Transcript 0:00 We essentially take land using the fungible token concept and make it a liquid and tradable asset just like a stock. I'd love to get your take on tokenization. What is tokenization of real assets? 0:11 That's essentially where it started is trying to figure out how to tokenize the trees, the dirt, the land, the carbon credits, the biodiversity markets, all of that as a tokenized asset after what we learned and read about from looking at the metaverse. 0:24 Ultimately the big question is ownership, right? Who owns what? What does that look like? He coined a term for what we do that I think just nails it. He's like, "You're just creating a digital IPN." 0:33 I'm like, "Yeah, that's what we do." Welcome to the Purpose Driven Capital podcast, where we help you align your money with your mission and maximize your impact. Here's your host, Matt Johns. 0:44 Today I had the pleasure to chat with Aaron Bumgarner, founder and CEO of Outside, a company that provides an innovative approach to land ownership, combining the great outdoors with tokenization and blockchain technology. 0:57 Aaron is a seasoned entrepreneur with a background in private property rights, financial markets, alternative investments, and of course, the outdoor industry. 1:05 In fact, he spent over 20 years designing and implementing wildlife habitat management projects in Virginia and North Carolina. He's even a certified arborist. 1:15 So after witnessing multiple development projects destroy some of his favorite natural areas, Aaron decided to build a solution. 1:22 By 2019 when he started Outside, he noticed that tokenization was becoming more widely adopted. 1:28 He realized that he could use it to make land ownership more accessible to investors by providing a more liquid form of ownership. 1:37 Aaron is an incredibly innovative and energetic guy, connecting with people all over the world. I'm excited to share his insight and vision. Welcome to my conversation with Aaron Bumgarner. 1:47 You've been an outdoorsy guy your whole life, right? I mean, this is something- Yeah... you've always loved. I saw where you're even a certified arborist. Yeah. So what drives your love for the outdoors? 1:55 I grew up in the outdoors. I was from Western North Carolina from the Granite Falls, North Carolina area, which is kind of between Hickory and Boone, right in North Carolina in the foothills of the mountains. 2:05 My grandmother owned a 90-acre farm where I grew up. My father was a forestry major. My f- ag teacher was a forestry major. He was from NC State. My dad studied forestry at Wake Mint College in Goldsboro, North Carolina. 2:18 He owned a landscaping company. So I just grew up in the woods. I grew up outdoors. And so I grew up hunting and fishing. I don't hunt much anymore, just kinda my love for fishing- Mm-hmm... 2:28 has taken over the hunting side. And so it's not that... Some people are like, "Oh, I took an interest in the outdoors seven or eight years ago because I wanted to learn how to do this and that." I'm not like that. 2:38 I grew up doing this. It's all I know. So- Mm-hmm... it, it's a lifestyle. It's a way of life. It's a culture. Yeah, and I love how you've- And so... 2:44 taken th- this culture, this way of life of yours, and you've combined it with this incredible forefront of technology and blockchain. 2:51 And that's one thing I can't get over with Outside and what you're doing there, and I know that being outdoors is a personal passion for you, but I also know that from the professional standpoint you see where all this is going and you know that there's great opportunity here. 3:01 But it's something you enjoy, I don't know if it's equally as much, but you certainly enjoy it an awful lot. I'd love to get your take on tokenization. W- what is tokenization of real assets? 3:10 I mean, that's what you guys really specialize in. So let, let me tell you how we learned about tokenization first because that'll kinda set- Please... the framework for a, a lot of this. 3:18 We started Outside as a traditional fund asset manager raising money, raising capital to go buy lands in, in a fund. 3:27 And so we were trying to buy these lands and then monetize the conservation, recreation, renewable energy, stream w- wetland mitigation bank opportunities on the land, carbon biodiversity markets on the land. 3:39 And what we started to find was that the traditional models are very antiquated and they're slow and they're complicated. And they're overly complicated to the point that we were running out of runway. 3:52 We couldn't monetize the asset quick enough based on the traditional models. Mm-hmm. And so then COVID came along. 4:01 Literally like the week COVID started, I don't remember exact dates at this point, I remember it was early March, we went under contract to buy like 8,000 acres or 9,000 acres for like 13 or 14, $15 million, something like that- Mm... 4:13 in Virginia and North Carolina, all timberland. 4:16 And what we had figured out is that to monetize these markets, conservation, carbon, biodiversity markets, there was an economy of scale issue that we had to overcome, right? And so COVID was happening. 4:27 We were trying to be an asset management company. And so then we started going out trying to raise money for this 8 or 9,000 acres of real land, timberland, something tangible with a real value to it. 4:38 And we couldn't raise the money. We just hit one brick wall after another. Of course, COVID was going on, right? So that was like the world's worst time to be trying to raise money, during COVID. 4:49 And so shortly after we discovered the metaverse, and I'm like, "What is this?" 4:56 And the metaverse is a virtual world, a pr- what, what I call a pretend world, virtual world where there's skyscrapers, there's real estate, there's land, there's office buildings, there's houses, and this was what the metaverse was. 5:09 And at that time, the Sandbox, which was one of the, the metaverse platforms, raised like $200 million in one week. And I remember reading this article and I'm thinking, "What in the world is going on?" 5:22 Like here I am, I'm trying to raise money to buy 8 or 9,000 acres, $13 million, and this virtual land, the metaverse, is raising $200 million in one week. I'm like, "Some- something's missing here. 5:36 Like what am I missing?" So we started looking into it and we started saying, "Okay, what is the metaverse?" And I, I don't come from a crypto background. 5:42 I don't come from a Bitcoin background, Ethereum background, none of that. I'm learning all of this as we're going. And so we started looking at it and we said, "Wait a minute. 5:51 If we can figure out how to take real land and tokenize it and capture the value just like the metaverse, we might, we might have something here." 6:00 And that's essentially where it started is trying to figure out how to tokenize the trees, the dirt, the land, the carbon credits, the biodiversity markets, all of that- Has a tokenized asset after what we learned and read about from looking at the metaverse. 6:14 That's where it all really started, just seeing, seeing the metaverse and how much it had raised in a very short period of time. One week, $200 million globally, I think that was the number, and it was insane. 6:27 And so that's where it all started, right there. That was where the light bulb started to come on, and we launched an NFT strategy. 6:33 I would call it a success, and that NFT strategy was to capture the value of the trees, dirt, and the minerals, the ground of a coal project in a, a former coal mine project in southwest Virginia on the Quince River, the most biodiverse river in North America. 6:48 And we sold those NFTs, and that was on a 392-acre property we own in southwest Virginia. Then we said, "Okay, what next? We want to try to figure out how to tokenize deeded ownership of land." 6:58 And so then we started tokenizing the actual deeded ownership of land. Essentially what we do is we create fungible tokens for the land, and so what does that mean? 7:07 Well, the way I think about it in the easiest form is that we build liquidity into the land using tokenization, and we essentially take land using the fungible token concept and essentially make it a liquid and tradable asset, just like a stock. 7:25 And so that's essentially what we do. We make land a liquid and tradable asset, and we're working on some other asset clas- classes as well in the very near future. 7:33 So the easiest way I could describe it is taking land and making a liquid and tradable asset that can be traded globally in marketplaces, and we're also rolling that up into Outside. 7:46 And, and so we have some public listing aspirations we're working on with Outside as well. So- Mm-hmm... that's where it all came from. That's where it started. That's how it evolved, and that's what it is. 7:57 You described tokenization in there as a key piece to your model. Can you explain a little bit more about how tokenization works and how it creates these fractional shares for these properties? 8:06 So essentially what we do is we create a holding company for the land, and every holding company has a certain number of shares depending on how you structure that and set that up. 8:17 And I always say every tract of land is different. Every acre is different, so every opportunity is gonna be different. Mm-hmm. You never can look at it as being, you know, black and white, cut and dry, copy and paste. 8:27 There's no such thing in my opinion. And so the, the structure you may use over here may be different from the structure you use over there for that particular tract of land and vice versa. 8:37 So essentially we've kind of built out two approaches. We're either tokenizing the land for an acquisition strategy, or we're tokenizing the land as a service provider for the current landowner to provide liquidity. 8:51 And so essentially it's wrapping it into a structure, a holding company, typically a corporation or something called a DAO LLC, a decentralized autonomous organization LLC. 9:01 There's a great DAO structure out of South Carolina that we've been using that's tied to the Catawba Indian Reservation. 9:08 And so depending on our strategy, we'll use one of those, either that corporation or that DAO LLC, and essentially wrap it into a wrapper holding company and tokenize the actual shares of the holding company that owns the land. 9:22 And so if there was another asset, say a, an airplane, for example, we could essentially say, "Okay, here's the airplane. 9:29 Here's the serial number, 8925," whatever, and essentially set up the holding corporation to tie back to that serial number. 9:35 And then we can essentially take that to the market and build liquidity out around those assets. So, so that's what tokenization is. 9:43 Where you're seeing a lot of, of tokenization come into play is both single-family residential. You're seeing it in commercial real estate extensively. It's, it's a different way of thinking about crowdfunding. 9:53 You, you have a, a million dollars of land, and you have a million tokens, which are shares, and each share is worth a dollar, then you and I can go onto Coinbase here in the United States and buy $20 of that token and own a fractional percentage of that asset. 10:11 So depending on where you are, what you're doing, depends on how you structure it, a lot of different ways to do it. But I'm seeing tokenization for wine collections, essentially as an investment. 10:21 A lot of times you're seeing tokenization being combined with Regulation A. That's a big one for collectibles and different things, and we're working on some stuff as well with it. 10:30 And so there are many different ways it can be structured. Just to be clear, instead of having, like, paper shares or something that's stored in somebody's computer in some log, it's stored in a blockchain, right? 10:39 These tokens are on a blockchain, so that's what makes them so much more accessible and easily, I guess, more liquid. Traceable, transparent- Tradable... liquidity. Yeah. 10:47 So, so essentially one of the things that happened to us when we were starting the company and we started to explore this tokenization strategy and going down this road is an article came out in The Wall Street Journal. 10:59 And the date of that article, I think it was December of 2021, if I remember correctly. We'd, we started looking at tokenization way before that date- Mm-hmm... like a year-plus prior to that. 11:11 And the article was about BlackRock, one of the biggest private equity firms in the world, uh, and Larry Fink, and he was quoted, and has still been since quoted, that tokenization is the future of finance. Mm-hmm. 11:23 Real-world asset tokenization is the future of finance. 11:25 And so that was a, that was tremendous validation for us as a company and a team at that time looking at it saying, "Okay, we might actually be doing something right for a change." So it's been a journey. 11:37 Every day's a little bit different. So yeah, we're just still moving ahead with it. I wanna make sure I understand the business model here because it is unique. 11:44 So basically you identify land that's m- may be vulnerable for exploitation or, or even destruction. Two, you acquire the land. Three, you improve the value of the land and then sell the tokenized shares. 11:56 And then fourth, you maintain and preserve the land. Does that sound right to you? Am I getting that correct? Yes, you are, partially. Let me correct you on a couple of points here. Please. 12:04 So we actually started, we started out into carbon markets, biodiversity markets, really focused on that. Mm-hmm. We are not as focused on that today as we first were. 12:13 What we're doing is we're coming in and saying, "We are a service provider. We've built this process. We know the strategy on how to take this asset and tokenize it." 12:22 What we're working on doing is we're working on bringing in joint venture partners and third-party service providers that are in the- Carbon credit market. We understand a lot about it, right? 12:31 So we know what we're looking for, but we're very focused on our space. Our space is real-world asset tokenization of these niche marketplaces. For us, it's land, ag land, forest land. We know it inside and out. 12:44 Private aviation- Mm-hmm... marinas are next. We like the marina business, uh, for tokenization. There's different asset classes that we'll look at as things evolve. 12:52 Again, everybody's focused on commercial real estate, single family residential. So we're not looking as much at the preservation strategies as we were in- Mm-hmm... previously just a couple years ago. 13:04 That's still a part of it when it fits, but we are a real world asset tokenization company. 13:09 So if that means tokenizing 40 acres for w- whatever the highest and best use that may be, if it's renewable energy or whatever, then yeah, we'll absolutely do that. 13:18 And so we also look for opportunities to invest in joint venture partners. We look for that extensively. And so what we started to realize is that we can't do it all. 13:28 We just need to focus on our strongest point, be narrowly focused, and then work with other partners to drive the opportunities on the real estate and the land, whether it carbon markets, conservation, whatever it may be. 13:40 And so that's what we've been focused on. One of the, I, I think a great opportunity for tokenization is small businesses. The small mom-and-pop business that's in Topeka, Kansas or, or- Mm-hmm... 13:51 you know, Omaha, Nebraska that John Doe, Grandpa Joe, whomever built and started that company and now it's gone from zero to $25 million in revenue, and maybe it's gas stations, maybe it's hotels, maybe it's like a family office type drive-through with multiple asset classes. 14:07 Like, that is a rich tokenization opportunity. That's a huge generational transfer of wealth there that occur in small businesses. Mm-hmm. 14:15 So you got an asset that is a, a great asset that's been built as an operating company or whatever it may be, or real estate combined, and these owners and these CEOs and these founders, first generation, second generation, third generation, they don't think about, "I could just take this public," right? 14:32 Mm-hmm. That's complicated. As a small business owner doesn't think about that. Well, with the processes we've built and created, we can think about that and go that direction. 14:41 Ultimately, the big question is ownership, right? Who owns what? What does that look like? 14:44 And it sounds to me like the ownership from tokenization with Outside or with anything else from this model is really no different than just a syndication deal or even being a limited partner. 14:56 Yes, but I would say it's even better than that. For example, like we're working with Coinbase over in Abu Dhabi, UAE, and Coinbase Asset Management. 15:04 And so I, I can, for example, your podcast show here, The Alternative Investor, we can literally take The Alternative Investor. 15:12 I don't know if you have this incorporated or not, or LLC or what, I have no clue, or maybe it- Mm-hmm... built into some other stuff you're doing. But let's just say you have it set up as a corporation. 15:21 We could take this corporation associated with this podcast and tokenize it, and we could say it's worth $100,000, and we want to go out and sell these tokens. Stock essentially is what we're doing. 15:34 We're tokenizing the stock, and we can go out and sell it into the marketplace globally. 15:39 And a lot of time, the people that are going to buy into this are your supporters, your viewers, the people that are engaged in, in what you're building and doing. 15:48 And so we can essentially take this podcast, The Alternative Investor, tokenize it, and go out and sell it to the marketplace. 15:53 Let's just say we, we, there are 100,000 shares and we put a dollar per share on it, so that's $100,000, right? Mm-hmm. And go out and sell it globally into the marketplace via stock. 16:03 The person that buys $100 of it can hold it in their Coinbase wallet, and they can see Alternative Investor, right? 16:12 And if they look, and this is where the technology is, is really interesting, if they look, they can dig into what's called the metadata of the actual token and see where we have essentially embedded the corporate document- Mm-hmm... 16:26 of The Alternative Investor podcast into the token. So they could see, it's, it's like an authentication of ownership. 16:33 But what we've also done is that person that went out and bought $100, if they need to be liquid on it tomorrow, they can be. And that's what's really interesting about these marketplaces is the ability to do that. 16:45 You can see the ownership. You're like, "Hey, we're, we're gonna sell this much, and Matt's gonna, Matt Johns is gonna keep this much, and he's gonna re- retain ownership of X." 16:55 And you can see the ownership, you can see the corporate documents. It's a liquid and tradable asset. It might go up, it might go down based on demand. And so I have an investor in Lenoir, North Carolina. Mm-hmm. 17:06 Hunt Broyhill, Broyhill Furniture family, who I've built a tremendous relationship with. 17:11 We essentially acquired 1,000 acres from the Broyhill family in Caldwell County, North Carolina, where I'm from, about 15 minutes out of Boone Rock, about a $5 million deal, and we're working on tokenizing that and rolling that into Outside and doing some stuff with Coinbase in it over in Abu Dhabi. 17:24 But he said it, he coined a, a term for what we do that, that I think just nails it. He's like, "You're just creating a digital IPO." I'm like, "Yeah, that's what we do." Mm-hmm. 17:34 So you think about The Alternative Investor podcast show, show that you've created. You talk about an airplane, you talk about land. We're IPO'ing this stuff. That's what we're doing. 17:43 We're building that marketplace around it. We know how to take it to market. And there's been a lot to learn. 17:48 There's been some, some ups and downs, as there is with anything, but for the most part, we're taking these assets that are traditionally illiquid and building them into a liquid asset. 17:59 One of the things that probably needs to be addressed is just the fact that the regulatory markets are still kind of figuring all this stuff out. So what is today may not be tomorrow. 18:08 We're still trying to figure all that. I, I mean, the SEC, the FINRA, everybody's trying to figure it out. They, they... 18:12 Actually, I have to say that if you look at what is available today, whether it's Regulation CF, Regulation D- Mm-hmm... or Regulation A in the United States, it's figured out. 18:26 So we can do everything I've talked about under any of those, and Regulation A is prime for it Um, so we, yeah, so we could take The Alternative Investor Podcast and set up a Regulation D around it and do exactly what I have shared- Mm-hmm... 18:42 and be within the confines of the SEC if you're gonna sell it in the United States to accredited and non-accredited investors, depending on how you're setting it up, right? 18:52 There are various ways to do that with Regulation D. Right. Same thing with Regulation CS, same thing with Regulation A. 18:58 So while I do agree that there's some stuff to still be figured out about this, there's actually a lot more answers than what people understand for this- Okay... in my opinion, in what we do. 19:10 Because we're not creating a token and calling it the Matt Johns and Aaron Dog Token or whatever, with something of no tangible value behind it. 19:18 We're taking something with tangible value, creating a token called the Alternative Investor Token, which is a stock, and take it to market. Mm-hmm. So for example, think about it in the reverse. Two examples, actually. 19:31 Bitcoin came from absolutely zero, nothing. Now it's being held by institutional markets, family offices- That's right... et cetera, has a ETF tradable in the public market in the United States. 19:47 It, it's came from, what is this? We have no idea. Figure it out to a 60, $65,000, $70,000 asset now that's tradable on ETF. So I think in the future you'll see land ETFs where land is tokenized. 20:00 I think you'll see aviation ETFs. I think you'll see entertainment ETFs with different podcast shows and different things in them. The second point is the reverse. 20:09 So you've got Apple stock, you have Amazon stock, you have Tesla, et cetera, all those. Those were companies that came from a startup. Somebody started the company. They were the founder. They raised money. 20:20 They probably did a Regulation D to raise money, and then they went and listed on the NASDAQ, New York Stock Exchange, wherever they're listed. 20:25 Well, now those assets, those tradable stocks, Amazon, Apple, Tesla, and more, are now being tokenized, and they're being traded on Ethereum-based network, which is Coinbase. They're being traded on Polygon. 20:42 And so they actually have entered into the tokenization side from a different angle. 20:48 So they came from the traditional side into what I call the non-traditional, whereas Bitcoin's gone from non-traditional into traditional. Mm-hmm. 20:57 So when I think about outside and what we're doing and building, I think, okay, we can follow a very similar trajectory of Bitcoin, right? 21:06 And I think there's a lot of opportunities in the tokenization of real-world assets, ETF, marketplaces, et cetera. 21:13 So while I understand your point about figuring things out, Ethereum, Bitcoin, these are all tokens based solely on supply and demand, whereas a land token is based on the actual asset. Yes. And that's very different. 21:31 And so that's why I said a lot of this stuff has been figured out. It's just for, there's still some figuring out to do for Bitcoin, Dogecoin, et cetera, all the different ones- Yeah... with the SEC. 21:45 So from my perspective, we're in a very different game than what the SEC has traditionally been investigating, in my opinion. That, that's a terrific point. 21:57 Now, I, I do want to come back to something that piqued my inter- interest earlier. When we were talking about the ownership and the fractional ownership and just being like stocks, what about dividends? 22:06 How do dividends work on the blockchain? If you want to declare a dividend, right, and the interesting thing is that this is all technology-based. You're using technology. Mm-hmm. 22:17 So traditionally, if you hold a, a stock, IBM, whatever, General Electric, Ford, we'll use Ford, for example, good blue-chip stock, pays a dividend, right? I don't even know what's paying anymore. 22:29 But Ford pays a dividend, and you're a shareholder, right? And you're in the registry as a shareholder, and you, you've got an account on Fidelity, and Ford pays out a dividend. 22:39 Well, it essentially will direct deposit into your account on Fidelity. That's what it does. Unless you've elected to receive a paper check or something. Right. Maybe you receive a paper check. 22:49 But if you've elected to receive the dividend, which is a 1099 dividend paid out to you, then you receive it as a deposit into your brokerage account. Well, with tokenization, you essentially just do the same thing. 23:04 So if there's a dividend to be paid out from, let's just say that we tokenize a King Air jet, I think it's a 650, I think is what it is, comes to mind, King Air 650, and we have it set up in a corporation so that we can, you know, charter it, rent it out, right, with, and the token holders own it, and it generates $300,000- Mm-hmm... 23:24 revenue that's gonna be paid out in a dividend, then all the token, just go in and just type in $300,000, and there's plenty of platforms that do this, and just send out a dividend to each of the token holders, and you're looking at your Coinbase wallet, and it pops up that you've received a dividend. 23:38 That's the future of things. Uh, so it's, it- And it pops up in dollars, right? Not in some kind of cryptocurrency, right? That's a wonderful question. So a lot of times you're dealing in what's called USDC- Mm-hmm... 23:49 which is a United States dollar coin backed by the US dollar. So you're probably being paid out in USDC 95, 98% of the time would be my guess. So again, this is stuff into the future where we see the technology going. 24:04 But I would say more than likely it's gonna be paid out in USDC, which to convert USDC on Coinbase is two seconds. It's not even that. Mm-hmm. 24:12 So you just go in and convert, and convert from USDC to USD, which is US dollars, as you and I understand it. So- Yes... um, that, that's typically the way it works. 24:22 Just to close things out, is there anything you'd recommend to people who are interested in deals that may involve tokenization or something they should look into before jumping in? 24:30 There's a tremendous lack of trust in this space. Because things are becoming more s- mainstream in a hurry, but for the most part, it's been a little bit in the wild, wild west in the past. Mm-hmm. 24:40 But I think that's quickly going away, particularly as you have more regulations being built up around it, which are good. I'm in favor of regulatory marketplaces, in my opinion. 24:50 But outside United States, there's a ton of interest in this space, and a lot of investment been made in it. United States is pretty slow. 24:57 I would just say seek out the people that are what I would call subject matter experts on whatever it is you're trying to explore. 25:04 You know, if it's single-family residential, if it's commercial residential, and you want to tokenize that, I would not try to go to the technology guys. 25:14 I'd find the guy with the extensive commercial real estate background- Mm... that's working in the space, that has figured out. Because for us, coming from the land world, that's how we- That's a great point... 25:23 actually figured this out. We did not come from the technology side. And the reason we were able to figure this out is because we said, "Okay, here's our knowledge of land. 25:31 How do we take this technology and apply it to the land?" As opposed to trying to make the technology work. We've had to try to figure out, here's the land, here's the technology. What changes do we need to make? 25:44 Because we understand the land side. We, we understand a lot less about the technology side, but it wasn't difficult to learn. I, I say that, but it probably was. 25:52 But, and the, the cool thing about it is that we knew land inside and out, so we started with land because it was a good niche marketplace for us, where we could really stand out and own that space. 26:02 And that's what we've done. But as time has evolved, we started to understand we can tokenize any asset just the same as land. If we can do land, which is one of the most difficult, we can do any of them. 26:13 And so I would say just try to, you know, if you're interested in it, then seek out the subject matter experts. 26:19 And don't seek out the people that pay to go to blockchain conferences and talk about this stuff that have never done it. There's a lot of that that goes on. 26:27 Seek out the people that grew up around airplanes, grew up around commercial real estate, know it inside and out- Mm... and are really focused on building out in the space. That's a great thought. 26:37 I really appreciate that. Aaron, I appreciate you. Thank you so much for taking the time with me today, for all of the wisdom and, and nuggets you've shared. 26:44 Wish you all the best with Outside, of course, and I hope you can enjoy some fishing today. Thank you so much. Appreciate it, man. We hope you enjoyed this episode of the Purpose Driven Capital podcast. 26:54 If you found this valuable, be sure to like, subscribe and share. Are you ready to align your money with your mission? 27:01 Discover the Purpose Driven Capital framework, access practical tools, and build meaningful connections to grow your movement and multiply your impact at PurposeDrivenCapital.co. 27:11 The views and opinions expressed in this show are solely those of the individuals speaking and do not reflect the views or opinions of Honeyhive Capital, any broker-dealer, investment advisory firm or its sponsors. 27:23 The content is for informational and entertainment purposes only. 27:26 Nothing in this content, nor any communications from it, should be treated as constituting financial, investment, legal, tax, or other advice of any kind, or as a recommendation to buy or sell an interest with respect to any investment. 27:39 We look forward to you joining us next time.
