SpeedRoute, our subsidiary brokerage.
If we can route shares of Apple more efficiently than the market and more efficiently than, call it, $100 billion funds and brokerages out there, we are very confident that we can route crypto on tighter spreads than what exists in that market today, and so we think there's a really big opportunity just in superior routing and execution and applying that technology we already leverage to sort of beat the market in U.S. equities into these sort of much bigger and sloppier spreads.
So people who trade their crypto through us, people who trade their crypto through the exchange we built will be availing themselves of that underlying routing technology, and we think getting significantly better execution than anyone else in the market now provides.
Yeah. As far as the valuation, so there's really five areas that we've talked about. There's the issuance side. There's the exchange side. So that includes ATS and anywhere where a security token is traded. There's the trading platform. So think of it as a retail broker-dealer for investors. There's the DLR platform, and then there's the one we've been talking about, which is the crypto exchange. So there's five areas. Any one of those five, if we can succeed at, I think we justify the $1.5 billion post valuation pretty easily. I mean, you can look at other companies that have done those. It's a pretty ambitious. It's a lot of things that we're going after, but we've staffed up to go after those and confidently go after all five of those areas.
And I think at the end of the day, if we are sitting here 20 years from now reminiscing on what we thought today versus what actually happened, I think the thing we'll find is there's going to be a lot of winners in this space, and people are going to take different roles. There's plenty of room out there for a lot of broker-dealers to exist. They're competitive with each other. They're going after each other, but there's a lot of money being made all around. And I think you're going to see the same thing in this space. I think the big advantages that we have is with having an open system where we're inviting other people to come in. That tends to be the people who win these games. When someone else doesn't have to build it from scratch, if JonesTrading? That's a law firm.
Jones Trading.
Yeah. JonesTrading. Thank you. If JonesTrading wants to get into the space, all they have to do is plug into our system. I think that gives us a huge advantage. And the question here is, how big is this market going to be, and what percentage of the pie are we going to get? And I don't see a situation where we don't have a significant piece of a very large pie. So I think $1.5 billion as a shareholder of tZERO, I think that's just scratching the surface.
It's a shame to sell that little jewel tZERO at a $1.5 billion valuation, but we'll do it because we need some capital. I think we're selling too cheap.
Yeah. And actually, the only reason I think as employees of tZERO that we feel really good about, I mean, I don't want I think the shares that I hold are valuable, more valuable than on paper right now. I'm comfortable diluting with GSR because of the opportunities they bring us. What are the things that are going to get exponential growth? And I really think that partnership is one of them. I'm thrilled. Initially, when we talked to them, there was a lot of opportunities. The more time we spend to them, the more, like you said, gems that we find. There are just so many opportunities out there for us to go after and opportunities that fit into those five pillars that we've discussed. So it doesn't require building a brand new team. It's just plugging things into our existing technology.
One other point that I would put on that. When we did our tZERO security token, Nariman made the point, "We're not trying to run a closed ecosystem here. We're trying to make it open." And while we have business in issuance and business in brokerage and so forth, our goal is not to own those sectors of the business. It's simply to facilitate adoption in the ecosystem. We put a ton of money into the development of the tZERO token. I think without a doubt, the tZERO token is the gold standard for security tokens today. The features that are in it, the forethought that is in it, the design that was in it.
And we released that. We open-sourced. Released it open-source back last month.
But we spent a lot of money, millions of dollars, into developing and designing that token to make it what it is. And the reason we open-sourced that tool that we spent millions of dollars developing is because now that it is open-sourced, the open-source community is adding more value to it. And so we don't have to spend the next several million dollars. If we were building a token and all we were ever going to do was issue our own tZERO token on it, we would not have invested so much in it. We would not have over-engineered it to that degree. But we knew that this was going to become the base infrastructure that would help enable and grow this market.
We over-invested in it and created that gold standard and then open-sourced it so others could develop on it because we believe it's really going to drive this market.
And now any company that issues. I mean, I think of issuance. It's similar to how issuance works now in private markets. Any company can issue shares on their own, but it's complicated. It's difficult. You want an intermediary to hold your hand, and you're willing to pay to have an intermediary to hold your hand when you want to raise funds. So we want to be one of the facilitators of that. We don't, by any means, have to be the only one. By releasing our token standard and making it open-source, anyone who issues on our token standards, it's plug and play into our system. It can immediately start trading on our platform without any work because of the coding standard. It'll meet that. And even if they make modifications to it, it'll still work because of the underlying.
Backwards compatible.
Yeah, backwards compatible.
Slide seven anticipates that these different issuances.
It's up on the screen for those who are here.
Yeah. That these different issuance platforms, I believe you will see these different companies of which you are reading, make sure that the tokens they issue are consistent with the standard so they operate on our exchange. Or I think that our exchange's standard is sort of de facto the global standard just by us having announced it. And we're already hearing everybody understands they're going to be building everyone but one. There's one group out there in Gibraltar who does want to make a last, I heard, they want their system to be exposed. They want it to be the Apple of security tokens. We want security tokens to be interchangeable all over the world, and they will be. Okay. We have 10 minutes left. Why don't we keep going, sir?
Yeah. I would like to better understand how you think about managing some of these constraints in terms of investing real capital and the human resources to build out these really promising technologies in the ecosystem. I guess what I'm missing is just some sort of longitudinal study as far as this year versus last year of how you shifted investment from business and legal resources more towards engineering output. How do we think about maybe some of the product development pace that we can expect to see?
Are you speaking of overall or tZERO?
I guess overall, but I guess specifically to tZERO.
In tZERO, up until last year.
The question is.
Sorry. The question is, how do you manage your resource constraints in terms of tZERO development and product roadmap and so forth? And I think the answer there is, up until last year, we were highly resource constrained in terms of technical resources within tZERO, and so we were developing serially. And in part, that made sense because the regulatory world still had to move along at a relatively slow pace. Through the period from tZERO's inception until the release of OSTKP and our first blockchain bonds, the regulatory process was really the long pole in the tent, not the technical process. And so we were able, from a technical standpoint, to develop everything serially. You develop the trading platform to live within the alternative trading system, the clearing and custody, the technical integrations back to introducing brokers.
All of that could be developed in a serial fashion because the regulatory haul was going to be longer than the technical haul. Now that we've started to sort of reach critical mass from a regulatory standpoint, and now that the market is starting to move, we injected resources largely funded through the proceeds of our security token offering to radically increase the size of the technical resources available so that we can parallel track all of those processes and develop improving capabilities across all of them. That way, we reach the market with viable, good products as the issuers are coming available and as the lockup periods on tokens being issued are expiring and so that we have great products to offer on all of those fronts: on issuance, on brokerage, on trading throughout the different nodes of the ecosystem.
Do you mind if I put a footnote on that? How I'm thinking of human capital is we do understand that we have this multi, multi-billion dollar or bigger opportunity on tZERO, and we don't want capital or human talent to be the constraint. I actually feel like we used it, though, to do something win-win. I actually, although we have losing like Saum to tZERO, seems like a big deal. But on the other hand, it was really, I feel, time. And I'm sure Saum will mind me saying this, that to go out and have gotten so, for example, we lost Rob. Greatest CFO I ever worked with wanted to go off and do this Medici Land Governance. He was giving us 10 years, and I can understand. I'd love to go do Medici Land Governance. It's going to change the world. It's going to change history.
He wanted to go do that. So we got Greg. Greg is a huge addition this year. We've already talked about his background, but huge addition. We've used this opportunity while also moving up people and reaching within the company and creating this new org structure that some of you see up there that we feel is like the ideal org structure for retail. We've also brought in these real industry heavy hitters like Chris, like Kamelia, like Catherine. So I don't feel like that it's a loss to retail. I actually feel like we've taken it as an opportunity to find people who are more specialists and not like Seth is the smartest guy I ever met. I met Seth 12 years ago on the Senate Judiciary Committee. He was a staffer.
He was coming out to law school, and we gave him a summer job, and we eventually talked him out of going to law school. He would be the smartest guy I ever met, but isn't it nice? And when Seth needed to teach himself SQL, he taught himself SQL and machine learning and all kinds of stuff. But now Seth has moved on to a different position. We have Kamelia, a PhD in machine learning. Take that as a microcosm of what's been happening throughout a lot of the executive staff. And in the meanwhile, freeing up, it doesn't that frees up Seth to work on other things like these things you've been hearing about today.
If I could follow up, just going back to tZERO, can you give us a sense in 2019, whether you index it, or just how many more engineering hours can we expect to be put into developing that platform versus what we saw in 2018?
Yeah. So if you look at the engineering hours put in in the last quarter, they are more than double what they were in the second quarter. And so that gives you an idea for the growth that came in.
2x to 3x, I mean, just based off of that?
Yeah. Based on the run rate, yeah. We'll be on a 2x-3x path.
I think even more.
I think the way I like to think about it is when the day that I don't feel resource constrained on the number of technologists that I have is the day that we're starting to run out of ideas. I don't see in the next decade that I will ever pass up a good engineering candidate. There's always more to do. There's always ways to accelerate, and we always want to do that. There's no point that once we have 75 engineers, we're satisfied. We have ideas. We've talked about some of the ideas, and those are the things we've narrowed it down to. There's dozens of other ones that I could spin off into a standalone business, and it would be worth $1.5 billion at least that we've talked about.
That's what we're finding. We see ideas within tZERO, just individual little ideas that are billion-dollar ideas themselves.
Yeah. So there's no limit to the things that we can do here and the ways that we can accelerate that I see in the foreseeable future. So the plan is to keep adding resources. We're not at a point, though, and we never want to be a company that just hires people because you need a warm body. Again, we're looking for the top talent. What we found is if you hire, and the same is true for Overstock, if you hire a mediocre or a subpar engineer, you end up taking away from the team rather than adding to it. You end up having the senior guys coaching them. So the most finite resource, I think, right now is the number of engineers that we have, and everyone's trying to poach from each other. And I don't see that stopping anytime soon.
How many engineers do you have on the tZERO and the non-tZERO part of the company?
I can answer that.
tZERO has about 60.
Repeat the question. Number of engineers.
tZERO has about 60 engineers. Medici has. Do you know the way it's around Medici?
I think we're close to 60 in Medici.
Yeah. Medici has about 60 as well and retail has about 350.
There's software engineers and then another couple hundred if you're talking about.
Data engineers.
Data scientists, network engineers.
ETL developers.
700 engineers altogether in retail, but about half of them are software specific.
And I would just emphasize the point that I know those 60, and those aren't a normal 60. They function well above that count. And a lot of our engineers do, but I know that the senior people we brought in, the way they function, that that would outperform, I think, teams of 100 or 200 other companies.
Yeah. It's a joy to work with the engineering teams that we have in Overstock in general and in tZERO in particular because the kind of people that are interested in doing blockchain development, they tend to be very passionate, and they're all self-taught on blockchain because there's no one to teach it right now. It's only been around for so long. So they're very passionate, and they do it because they love it, not because they need a paycheck. So you just get.
Yeah. A lot of these guys, some of them are guys who have made millions or at least one case, a couple tens of millions in all their blockchain crypto stuff, but they're in here every day coding.
Yeah.
Can I add one thing on that? What's great and unique about the team we have here is we have this really nice mix of blockchain enthusiasts who are self-taught and exploratory, but maybe don't know how to build a hardened super secure system at an enterprise level, and these guys have been working with the Overstock website for years and know how to do enterprise-grade software. And so when you mix them in a team, it makes for this amazing synergy. It's really cool to watch you get one of them with just all these crazy ideas and another guy who actually knows how to build them. And you put them together, it's really impressive. That's one of the big dirty secrets, I'd say, of the crypto industry is these ICO companies, so many of them are finding out.
It's a husband-wife who wrote a term paper one weekend, and they raised $100 million in an ICO. And now they're supposed to be doing the stuff with the capital that they promised to do in the term paper. And it's really hard to get the blockchain talent. It's the big constraint in this industry. And we're hearing about a whole bunch of them who are just finding they've got this big pot of cash, and they're not able to deliver any of the things they were talking about. And we, on the other hand, because we started going, is it almost five years ago? Yeah. It's coming up on five years ago, started taking Bitcoin. We knew there wasn't going to be much Bitcoin business.
I didn't expect that to take off, but we became such for people five years ago who wanted a corporate job in blockchain. We were pretty much the only game in town.
How many years now? 2014, I believe.
2014, so four or five years we're coming up. Yeah. Anyway.
2018. Yeah.
Being a lawyer, not. Oh my God. Oh my God. Oh my God. That's why I'm not in the cast.
Being a lawyer, not in that position.
Yeah. I'm thinking about the future. Why don't we take three last quick questions?
I think it's ready for all of you.
So it sounds like the pipeline land is significant. And to Marion's point about being resource constrained, I just wondered if it might be possible with the World Bank or some of the other countries that you're partnering with to obtain some sort of non-dilutive financing from them to push that business forward?
That's interesting. On the Medici Land Governance, you mean?
Yeah.
The question is, could we get some non-dilutive capital to push that forward? I think we're doing the first couple things for free because they're so cheap, and we're getting our product refined. But after that, we'll be charging. And like I said, I just put in $6.5 million. So other than that dilution, which the board wanted.
Another thing to understand is capital is not the constraint on getting additional resources. It's not at all the constraint. There's a lack of talent out there. You really have to work to recruit. We hire outside agencies to help with our recruiting. It's a constant struggle to stay on top of it. And in Silicon Valley, where a lot of the talent is based, they have some places about eight months average at a place of business before they get poached by the next one. So it's just constantly playing in that field. So it's not at all a capital constraint.
Our people are not getting poached.
We actually have very good tenure.
Yeah. We have insane tenure for engineers.
Any last question?
So you mentioned on the call last week recruiting for President of Capital Markets. Could you talk about other things that you're going to be doing or contemplating doing to strengthen the team and the talent base that is not engineering or development or regulatory? Because these could be and should be big businesses with sales and growing cash flows.
We are seeing incredible applications now to tZERO. Managing directors at really premier Wall Street institutions are applying to us, but Marion, you're closer.
Yeah. There's quite a few positions. We agree that there's a need. I think we've been talking about technology in part because I'm the person in the room, and I focus on technology day to day. But we're recruiting on the other side just as aggressively as we're talking about the technology. We agree there's a huge need for sales, a lot of support staff that we just have to fill. I think the area that we saw the most immediate value was technology. But now that we've got our security token live and our platform is pretty much ready to go, it's now about building out the back office, which we're doing. So we plan on getting additional space in New York, for one, because that's where a lot of the talent is.
Have we announced it yet?
I don't think we've announced where, but.
Have we signed?
No, so let's not announce that, but we're looking for additional space, and.
We have found some additional space. Great location.
Yeah. And now we're going to fill that office too. So we bought the space with plans to grow at least 100 heads. So that's more than double the office. So we're not skimping on that side either. I think the one that we announced is the president for capital markets because that's a sexy-sounding position. And it's an area where we've gotten some great talent, but we just brought on Alan, who's our general counsel now, who's a Harvard-educated attorney. So we are getting great, great talent in. But I think one of the things that's the most important functions of senior leadership of the company is to bring on the right people. JP always likes to say, "Get the right people on the bus." And we're taking that very seriously on both sides.
We have some very sharp people at SpeedRoute. I mean, people who know the routing business, I'm told, better than anyone in America. I mean, you have that core tech team from there, but they're not blockchain people. But again, beyond the technologists, we recognize that we need. We have a wonderful securities lending person, but I think we need a couple more people who know the securities lending field. We need more people from the conventional world to come in to tZERO.
Thanks to everyone for spending your valuable time on this session.
My pleasure.
Thank you.
All right.
Any last question? Any last quickie?
Before we wrap up, I want to thank everybody for coming out. We really value getting input and getting feedback from shareholders, as well as understanding what you were thinking about. That gives us guidance, particularly where we're operating in tZERO in the world of capital markets. You all eat and breathe it. And so we get very salient feedback from shareholders on our products themselves. And we appreciate your thoughtful analysis and the work you do as shareholders of the company.
Absolutely. Nice work for smart owners. Thank you very much.
Thanks.
You're going to have people having lunch here?
Yeah. We've got lunch.