From Telecom to Crypto: Jordi Riulas' Evolution as a Tech Entrepreneur and Angel Investor
Jordi Riulas' story follows a fascinating trajectory from technology and telecommunications to fintech and biotech, now onto blockchain and crypto. His diverse background spans over several decades, illustrating how technology can be adapted and repurposed in evolving market environments. Importantly, Riulas' narrative offers profound insight into the importance of agility, reinvention and forward-thinking in the world of tech entrepreneurship.
One of the striking points is Riulas' transition to becoming an angel investor or, in his own words, a "groupie of a startup." As Riulas explains, this role isn't simply about providing financial backing. It's about investing time, energy, experience, and mentoring to support young entrepreneurs with potential. Here, Riulas brings up the "funnel" approach to investing – the project must be fun, economically viable, and he must be able to add value to it.
Riulas’ first significant venture as an angel investor led him to Capital Cell, a crowd equity platform for investing in biotech startups. This innovative platform allowed anyone with a credit card to buy shares in small companies just like purchasing shares in large corporations such as Apple or Google. Over time, Capital Cell became the largest non-institutional investor in biotechnology in Europe.
Riulas' next adventure led him to the world of cryptocurrencies while he was in Bali. Here, he came across a project that intrigued him: EthicHub. This platform aimed to provide loans to small farmers in remote parts of the world using cryptocurrencies. The vision of EthicHub struck a chord with Riulas, leading him to invest both financially and personally into the project. He even went so far as to visit the farmers in Mexico, becoming fully immersed in the cause.
As Riulas explains, EthicHub serves a community comprising two key roles: investors and farmers. Investors seek protocols where they can safely place their funds, while farmers, who often lack access to traditional banking, seek liquidity. EthicHub uses blockchain technology and smart contracts to manage the lending and borrowing rules, thereby connecting these two needs and breaking the cycle of high-interest rates for farmers.
To solve this problem, EthicHub introduced Ethix, the token underpinning governance on the platform. Riulas explains how it functions not only as a tool for governance but also as a means to create value and exert buying pressure in the market. A portion of all loans (4%, as stated) is used to purchase ethics, which in turn, collateralizes the loans made to farmers. This ingenious mechanism creates a binary market force – if loans are repaid properly, the value of ethics rises, and if not, it drops. Therefore, buying ethics is seen as a gesture of trust towards the borrower.
Interestingly, Riulas also mentions that a significant proportion of EthicHub's investors are non-crypto users who invest directly using fiat currencies, which are converted into stablecoins and put into smart contracts. The platform offers a user-friendly experience where investors can simply register, invest their fiat, and receive returns, while being aware of the underlying crypto mechanics.
Riulas notes nothing is entirely risk-free, the platform maintains a high collateral-to-loan ratio – currently around 25:1. Additionally, the EthicHub model is designed to ensure that as the platform's adoption grows, and subsequently the price of ethics, the value of the collateral also grows, making it safer for more funds to be lent to farmers.
Smith presents an interesting comparison between EthicHub and traditional banks, observing that even though traditional banks can lend more owing to lower capital ratio requirements, EthicHub is more efficient at lending to farmers who have historically had limited access to such services. Riulas emphasizes EthicHub's focus on small-scale farmers, who represent a significant portion of the unbanked population worldwide.
Smith further queries about the macro risk in the Defi space. Riulas explains that in Defi, collateral is typically above 100% of the loan value. EthicHub aims to maintain this ratio to assure its investors while enabling access to credit for small farmers. As loans increase, the value of the ethics token also rises, creating a beneficial feedback loop. He adds that EthicHub is not just extending traditional banking services to the unbanked; it's creating a new financial system for them.
Jahed Momand introduces another facet of the discussion – the technology behind EthicHub. He points out the merger between Xdai chain and Gnosis, asking Riulas how this impacts the farmer's user experience and the process of funds transfer. One significant point Riulas stresses is EthicHub's protocol agnosticism. The platform is currently operating on Gnosis, but it can run on any chain, with two conditions: the chain needs to have a stablecoin reference (preferably in USD) and a synthetic of the EthicHub token needs to be created in the network for loan collateralization. This flexibility enhances the platform's adaptability and reach.
The platform is presently focused on a cooperative-based model rather than individual farmers. Riulas explains that this approach not only enables the platform to scale but also enhances the distribution of loans. It aims to create more cooperatives across several countries. The loans are provided by EthicHub users from Europe and the US, who are keen to share their savings with farmers in need. As per Riulas, the platform has cooperatives in Mexico, Honduras, Brazil and plans to add between 10 to 20 more over the coming years.
EthicHub has not only facilitated access to funds for farmers but also offers a fair price for their produce. This strategy is critical, as Riulas highlights, to break the cycle of poverty. The platform buys coffee directly from the farmers at a fair price, and the profit generated from selling this coffee is partly returned to the farmers in EthicHub's native token, Ethix. This way, the farmers not only receive a fair price for their coffee but also accumulate a financial asset – the Ethix token – which they can hold, sell or use as collateral for more loans. The token in some respects becomes a 'call option' for farmers rather than a price premium.
In addition, EthicHub has also started a new initiative to sell coffee directly from farmers to consumers via their website. This initiative eliminates intermediaries and directly connects consumers with producers. The model represents a paradigm shift in the traditional system, creating a circular economy that includes loan providers, farmers, and coffee consumers, all participating in and benefiting from the EthicHub ecosystem. The ultimate aim is to prevent structural poverty, ensure fair remuneration for farmers, and build an 'ownership economy' that is sustainable and equitable.
Riulas also stressed the significance of the pride that farmers feel in their work, which consequently improves the overall quality and experience of the end product, in this case, the coffee. These improvements are partly a result of their ability to purchase organic fertilizers and properly manage their fields due to the increased financial stability, further demonstrating the benefits of a well-structured financial system.
In the view of the EthicHub’s founders, cryptocurrency is a tool, not an objective. The goal is to utilize this tool to foster a more decentralized world, emphasizing financial and societal freedom and sustainability. He pointed out that EthicHub aims to direct the benefits of the emerging crypto economy towards enhancing human welfare and sustainability of the planet.
The conversation then switched gears to the concept of EthicHub's DAO (Decentralized Autonomous Organization). Riulas explained the DAO aims to allow decisions, such as the determination of loan interest rates or selection of farmers who can apply for loans, to be made by the community. The idea is to reach a balanced point that considers the needs and limitations of both the farmers and the investors.
In terms of growth, Riulas pointed out that the EthicHub protocol is designed to scale without limits. Community members can propose new projects or products, with the community then voting to approve or reject the proposal.
In the context of potential investors, Jahed Momand emphasized the attractive aspects of EthicHub. It offers bottom-up governance, leverages existing community networks, and distributes wealth through participation in governance, thus promoting a more equitable financial system.
At this point, the conversation pivots towards the tokenomics of EthicHub. Riulas provides an interesting insight into how the platform's native token, 'ethics', derives its value. He explains that it's not tied to the underlying equity of EthicHub as a company, which may be counterintuitive for traditional investors. Instead, the 'ethics' token captures the value of the business protocol.
In essence, EthicHub uses a portion of its loan revenue to buy back 'ethics' tokens, a practice that attempts to link the success of the platform with the appreciation of the token. It's worth noting that this represents a novel value creation method in the DeFi sector, challenging traditional valuation methods. The balance sheet assets of EthicHub aren't actually owned by the shareholders of the company or the team but by the community, adding a layer of decentralization.
This sparks a line of inquiry from Martin Smith, who tries to conceptualize how one would go about valuing 'ethics'. Riulas suggests the token's future value is determined by the platform's transactional volume and the token's organic demand. A key takeaway from this part of the conversation is that DeFi and its native tokens operate on a value proposition that's fundamentally different from traditional financial models. The role of community input in shaping the project's direction and the token's value also stands out, showcasing the democratic ethos of DeFi.
EthicHub's philosophy, as articulated by Riulas, is not about creating something entirely new, but rather about borrowing from existing projects and blending those elements into a unique model that adds value for the community. This approach embodies the spirit of open innovation that has come to define the blockchain and DeFi sectors.
Overall, the podcast offers an intriguing exploration of EthicHub's potential to blend social impact with decentralized finance, all while challenging traditional models of financial intermediation and value creation. As the boundaries between the DeFi and traditional finance worlds continue to blur, conversations like these will undoubtedly become increasingly vital.