DISCLAIMER: CryptoTapas has no affiliations with Pithia and this is NOT a promotion. This is an effort to bring more awareness to the blockchain space, not only on technology but companies that are funding this technology’s progress, and directly helping blockchain space grow through their investments. In our opinion, Pithia is one of them.
ICOs are dwindling down. We know Security Token Offerings (STO) are coming, they are not here in full swing but they are coming.
The bear market has made investors more aware and they are in a skeptic’s mode right now. Although that is good for the broader space, it is not a desirable situation for those who can truly bring life to revolutionary blockchain solutions.
That’s the central theme of this article.
There are companies that are continuing to fund the blockchain revolution, irrespective of the bear winter. Pithia is a Seattle based venture company that touts itself as “Blockchain Realists.”
Interested in scalable blockchain solutions? Pithia got you…
From the Pithia website [We invest in] “companies providing scalable business solutions to develop, grow, and drive blockchain adoption.”
Even if you are a traditional company that is looking to broaden your presence by bringing your solution onto Blockchain, but lack funding to do just that, Pithia wants to hear you out.
Their website states “we invest in those developing blockchain-native businesses as well as software and enterprise companies who are extending their products and business models with blockchain.”
We immediately got interested to learn more because we believe information like this helps blockchain space as a whole.
We reached out to Pithia’s Tamara Rogers, General Counsel, who graciously agreed to help answer our questions.
Team’s proven record of execution is key
Pithia’s primary focus is filling the gap between talent and investment.
In other words, if you are a team of truly talented individuals with know-how, experience in executing similar projects, can articulate the problem statement and solution, have clear goals (milestones) and technical expertise to pull it off, but lack funding, Pithia will hear you out.
Company’s focus right now is to find scalable blockchain-native solutions with a team that has what it takes to see the project through.
Women are on equal footing as men in blockchain space
Talking about women’s role in blockchain space, Tamara said: “A young woman entering the space may find herself on the exactly the same footing as someone who is a 40-year veteran of technology because they both have the same level of education about blockchain.”
We have personally observed this welcoming change.
The executives are we lining up for future interviews and the interviews we did in the past confirm Tamara’s statement.
New technologies are great equalizers of gender biases.
Tamara commented, “I think that because blockchain is a new industry it’s not yet overpopulated with established players who happen to be male.”
Special note: Tamara was going through the flu when we contacted her and then there was a family emergency, however, she continued to stay in touch and got us the responses to us. In our view, that says something about the commitment Tamara (and Pithia) has to space.
If you are in the blockchain development space, you will get a lot from this interview. Let’s begin.
Thank you, Tamara, we appreciate your time and your relentlessness in spite of all the hurdles you have come across recently.
CryptoTapas: Tell us a little bit about your personal and professional background, and how did you get involved with Blockchain space?
Tamara: Prior to working at Pithia, I did a stint working for the Washington State legislature as a Legislative Assistant, and a year working as a consultant mostly detailed to Microsoft, assisting with language around their internal change from a product to a services company. I spent a small amount of time working with Azure developing internal training materials.
I then put out my own shingle as a contract lawyer trying to focus on technology contracts.
I had known Lawrence Lerner, the Pithia CEO, for about 4 years and when he brought me on board to do some due diligence it was a good fit and I ended up staying, and getting really excited about blockchain.
CryptoTapas: What type of companies would you (Pithia) typically consider as a good fit for your investment in the blockchain portfolio? What is a well-defined problem in Pithia’s definition?
Tamara: Our first fund was strongly focused on backbone application uses of blockchain like wallets and identity.
Going forward we’re opening it up and looking at a much broader selection. Ideally, we want to work with companies that are solving a significant pain point: be it for consumers or small business or Enterprise level companies.
We want a well-defined problem statement and a reason why blockchain is actually the best solution for the problem.
Their technical solution must be sound, but that’s the thing I can speak to the least as I am not well versed in technology.
We want to see that they’ve done a good market analysis and know who their target customer will be and why their particular blockchain-based solution is the best solution to the identified problem.
We like to see a good strong 18-month road map with milestone deliverables and their plan for execution.
The team needs to have a history of executing on business and preferably have people who are extremely knowledgeable in the market space they’re attempting to enter.
It’s great when someone wants to solve what they perceive as a problem, but if they have no experience or knowledge of the space they’re trying to enter it usually ends being a flop.
I specifically look to see where their product intersects with legal or regulatory boundaries, whether they’ve done their homework, know what hurdles they need to clear and what prep they need to do, and whether they have appropriately budgeted money for that legal work.
If they’re planning an ICO or STO we really need to see proof that that’s the best route for them to raise funds. We only accept equity in exchange for our contribution to the company. If they are planning an ICO, we want to see that they have either sufficient existing funding to pay for the legal and regulatory disclosure requirements, or that they are planning a private sale in order to generate those funds. ICO and STO’s need to be treated as if they require the same regulatory disclosure and legal work as a traditional IPO.
We also aim to be Hands-On as active advisors and take a board seat.
CryptoTapas note: For those interested in seeking funding from Pithia, you can go to their site, download their guide before trying to make your first contact.
CryptoTapas: That is amazing.
Let’s shift gears a little bit and talk about the legal aspects of the Blockchain technology itself. What is your opinion on Smart contracts? Are they contracts? Are they legally binding and if not, what in your opinion needs to happen to make them legally binding?
Tamara: Right now, I see smart contracts as more of a piece of self-executing software.
I think some of them will become legally binding if they meet the definitions of a contract and are properly written. For the most part, the contract is a misnomer because they aren’t executing legal functions, they are simply executing functions.
I would say that, in their current state, they’re not contracts any more than you are forming a contract with the vending machine when you enter money and expect to receive your product at the other end.
To become legally binding they would need to be put together in conjunction with both lawyers and technologists and best targeted at very specific use cases.
CryptoTapas: Past 18 months, we are hearing a lot about ICOs and STOs. The liquidity of several of these companies is impacted due to crypto winter. Are you seeing such companies going back to traditional funding sources like VC / PE etc.?
Would Pithia be interested in such companies?
Tamara: Yes, a lot of companies are going back to traditional VC and PE, and since we only take equity, those are our target companies. A lot of companies who initially funded themselves via ICOs or token sales are seeing themselves falling cash-poor with the drop in the crypto prices.
CryptoTapas: In your opinion, how can Law be an enabler for blockchain?
Tamara: I think the law can be an enabler by making sure that it is fully taking into account the aspects of crypto that it is attempting to regulate.
There are certain problems that blockchain is seeking to solve that are currently blocked by either a lack of enabling regulation/laws or that simply are in contravention to existing regulation. The regulations either need to be changed or created to allow these functions to take place.
Many non-regulatory bodies and lobby groups are working to create model legislation to enable these functions.
Here in Washington we currently have house bill 5368 that proposes the establishment of legal definitions for “blockchain” and “distributed ledger technology” and provides clarification on the legal status of records created and stored using distributed ledger technologies.
Excluding the ongoing discussion of the legal status of tokens (though we are seeing significant changes in the US with the SEC Chairman’s recent definitive statements around security/utility tokens) there will need to be a continuing series of upgrades to laws to enable some of the solutions blockchain proposes.
Another example would be placing wills, trusts, and living wills on to the blockchain. At current, the law does not allow for this because most states require a wet-ink signature in the presence of two or more witnesses to render a will or power-of-attorney valid. Allowing a testator to digitally sign their will and place it on the blockchain would render it immutable and theoretically as valid as one witnessed by other humans, but as yet this is not legal in most states.
That means that people knowledgeable about the crypto space need to work side-by-side with lawmakers to ensure that they are getting laws made that are well-formed.
Continue transparency and proactive legislation, opinions, and administrative rulings from regulatory bodies. To my knowledge, the IRS has still not answered the questions on the taxation of crypto and that’s a huge pain for just about everybody.
CryptoTapas: How will Blockchain address ‘right to be forgotten’ clauses of the law (like GDPR)?
Tamara: This one is tricky, and I remember reading a paper a while ago presented by a French agency looking at this problem.
The answer to this question turns on whether a participant is a controller or a processor, as such terms are defined under the GDPR, and is fact dependent based on the blockchain architecture and the types of users engaging with it. The greater the ability of the participant to intervene with and influence the blockchain transaction, the more likely they will need to comply with GDPR. An individual who meets the requirements of a “processor” will be subject to the GDPR. So, this becomes a very typical lawyer-like answer, “it depends.”
CryptoTapas: From a regulatory compliance standpoint, where does the US stand today and where would you like it to be? We personally think countries like Malta, Switzerland, and Japan are pushing their position in Blockchain while the US has not come out with clear guidance.
Tamara: The US is taking a wait-and-see approach which I think is smart.
Rather than outright banning crypto, they have made small concessions as to what they think is legal, and then carefully watch the repercussions.
They’ve taken strong steps against what they are identifying as really bad actors, like scam ICOs, but since we have a larger country with a much heavier bureaucracy and a long history of regulation than some of the small countries who are able to move forward more rapidly and flexible, I think the US is taking a measured approach and is sometimes being sidelined by all the other political crap that the US is loading itself down with at the moment.
The SEC has recently made a decision better outlining the difference in security token and a utility token, positing that a security token may at some point change to become a utility token if the underlying technology reaches a point of utility where it no longer meets the definition of an investment contract under the Howey test (i.e. when the platform becomes usable and functional).
CryptoTapas: We couldn’t have articulated it any better. Thanks. What BIG questions should companies ask before thinking about Blockchain or Crypto?
Tamara: I think those companies really need to ask themselves if blockchain or crypto is the best solution to their problem.
It’s not the best solution to everything, it’s not better than a lot of databases, and implementation presents unique challenges.
Switching to a blockchain based solution requires a fair amount of technical knowledge which might include bringing on an outside team, plus integrating into an existing business solution will take time. It does honestly become used case dependent.
CryptoTapas: Token compensation, we are seeing companies that are considering to issue tokens to employees as an incentive for services and performance. Any recommendations that issuer and recipients need to keep in mind from a legal compliance stand-point
Tamara: I think on this one the bigger question may be whether or not those tokens will retain value and whether those employees should have the option to receive equity instead.
The fact that the taxation on tokens hasn’t been firmly established can be a bit of a catch-22, with equity you have options to help minimize your future tax burden but I don’t think we have that yet for tokens.
Just like accepting stock, there is always a question of whether or not that stock or token will retain or appreciate in value. There is a separate question over whether or not tokens offered as equity to employees may someday fall under a different legal status than stock, but that so far hasn’t been viewed as a potential issue. Largely it comes down to the same determination any employee needs to make when accepting non-monetary compensation.
CryptoTapas: Do you have any advice for Women out there about the opportunities in Blockchain and what they can do to make their mark?
Tamara: I think that because blockchain is a new industry it’s not yet overpopulated with established players who happen to be male.
I think women entering the space are at an equal level playing field with men in the space because it’s new to everyone.
A young woman entering the space may find herself on exactly the same footing as someone who is a 40-year veteran of technology because neither of them knows anything about blockchain. (This is a repeat of above. Without saying “here’s how I did it,” you can make some examples and allude to yourself.)
The blockchain community also seems to be pretty open to new and fresh voices.
Want to learn more about Pithia? Check out this link for Founders https://www.pithia.com/workingwithus#Entrepreneurs
Thank you for reading this article.
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About the author
RK Reddy holds two Masters degrees, one in Accounting and another in Business Administration with over 15 years of experience in the financial services industry.
RK Reddy is an ardent fan of Blockchain and Cryptocurrencies. You can see the excitement about this new technology in every article on Cryptotapas.com. Sometimes this excitement leads to an overly optimistic view. Guilty as charged. RK Reddy says “what may seem like an ‘overly optimistic expectation’ today may become an everyday norm in 5-10 years; look at the history of cars or airplanes, Blockchain and Cryptocurrencies belong to a similar frame of reference.” Of course, that is just his opinion.