0:00 Nicholas Racz ｜ Investigating the Game of Trust ｜ KERI Conference 2026
0:07 Okay, it is 3:15. So 3:16 now.
0:14 So I'm going to get started.
0:17 Welcome everyone to my second talk.
0:21 It's going to be a lot less complicated.
0:23 I can tell you that because I don't want
0:25 to delve into any of that anymore. We're
0:26 just going to talk about the history of
0:28 Key State. We're going to talk about our
0:30 philosophy, investing in the trust
0:32 spanning layer, what it's been like to
0:34 be at the ground floor and pushing it
0:37 forward going forward into the future.
0:39 So, yeah, we've been here six years.
0:42 We've got a partner right over here,
0:44 Will Dahlquist. Thank you for making it.
0:46 And this is a field report about,
0:49 you know, what we've done in this space.
0:51 And thank you all for being here,
0:53 everyone who's been part of our journey
0:54 from the beginning.
0:56 Okay, so the idea really is simple. Evan
1:00 and I actually had a conversation about
1:02 this earlier. Capital creates
1:05 reality.
1:07 It's pretty profound when you think
1:09 about it, but it can simply be said that
1:12 when you place money in something you
1:14 believe in, you bring that thing from
1:16 the future into the present. And
1:19 when we saw KERI, when we found Sam
1:21 out of the wreckage of the sovereign
1:24 debacle,
1:26 we saw a future that was worth
1:28 believing in. And it was
1:31 profound.
1:33 So, we're going to
1:35 talk about the rest.
1:38 And so this is the protocol
1:39 moment like what is KERI, right? Every
1:43 internet wave needed a protocol layer
1:45 first. The identity layer is being built
1:47 now into the open under the name KERI.
1:50 And the protocol is not a product. It is
1:52 a service,
1:55 public service. Every wave of the
1:58 internet value needed this protocol. It
2:00 starts with TCP/IP. It emerges with
2:03 HTTP and URL. Then we have SSL and TLS.
2:06 And finally, we have really the epitome
2:08 of security in the internet as we know
2:10 it in the form of KERI. In this
2:12 we're making trust portable and the
2:14 operators are being funded right now in
2:17 this room.
2:21 So yeah, what is KERI for those that
2:23 don't know? It's a self-certifying
2:25 identifier that travels,
2:27 cryptographically verifiable, portable
2:29 across jurisdictions, rotatable without
2:32 losing history. The protocol is stable,
2:34 the governance is real, and both are
2:37 open.
2:41 In essence, when we first started,
2:45 there was… this is really just a spec.
2:48 Sam came out with a white paper which
2:50 had every bit of the ingredients
2:52 that needed to establish the trust
2:53 spanning layer but no one had yet
2:56 built out the essential infrastructure.
2:58 And when we started actually and [via]
3:00 Timothy Ruff (thank you for introducing
3:02 us). We got pitched the idea of
3:06 Provenant. Provenant was an idea
3:10 in the mind of Randy Warshaw. He wanted
3:12 to bring verifiable communications
3:15 natively to SMS, RCS, calling, Voice over
3:21 IP, etc. And it's only now six years
3:25 later finally coming to fruition for
3:27 example. And so, Provenant is one of
3:29 these three levers that we have in
3:32 the KERI ecosystem.
3:39 The three actual approaches we
3:41 want to take in terms of deciding what's
3:43 actually investable are the following.
3:45 The first is industry adoption. You have
3:47 to identify a vertical which distinctly
3:52 can be owned by the company we are
3:55 bringing into reality. And then
3:58 the second is actually technical
3:59 development. We want unique features
4:02 that's only possible to be created in
4:05 KERI that no one else has created
4:07 before. And then finally we want to
4:10 emphasize the human talent emphasizing
4:12 human resources that we can
4:15 attract to actually make this real.
4:20 So you need all these three things.
4:22 If you have tech without industry, you
4:25 essentially just have nice theory,
4:27 right? There's nothing to apply to. You
4:29 can't help anyone's problems and you
4:31 just have nothing to fund. If you have
4:33 industry without tech, you essentially
4:35 have synergy, synergy, synergy. You
4:38 choose logo and you can't ship
4:40 integration and you lose the edge. And
4:43 if you have both of these, but you don't
4:45 have the right human resources, you
4:47 essentially have a beautiful idea that
4:51 completely flames out. I've seen this
4:54 personally where visions of really
4:58 advanced technical ideas pushing forward
5:01 Proof of Work. For example, I visited
5:03 New Zealand twice to fund a specific
5:06 company that was pushing the edge of
5:08 what was possible in blockchain, but the
5:11 team just wasn't right. They had the ear
5:13 of the New Zealand government but they
5:15 could not bring it home because the
5:17 leader did not have the appropriate
5:19 direction to anchor in real economic
5:22 realities. So, right now within our
5:27 strategy we've identified three key
5:28 Roots of Trust. The first is GSMA.
5:32 And within each one of these entities
5:35 we've actually funded, we really wanted to
5:39 direct them to actually colonize and
5:43 leverage the trust that a Root of Trust
5:45 has within a given ecosystem. So the
5:47 GSMA route within telco is a clear
5:52 showstopper, right? When you have a
5:54 phone number that's verifiable, that
5:56 means you have an OOBI introduction at
5:58 your fingertips and that KERI is not
6:01 just a figment of the internet. It
6:02 actually starts to span multiple
6:04 different communication layers. So, it's
6:06 a great utility there. Secondly,
6:09 as well, we have DirectTrust and Vital
6:11 Alliance being emphasized by healthKERI.
6:14 – Vital Initiative.
6:16 – Was that changed?
6:17 – DirectTrust.
6:19 – Okay. Vital initiative. Excuse me.
6:22 So essentially DirectTrust
6:25 leading this were Jared and team are…
6:28 well maybe Jared do you want to speak
6:29 about it a bit?
6:30 – Yeah I'll tell you the thing that I
6:32 found most interesting about the work
6:34 we're doing with DirectTrust
6:36 is how [inaudible] it is to work [inaudible]
6:52 If you think about certain
6:56 evolutionary tactics in nature, there
6:59 are different paths like lobsters and
7:02 crabs and claws. They don't have the
7:04 same ancestor, but they came to the same
7:06 use case at the end of it.
7:07 – Well, you kind of do have the same
7:09 ancestor
7:10 in Key State [inaudible] but it wasn't like I
7:14 ever worked with ratings and how are
7:16 you guys tackling problem in your
7:18 industry, which I think gives stronger
7:21 validation to both missions.
7:25 The way that you win with a B2B focused
7:30 KERI play is to go from the
7:33 regulators, the standard bears in the
7:35 industry and convert them to the project
7:39 and then they will bring the rest of the
7:41 industry into
7:42 – Right. I mean I say this a lot. I
7:44 think, you know, the goal for me is
7:47 promoting harmony within different
7:49 investments in our ecosystem. We want
7:50 canopy shyness. So, you know, Provenant
7:53 doesn't tread on healthKERI's toes.
7:55 healthKERI doesn't tread on a yet
7:57 unnamed third company we're going to
7:59 fund in defense's toes. I can't wait to
8:02 bring you all to show off this next
8:04 team. They're going to be fantastic.
8:06 But yeah, and the idea is really getting
8:09 back to those previous principles, you
8:11 know, we have this beautiful network
8:13 effect in the form of KERI. We can
8:15 share in the things we build, the
8:17 learnings we have. And you
8:21 could even hunt together, but what you
8:23 catch is what you catch, right? We want
8:25 independent revenue streams that are
8:27 converting independent users and
8:30 adding to the overall network effect of
8:32 KERI as we see it. Which builds into
8:35 also our final Root of Trust which
8:38 would be the SEDI, state-endorsed digital
8:40 identity. Now that we have
8:42 organizational identity via the vLEI and
8:46 personal identity endorsed by the
8:49 state of Utah, we have both ends of what
8:52 essentially amounts to a trust
8:54 ecosystem. I think we can actually start
8:57 really creating new trust services
9:00 that previously weren't
9:02 possible.
9:03 So yeah, let's go first into
9:05 Provenant. This was the hardest.
9:09 We had to break really tough ground.
9:11 There was like, in Texas, right? I
9:15 actually was born in Lubbock, Texas, right?
9:17 And the Spanish actually colonized
9:20 that and they called it Llano Estacado,
9:23 which means the stake plains. And
9:26 the reason why they called it is because
9:27 there was this thin layer and by thin
9:30 it's like several inches thick of
9:32 capstone that covered the entire
9:35 west. And so breaking through that
9:38 capstone is tough. But once you did, you
9:42 could put a stake in the ground and know
9:45 that it would be there in perpetuity.
9:48 And for us, Provenant was exactly that.
9:52 We've been hammering down on this
9:53 stake for like literally six years now
9:56 and with GSMA we finally have it in the
9:59 ground.
10:00 So you know building out open
10:03 verifiable communications
10:06 did not just come overnight. You
10:08 know, initially we actually thought we
10:10 were gonna have an exit within a year,
10:13 right?
10:15 And the reason being is that we had a
10:16 precedent. Timothy Ruff had come
10:19 just recently out of Credential Master
10:23 selling to Salesforce. A beautiful exit
10:24 within nine months, wasn't it?
10:28 18. Oh, okay. Sorry. Excuse me.
10:30 But there was a really quick turnaround.
10:32 And so a lot of the members of Key State
10:34 itself actually thought, okay, great.
10:36 We'll do the same play.
10:38 We're going to appeal to one of these
10:39 regulatory bodies that needs the
10:41 services Provenant is bringing and
10:43 they'll snap us up and we'll have a nice
10:44 turnaround. But it didn't turn out that
10:46 way. So we actually had to pivot our
10:48 expectations on what Provenant was into
10:51 a much deeper technical play in
10:53 colonizing the GSMA Root of Trust.
10:57 And really also we funded it quite
11:00 heavily but they also had not only to
11:03 pierce telecom but they also had to
11:05 build the first QVIs, the first wallets
11:09 the first means of
11:11 I'm sorry
11:11 – I don't mean to interrupt but I'll
11:12 just add a comment when you have a break
11:14 – Right, I mean just go ahead
11:17 – So think about Provenant as often
11:21 happens with startups and by the way the
11:23 co-founder of Credential Master
11:25 sitting back there in the corner, Allan.
11:28 And you know, we went from zero to
11:30 exit in less than two years, which was
11:32 amazing. But if that was your
11:36 expectation?
11:39 – We and this was a naive
11:41 expectation. I'm being quite honest with
11:42 you, actually.
11:43 – But Provenant pivoted twice.
11:46 – Provenant pivoted from original
11:48 telecom focus to thinking that being the
11:52 world's first QVI was a business.
11:54 It wasn't.
11:56 It was a good thing. It was an important
11:57 thing. They broke important ground
11:59 business
12:00 and then pivoting back to telecom.
12:03 And it's dangerous and hard
12:06 to make pivots
12:09 and some investors will evaluate a
12:12 startup as to whether they've made any
12:13 pivots and if they haven't that they
12:15 haven't been listening to the market.
12:16 – I actually don't think that's quite
12:19 right. I think that
12:22 they did pivot away from .., oh my
12:27 goodness this is failing me, but
12:28 anyways but, they did pivot from their
12:29 first approach but when they had to
12:31 become the first QVI it was a necessary
12:34 step they had to take to actually
12:36 convince the regulators that existed
12:38 about the legitimacy of the vLEI and
12:41 essentially the leverage to convince
12:43 them to use KERI
12:44 – I'm in agreement with that the
12:46 pivot was where they would make money
12:50 They thought there would be a business
12:51 in one place, pivoted to that.
12:53 Decided it was and decided to pivot away
12:55 from the business model.
12:57 – That's right. Cool.
13:00 Thanks.
13:03 So, yeah, exactly. And going into
13:05 this, they had to build alongside their
13:07 product, wallet infrastructure, vLEI and
13:10 the first QVI. They had to build
13:13 Java SDKs for KERI, these KERIpy
13:16 libraries to be usable. And then
13:18 ultimately what amounted to the
13:20 Verifiable Voice Protocol, which is what
13:22 OVC itself is using to have branded
13:26 calling, verifiable branded calling.
13:30 And telecom as an industry is a
13:33 pretty substantially in need of what
13:37 KERI provides. You're seeing a 25%
13:40 decline year-over-year from 2024 to 2025
13:42 in terms of SMS trust. 72% of US
13:45 consumers, including myself, I don't
13:48 answer phone calls that I don't
13:50 recognize. I'm sure. Do if you guys
13:53 get a phone call that you don't
13:54 recognize, do you answer it?
13:56 – Only if it's from China.
13:58 – Okay. They might have a cookie for
13:59 you. You never know.
14:06 So, really it says to how much
14:09 this public utility has been abused and
14:12 how much it needs a trust infrastructure
14:14 like KERI. There's 80 billion in
14:16 fraud losses in 2025 and
14:19 STIR/SHAKEN as well was just insufficient.
14:21 It's built on X.509-based
14:23 infrastructure. It's not enough to
14:25 actually solve the problem of spam. Mr.
14:28 spam guy here is nodding his head in
14:30 approval. Yeah.
14:33 Cool. So now let's go to healthKERI.
14:36 So healthKERI was actually our second
14:39 investment.
14:43 Sam came to us.
14:44 He said hey I've got
14:45 a brilliant proposal. Phil Feairheller is
14:49 going to be the CTO. Jared Jeffery is
14:51 going to be the CEO and we're going to
14:54 take healthcare headon. I mean, and
14:57 Jared maybe you could talk about it.
14:58 What was your initial expectation
15:00 founding healthKERI? What were your
15:02 thoughts there?
15:04 – Well, we've pivoted. We're on our third.
15:06 Right. So, we were wrong twice. I think
15:09 we'll probably come back to some of
15:11 those concepts later.
15:14 But one of the things that we
15:16 initially thought was
15:19 that the
15:21 the pain of insecurity in this industry
15:23 would be sufficient to drive adoption of
15:25 new technology. What we found very
15:28 quickly was the industry gives a whole
15:32 lot of lip service
15:34 to this issue of patient harm by
15:36 way of cyber security. And in the
15:40 boardroom that all goes [inaudible]
15:43 and so for
15:46 us as we kind of initially started this
15:49 I was like I believe that KERI can solve
15:51 this problem.
15:53 But I've always tried to temper the
15:57 expectations of my team to know that…
16:01 listen, healtKERI runs on cold glasses
16:04 the industry moves very slow
16:08 [inaudible] technologies and that gets worse when
16:09 you're talking about technologies that
16:11 identity
16:13 – Do you think, and this
16:14 just occurred to me actually, the notion
16:17 of data loyalty could actually whip
16:18 these guys into shape?
16:22 – Yes probably,
16:24 it's going to be a long road to get them
16:26 to fight on something like that, it
16:29 would have to be forced.
16:30 – Well, but that's what I mean.
16:31 Enforced from SEDI down,
16:33 regulators down.
16:34 – Yeah. It would have to be regulatory,
16:38 [inaudible]
16:41 – Well, well, anyways. Oh, sorry. Go
16:42 ahead. – See I spent years a few more
16:49 understanding [inaudible]
16:52 the issue is the consumer
16:56 of what to ask for
16:58 unless that really gets in front
17:02 You don't know what to ask for
17:06 push these companies to move that
17:08 fast
17:09 – Right which is why I think the data
17:11 loyalty framework network if applied
17:13 could actually incentivize right.
17:19 – What happened to the data by
17:23 right? How much of privacy to give up
17:26 between just two weeks of March 2020?
17:29 Just look at that before COVID
17:31 during COVID after COVID.
17:33 So if you go through those parameters
17:35 and understand how people are
17:37 interacting and secondly how fragmented
17:40 the digital touch points are.
17:43 That's another area to look into and say
17:45 okay where is the where is the
17:47 commonality getting in where is the
17:49 critical mass? These are all critical
17:52 inputs because even if you look at from
17:54 their angle the digital engagements has
17:56 been completely different.
17:59 So there is opportunity here but it
18:01 comes with letting the consumer know
18:04 what to ask.
18:06 – Very good feedback. Thank you. I
18:08 appreciate that. Well that aside,
18:12 excuse me for bringing us off track.
18:15 Bringing this back healthKERI. So, we're
18:16 still high on
18:19 contributing to Provenant. There's a lot
18:21 of liquidity milling around in the
18:24 macroeconomic space. So, we place with
18:26 healthKERI as well. Jared, like Jared
18:29 said, you had to pivot several times. I
18:31 think Jared epitomizes actually a
18:35 tenacity that I think is
18:37 admirable because the amount of funding
18:39 we actually gave Jared as opposed to
18:41 Provenant was remarkably less. And I
18:44 think what they've done to produce is
18:47 substantially more proportional to
18:49 the amount of capital that we've
18:50 actually contributed. So Jared is an
18:53 exemplary showcase of what a founder
18:56 should be like in order to survive tough
18:58 times and we'll go over like what
19:00 I learned from that later. So yeah
19:03 healthKERI just the overview: quantum
19:05 ready, phish-proof network security for
19:07 healthcare data layer. You've got
19:08 production watchers, you've got
19:10 witnesses, you've got cryptographically
19:12 signed and transit gateways. The
19:14 vertical is healthcare obviously, the
19:16 layer is like an overlay essentially and
19:18 the idea is to sign every transaction.
19:24 So again they built production
19:25 witnesses you have watchers at the
19:27 edge. In-transit gateways and as well I
19:30 mean the Locksmith
19:33 stack that Phil has demonstrated several
19:35 times is extensive. This is a full end
19:38 to end credential life cycle management
19:41 for the healthcare ecosystem.
19:44 – And can I just put a comment on that
19:46 one? One of the questions that Phil got
19:48 a couple of times he's been demoing the
19:50 the wallet is the question of do you
19:52 think this is going to be the end UI for
19:55 the wallet? And the answer is no.
19:57 Absolutely not.
19:59 But we can't worry about UI challenges
20:03 until this exists. So part of the reason
20:04 we put that into the open source is
20:06 because I mean I'm operating
20:09 on a very
20:11 resource constraint
20:12 – Shoestring budget is what he means.
20:15 – We produce because we focus
20:17 on the things that matter most.
20:19 So part of the reason we put that into
20:21 open source understanding that right now
20:23 the UI is very KERI developer oriented
20:26 is to invite this community to come
20:29 together and say okay let's do the UI
20:31 work on this right let's make this thing
20:34 sing for all the different use cases
20:36 that will exist in the ecosystem.
20:38 – So do you think that the UI
20:40 itself has substantially been
20:43 influenced by the more you learn about
20:45 KERI as time goes on?
20:47 – So yes and no. I think really what we
20:50 found is
20:53 as we grow we need to hide KERI to
20:58 everyone
21:00 so that for them it feels like
21:06 everything else that they're used to. I
21:08 so during SEDI conference Phil's
21:10 demonstration of how to log into a payer
21:14 portal with Senn
21:15 Yep. I don't actually think that any
21:18 of the legislators that watched that
21:21 presentation had any idea the magic that
21:24 was happening there. And that was by
21:26 design, right? We wanted them to look at
21:27 this and we wanted them to say, "Yeah, I
21:30 logged in with Google this exact same
21:31 way."
21:32 Exactly. Perfect. So all of that to
21:35 say that the stuff that we put
21:38 into the open source, the watchers,
21:40 the witnesses, the wallet is an
21:42 invitation. It's an open invitation to
21:44 the industry to say go build on top of
21:47 this. We've given you the
21:49 production ready code to go pay
21:52 [inaudible]
21:52 – And didn't you also have several
21:55 feedback from
21:57 potential customers and adopters of your
22:00 technology that they wouldn't even adopt
22:03 the technology if it wasn't open source?
22:05 – Yeah. So,
22:08 one of the things that everyone in,
22:10 entrepreneurship, particularly tech,
22:14 has to contend with now is that the
22:16 stock standard mode of defensibility for
22:19 companies has completely dissolved in
22:21 the last year. And it used to be that
22:23 you were going to stand a proprietary
22:25 code, you would get a patent on those
22:27 things, and then you would basically
22:28 rinsing of that patent with your code.
22:32 Claude makes that completely
22:35 useless.
22:37 - I have watched videos of people just
22:39 walking through the UI of a platform
22:41 with an AI agent and the agent can then
22:44 on the back end code that for you.
22:47 This defensible mode of
22:50 the last 20 years is no more. Which
22:52 means I think that you need to find
22:55 other modes. And in so doing, the
22:59 code that you used to hold on to so
23:01 dearly now becomes only valuable if you
23:04 put it into open source and let the
23:06 community, let the, not the AI brain, but
23:08 the human brain and collective make that
23:11 code more valuable.
23:12 Jared's pointing
23:13 at something very essential that
23:15 Key State understood getting into this,
23:18 that most of these funds that we
23:21 put into these companies would be going
23:22 to open source development. And
23:24 there's a fine balance.
23:25 Not everything should be open source.
23:28 There's a time and a place for IP to
23:30 be leveraged. (IP = Intellectual Property)
23:32 – Our gateways are not open source.
23:34 – Right.
23:35 And exactly like the open
23:37 source is to invite people to
23:38 participate in the ecosystem and you can
23:40 provide what is uniquely yours on top.
23:45 – Just wanted to follow up to that source
23:48 code is not patentable. It's
23:51 copyrightable.
23:54 It's a big difference.
23:57 – I think you are the foremost
23:58 authority in making that declarative
24:00 statement. – Anyway, the issue is
24:04 that's how open source works is by
24:06 copyright.
24:07 Because since you assert the
24:09 copyright, you can decide what to do
24:11 with it.
24:11 – Sure. And it depends on the license you
24:13 use for said copyright, right?
24:16 – Well, yeah, that's your choice.
24:18 – But you're asserting
24:19 ownership in order to give it away. But
24:23 you have to assert the ownership first.
24:30 – I want to throw something out in an
24:32 assertion that I would love to have
24:35 challenged if someone disagrees with it
24:38 and it's about where open source is
24:39 appropriate and where capturing IP is
24:41 appropriate where the line is and I
24:43 think there's actually a new line a new
24:45 bright line because of AI
24:46 and I think it's bright
24:48 and let me just throw it out there as an
24:50 idea
24:51 and that is if your
24:54 code, your protocol is something that
24:58 you need multiple parties to adopt.
25:01 There's an issuer holder verifier or
25:04 there's two sides. If it's a two side,
25:05 if it's multi-sided at all,
25:08 I don't think there's a choice anymore.
25:10 But you have to open source
25:12 – From strategic necessity.
25:13 – Otherwise, you're trying to be the
25:14 platform, what I call EUM: “Everybody Use
25:17 Me” and I will be in the middle and
25:18 everybody use me to be the bridge of
25:20 everything. But that's only if it's
25:22 multi-sided.
25:24 I think it's 180 degrees different if
25:26 it's single-sided.
25:28 I think if you do not protect
25:31 your architecture, you copyright
25:34 code, but you can patent architecture,
25:37 right? So, you can patent architecture
25:40 and if it's single-sided
25:42 architecture
25:44 and you do not patent it, you're going
25:47 to be destroyed in a New York minute by
25:50 every AI copier… it's
25:54 too easy for them to just take it and do
25:56 it. And I used to feel that everything
25:58 was open source and make fun of
26:00 everything IP,
26:01 But now I'm starting a company to
26:03 take advantage of the SEDI momentum
26:05 and I started doing product design and I
26:07 invented something and I'm like, "Holy
26:09 cow, this is single-sided. If I come to
26:11 market with this product without any IP,
26:14 I'm going to get exploded in a minute."
26:17 And so I just defensively, apologies to
26:20 you, Steve, because I've been
26:22 criticizing you for your very pro-IP
26:25 perspective, but I realize the
26:28 distinction. It's whether it's a
26:29 single-sided product or multi-sided.
26:32 Multi-sided, open source, single-sided,
26:34 you got to patent it any way
26:36 you can or you're going to get raped as
26:38 soon as it gets public.
26:39 – Robert.
26:41 – Just a question to your challenge,
26:44 and I'm not saying it's either way, but
26:45 would you say the FICO score has to be
26:48 open source now since that's proprietary
26:51 yet multiple sides?
26:52 – No, it's singlesided.
26:54 Each one of those credit rating
26:58 authorities has their own proprietary
27:00 way of doing it single-sided to them in
27:02 their own environment. That's why they
27:03 keep it proprietary.
27:05 That's why there's three. If it was open
27:07 source, everyone would use the same one,
27:08 but they each have a proprietary one.
27:11 That's a good example,
27:12 – Steve.
27:13 – So, let me follow on to answer your
27:16 question, but I agree with Timothy.
27:19 – We agree.
27:20 – Yes.
27:22 But the issue is: the reason
27:26 it's good to have KERI open source is
27:29 because your goal is uniform adoption.
27:33 – Multi-sided.
27:34 – Yes multi-sided. I'm just trying
27:37 to put it in a different language that
27:39 you want everybody to use it because
27:42 then you become interoperable
27:44 and that's different than coming up
27:47 with secret sauce to do something
27:51 and you want to keep that protected. And
27:54 so both the app world and the open-
27:57 source world are indispensable
28:01 tools. We use a different time.
28:03 – Right. Exactly. The timing matters and
28:06 to what degree.
28:08 So, and honestly, it's still
28:10 something that I think we're working on
28:12 in terms of our understanding, but
28:15 Jared and the healthKERI team, I think,
28:18 have the right approach. A lot of this
28:22 sort of SEDI support for
28:23 example with the watchers the witnesses,
28:26 the wallets, it needs this level of
28:31 open-source licensing to allow for
28:35 that network effect to propagate and
28:37 again we knew that coming in
28:38 that this was going to be a little bit
28:39 of this sort of allowing the fruits
28:44 of our labor to be freely appreciated.
28:48 On healthcare in particular
28:50 to speak on what the opportunity was.
28:53 If breaches were a contest, healthcare
28:54 would be numero uno. The third party
28:58 ransomware origin is pretty
29:02 extensively documented. There's hundreds
29:04 of millions of US patient healthcare
29:06 records stolen. And the most serious
29:09 of attacks actually affect real life
29:13 care environments. Jared, I think
29:16 didn't we have the first case of someone
29:17 dying from ransomware?
29:20 – There have been a number of cases where
29:21 they said this probably was because of
29:24 ransomware. This last year BBC
29:26 finally put out an article and said,
29:28 "No, we can clearly state that
29:31 this person died to the hospital they
29:33 were supposed to go to but couldn't."
29:36 They would have survived. So,
29:38 Yes, ransonware, and it's worse than that.
29:41 Most of these attacks are not
29:43 individuals looking [inaudible]
29:45 Most of these attacks are nation state
29:47 actors that look at healthcare as a
29:48 critical infrastructure.
29:51 It's the cyberwar.
29:52 – And this is a key thing as
29:54 well. One of the big and we're going
29:56 to talk about macroeconomics in a bit.
29:58 One of the big investment thesises
29:59 that's emerging as we speak is defense.
30:03 We are literally as we're in
30:06 World War III right now. It's not
30:08 completely physical. It's not ballistic
30:11 necessarily. It's more information based,
30:13 state-based actors have been performing
30:15 these attacks for decades now. I
30:18 mean North Korea, Iran, classic examples
30:21 this is not just like fanning the fear
30:25 flames but it's actually these are real
30:27 outcomes that we have to protect against.
30:30 So here's a table so to speak of sort
30:33 of where the capital has been moved.
30:38 We still have
30:39 some gaps that we've identified. I
30:44 think we're addressing the wallets at
30:45 the edge with Locksmith in particular. I
30:48 want to see more use cases emerge that
30:51 feature wallets and credentials being
30:53 used in production. I honestly
30:57 think the gap in supply chain is
30:58 massive. Verifiable.Trade Foundation,
31:02 led by Stephan Wolf has been
31:05 spearheading this sort of approach now
31:08 for three years now. Yeah. ever since
31:10 Stephan Wolf left GLEIF and what
31:13 they're building to will be a
31:15 multi-billion dollar opportunity. It
31:18 just needs to be realized and the
31:19 problem of verifiable bills of lading
31:22 is one in particular that's quite hairy.
31:24 Getting that recognized across
31:26 different domains of trust.
31:29 And then again having capital allotments
31:33 to future SEDI initiatives is something
31:36 that will open the floodgates for
31:40 startups and also KERI as a whole.
31:43 So Utah is just the start.
31:47 So we're going to go into what
31:50 this taught us.
31:52 When we first started most of
31:54 the members of Key State Capital were very
31:57 asset-rich. The crypto boom had
32:01 just finished in 2020. We were
32:05 sitting on our laurels. We have
32:08 this incredible technology in form of
32:09 KERI and we actually did not properly
32:13 allocate resources in a way that was
32:16 considering the fact that this flood of
32:19 capital was going to subside and it did.
32:22 It did in a way that was substantial.
32:24 We're talking about an order of
32:25 magnitude less capital available just in
32:28 terms of depreciation of assets and
32:30 how we allocated risk. For me that's
32:34 unacceptable going forward. It's not
32:37 something that I can do for myself, I
32:40 can't do it for my family, I can't do it
32:42 for my founders and the industry
32:44 as a whole. When capital actually
32:47 creates opportunities and we're
32:50 allocating capital irresponsibly, it
32:53 creates danger for our entire ecosystem.
32:55 So, we need to actually have a means of
32:59 measuring
33:01 the risks we take in an appropriate
33:03 fashion. Another thing that we've
33:06 learned is that before the contract is
33:09 set, no one's your friend. I mean, it's
33:12 really easy, especially when you're in
33:14 these sort of highly intellectual
33:15 pursuits where you have to share
33:19 ideas in order to validate and verify
33:21 their authenticity. But when
33:25 you're in a business negotiation, all
33:28 all hats are off. It's a matter of
33:31 survival in many ways. And you two are
33:34 feeling each other out in real time as
33:36 to the integrity of each one. And so
33:40 that respect is established in the
33:42 negotiation process. If you can't stand
33:45 up for yourself and have, as Timothy
33:48 says, the crucial conversations,
33:51 then there is just no basis of trust.
33:54 And when the deluge becomes the
33:56 desert, then people are pointing
33:58 fingers. You're like, why is this
33:59 happening? There's a lot of confusion,
34:01 and you don't have a relationship that
34:03 can actually stand the test of time. So
34:06 a lesson there.
34:08 Knowing your founders. So this is
34:10 something that I've really learned
34:12 personally. It's amazing how
34:16 distinct every single one of our
34:20 entrepreneurs are and understanding
34:23 their nuances, understanding what makes
34:25 them tick, understanding their
34:28 strengths and their weaknesses both
34:30 while you're evaluating and also after
34:34 you've placed capital. You don't
34:35 just go away after you place money.
34:38 Having equity in a company means being
34:42 part of that company. If you're
34:45 not actively contributing to the value
34:48 generating process,
34:50 you're not boots on the
34:52 ground necessarily selling this stuff,
34:54 but you can open opportunities, you can
34:56 introduce new capital. And you
34:59 can learn how to speak with your
35:02 founders. Communication is so key. And
35:05 so maintaining that dialogue and
35:07 checking in and keeping things
35:09 accountable is the way we've kept this
35:12 ship afloat. We've kept this
35:15 thing on track. So whenever something is
35:16 needed, we always have an ability to
35:18 call each other and that's essential. So
35:22 knowing your founders, communicating.
35:25 We heard this like two distinct
35:28 times. So obviously you invest to allow
35:32 people to create something new, but you
35:35 cannot be attached necessarily to the
35:37 first iteration of that vision. You have
35:39 to be able to pivot what you've created
35:42 and formed an emotional attachment with
35:44 when you get enough signals from the
35:46 marketplace that you're not going to
35:50 make it or this is not working.
35:53 So essentially when you have creativity
35:57 without flexibility it's just an
35:58 attachment and this is…
36:02 sorry go ahead Jared
36:02 – So one of the things that I, one of
36:05 my mantras is that creation is a
36:07 destructive process
36:09 by virtue of creating you will tear down
36:12 and try again,
36:16 creation is a destructive process.
36:18 – Right to make an omelet you got to break
36:20 a few eggs.
36:24 And finally, I think the key thing is
36:26 patience. When you have a vision for
36:31 something that is special, when you've
36:33 you've tested it and you know it's true,
36:36 you've done what you can. Having the
36:39 wisdom to know
36:42 when not to do things, when to just wait
36:45 for things to mature over time, and to
36:48 let your founders do what they do best,
36:51 I think is the key. We're only
36:54 just now after five years of investing,
36:57 seeing fruits from this labor. And I
36:59 think it's going to be accelerated
37:01 growth. I think we're in our teenage
37:03 years, so to speak. And we'll see
37:07 how far our core
37:09 companies go but I think being
37:12 patient is one of the best virtues you
37:14 can have as an investor.
37:18 So and these are the three principles
37:20 I'm looking at, right: identifying the
37:22 right market
37:25 finding the right technical ecosystem
37:28 and then having the right team. And
37:32 so when you have all these three things,
37:33 you have a recipe for success, I
37:35 think, in terms of finding an
37:38 investable opportunity in this space.
37:44 So we've been funding the teams from the
37:46 front lines. We're seeing that KERI
37:50 becoming the trust spanning layer of the
37:51 internet. And the job is to keep
37:55 filling in the gaps, recruiting new
37:56 Roots of Trust and
37:59 sharpening our filter, making sure that
38:02 we can understand what is a good
38:04 founder, what is a bad founder, a good
38:05 opportunity, a bad opportunity, and so
38:06 on and so forth. So we're still
38:09 looking for investable opportunities. If
38:11 you have any, please come my way.
38:14 I'll give you a card and we'll talk.
38:17 So, thank you all for your time.
38:19 [Applause]
38:25 Any questions?
38:29 – You work with other
38:32 try and help them understand what
38:36 the import of the digital
38:39 identity ecosystem is. What are some of
38:42 the biggest things that you hear in
38:44 terms of reticence to invest?
38:48 What are the complaints you hear from
38:51 other investors when you bring to them
38:53 identity based deals like…
38:56 – Well I think the uncertainty the
38:58 technical barrier is big, having an
39:00 ability to communicate what this is in
39:02 plain language to someone that isn't
39:04 technical is
39:06 one of the biggest barriers, I think
39:08 also
39:10 liquidity is an unconscious
39:13 limiting factor in a lot of this right
39:15 right now, it's not the best time
39:19 to raise money. I mean, if you have
39:21 adoption, if you have proven
39:23 revenue streams, you can raise, but
39:26 it's this is not a zero interest rate
39:28 environment any longer. So, I
39:31 think a lot of this comes down to trust.
39:33 You have to build a relationship
39:34 actually with the person you're
39:36 introducing the idea to. If someone
39:39 knows that you're a smart guy, they
39:41 trust you. They may not know what you're
39:43 talking about. They may not know what a
39:44 key rotation is, what a KEL is, any
39:48 of this stuff, but if they have your
39:50 trust, then I think you can convince
39:52 them to place. And that's how
39:54 literally what it comes down to. But…
39:56 what's up, Will?
39:57 – Yeah, I was going to add to that for
40:00 Jared's question here, too. From my
40:02 experience, conversations and trying to
40:05 persuade investors to take a leap into
40:08 this industry and this ecosystem, the
40:11 largest hesitation has been
40:14 just the vast scope of the problem that
40:17 is trying to be addressed and solved and
40:20 convincing them of the idea that
40:24 there is a technology, or
40:26 a protocol
40:28 that has the ability to address that
40:31 issue that they see as just almost
40:34 unsolvable.
40:35 – Right, or they just presume that it's
40:37 always going to be this way…
40:38 – And then there are so many others trying
40:40 to do it
40:40 right
40:41 the fact that there are so many that
40:42 have tried and failed or have
40:44 tried and succeeded at various levels.
40:47 So, that's been the largest
40:49 amount of hesitancy that I've seen.
40:55 – Two questions that probably are related,
40:57 a lot of times
40:59 investors during a pitch or
41:02 whatever will ask about exit strategy.
41:05 Meaning when are they going
41:06 to get paid back as an investor
41:08 basically,
41:08 and this is the
41:12 kind of bet that may take a
41:14 while to pay off [inaudible]
41:16 …investor perspective and so be
41:18 … your color on that. And
41:19 then the other one especially you
41:22 know perhaps with healthKERI and Provenant
41:24 that are starting to gain some traction.
41:27 It's not going to be too long before
41:28 they're looking for A rounds.
41:30 And so how do you see your role in
41:32 helping secure A rounds?
41:34 – Well I think one of the
41:35 interesting things that…
41:39 In a traditional equity
41:41 market, exit is a binary, right? You
41:43 either have an exit or you're waiting
41:45 for one. You can be bought out. In
41:48 private markets…
41:49 – Also a valid exit.
41:50 – Not really, honestly. Dividends are a
41:52 bad, they're a poor choice. Every time
41:54 you take a dividend, you're taking away
41:56 from the reinvestment opportunity of the
41:57 company to actually push it forward.
41:59 – Going public is a long shot for
42:02 many companies. So, what do you
42:04 look for an exit strategies pitch?
42:08 – Well, in this case, it's like just
42:11 building as much value as you possibly
42:13 can as an acquisition target is
42:16 smart. I think there's a lot of
42:18 potential innovations we can actually
42:20 leverage around
42:23 tokenized revenue
42:25 that I think are fascinating.
42:28 In this case, if you actually have
42:29 market adoption in terms of
42:32 infrastructure that has a longterm
42:35 productive yield and that's an
42:40 asset and if you can actually sell that
42:42 up front, right,
42:44 you can have
42:47 liquidity without necessarily having an
42:49 exit. And I think within five
42:52 years there will be plenty of these sort
42:54 of new sort of levers that companies can
42:56 actually pull that previously they would
42:58 never even dream of doing, right? So I
43:00 think it's going to be less of a binary
43:02 thing and more of a… it'll be more of
43:04 a liquidity friendly equity
43:07 investment market.
43:08 But that's out of
43:10 my scope. I don't know whether or not
43:12 that's coming.
43:13 – And then with the A round, if you have
43:15 just a thought, or we can take this
43:17 offline if we're out of time.
43:18 I'll get back to you on that.
43:20 – Okay, cool.
43:22 [Applause]