Sweetbridge Alliance Is Incubating Blockchain’s Tomorrow

Blockchain, Education, FinTech, Innovation | November 15, 2017 By:

Sweetbridge is a non-profit, global alliance of businesses that are leveraging blockchain technology to solve issues of liquidity and resource sharing within supply chains. Sweetbridge President Mac McGary talked with Block Tribune about how the organization is using its connections to create new companies.

BLOCK TRIBUNE:  Your setup is basically as an incubator.

MAC MCGARY: Well, that’s correct. That’s a large part of what we do. As you build out an ecosystem and you introduce a new technology, you need to engage with enterprises to solve for supply chain complexity, and not one company today has a full end-to-end solution. The market dictates collaboration is a favorable way, and we’re in an open source, non-profit foundation organizational structure.

For us to advocate for open source technology, we need to promote it, and the best way to promote it is through actual usage in the marketplace. That’s true for most of our alliance partners. Our goal is to solve for how do we combine efforts to engage with enterprises and provide valuable solution sets.

What we’ve also understood from blockchain, as Scott (CEO Nelson) and I, as partners in this business have learned through other new technologies, often you have people with brilliant insights and small teams that desire to take on a big market. In the supply chain, you’re talking about working with hundreds and thousands of companies. If you work with a channel master like a Cisco or a GSK or a Procter and Gamble or a Pfizer, they want to have the assurance that you’re going to be able to provide not only good technology, but to deploy it for the purpose intended.

When you have these small companies, they just don’t have the wherewithal to take those products to market. We aggregate these technologies in pursuit of better supply chains. In cases where it’s a five, 10, 15-person teams and they have some funding but not sufficient funding, what we like to do is incubate those projects of promise. The incubation services range from business planning, executive oversight, financial planning, NVP development, white paper development and editing. Obviously, they’ll be the subject matter experts, but they may not have created a commercial grade white paper for large market-wide consumption.

We typically find that their idea of a white paper is a summary of assessments and observations versus something that would make sense to the general market, so we have a lot of insight there. Of course, we bring in token economics, which we believe we’re experts in, and how we’re going to change behaviors through cryptocurrencies or tokenizing a community effort. 

BLOCK TRIBUNE: I’m sorry. I just had a vision of somebody handing over a napkin with something written on it and saying, “This is my white paper.”

MAC MCGARY: That’s how it starts.

BLOCK TRIBUNE: How did you choose your partners?

MAC MCGARY: We have a road map and assessment on what we call the white space. What are the problems that have not been solved with best of industry practice today? What would be the blockchain and related technologies bring that would be different if we did it all over again, or if we extended the solution set, or we addressed things that haven’t been adequately addressed before, like first mile, the genesis of a supply chain, or a final mile from when it gets to a warehouse to the consumer, or how a patient would actually record the use of a drug therapy.

We have a view on where the market opportunity is, and then we seek out partners who have a shared vision, and then from there we looked at technology wherewithal, and first and foremost, an industry expertise as the competency. We don’t look for necessarily prior business experience providing that solution to market, but we do want to say you’ve got a clear understanding of the problem and you have a clear understanding of the merits of the technology.

Blockchain is central, but it’s not just blockchain. We’ve got projects which may be AI related or IoT as a data source, the feed blockchain, but it is related to what’s new in technology and how do we bring those technologies to bear on the supply chain.

BLOCK TRIBUNE: I want to drill down a little bit more. Who can join your Alliance? How far along must they be in their planning? Should they already have their funds in place, at least seed funds, before they can join? What are you looking for, essentially?

MAC MCGARY:  We found a couple of people who are serial entrepreneurs who have current day jobs as consultants who are part-time, but they’ve spent six months of a year building a vision, and it’s a derivation of what they’ve done before. In those cases, we will say, “We will help you get funding to move from concept to white paper.” There are some cases, but that would be rare.

Typically, what we’re looking for is people who have six or nine months of traction and five people trying to build. So far, all our partners are typically people who are already established and incorporated, though sometimes we find our their legal structures are not designed for the current market ICOs and non-profit and open source and hyper collaboration. Sometimes we ask them to actually revisit their legal structures.

BLOCK TRIBUNE: Is it hard for you to find developers?

MAC MCGARY:  Yes. Like everyone, I think there’s an acute shortage of people with blockchain experience, or with relevant programming experience that understand the nature of building an exchange or a platform by which large sums of money are changing hands in the payment services area, which is a little bit different than building a cell phone application that you download.

I would say there’s a deficit of talent, and that’s one of our major obstacles. We’ve sought to remedy that partly by having relationships with firms across the globe that are in the cultivation of talent business, and then of course university structures. ASU’s one of our early partners, the largest university in the US, Arizona State. They have agreed to create a blockchain certification program that could produce as many as 2,000 blockchain programmers in the academic year 2019.

That’s just indicative of what you need to do to stimulate it. Maybe we’ll take 25, maybe we’ll take 100. They’ll maybe have some experience working with our open source software before they would seek out employment jobs, kind of like an intern on a school-related project. They’re not the experts we’re looking for, but that’s the way to feed the system.

BLOCK TRIBUNE: Right. What open source software are you using?

MAC MCGARY:: Well, we’re creating our open source protocols, and then we’re leveraging ethereum. There’s a number of partners who are also building smart contract templates and other derivative works like in the case of arbitration. Materium is building an adjunct to ethereum, so a lot of open source technologies will come together.

BLOCK TRIBUNE: Do you have any success stories so far?

MAC MCGARY: Well, I would say we do. We were partnering with a company called Aperio, and they’re in a sense an incubator based in Arizona working with high tech companies. Probably by coincidence, Todd Taylor, the CEO and founder, and I worked together years ago on a project for the HP supply chain. We started to build out our partnership, and then we decided to actually combine forces, so it’s actually an acquisition in process.

What was beautiful about that was a common understanding of the problem. They had engaged in some POCs with high tech companies, and they had part of the solution. But with Sweetbridge, they get a broader part, and then they get much more momentum. That’s my first example. Maybe that’s not a model we want to replicate. We’re not in the business of acquiring, but when you have these five and eight-person teams, if they’re directly in line with our goals and objective, we might uncover an opportunity to combine for a common purpose.

BLOCK TRIBUNE: How many companies do you have under your purview right now?

MAC MCGARY: We have 22 agreements in place today, and we hope to land another 12 by January 1st. We have kind of a hierarchy of relationships. Level one is we’ve agreed to collaborate and know about each other and be certified in each other’s products, and to promote each other in the marketplace and engage together. There’s no specific change of funds or revenue. It’s a collaborative marketing alliance. Then, there’s a level five, where we are actually managing their crowd sale and using our ICO platform rails to help them raise money. We’re providing mentoring, incubation acceleration. That’s what we call level five relationships.

I would say about half of those 22 are in the category of level five and half are currently just level one. They may already be well-funded. In level one, my relationship might be an example with IBM Hyperledger. They don’t need our money or mentoring, but that would be a platform that we would build upon, and then we would be committed to be certified and advocates for that Hyperledger project. Does that make sense?

BLOCK TRIBUNE: What is your share of revenue on this? How do you keep up your funding? You’re a non-profit. Are you taking anything from these companies that you’re incubating?

MAC MCGARY:: There will be some services that we’ll be reimbursed for with tokens, or there will be token exchange to align interests. If we help a company successfully go through a crowd sale process, we’ll be earning, if you like, a commission for said services, legal advice as appropriate, PR advice as appropriate, white paper and NVP development as appropriate, marketing and strategy development. For those services, we will be getting tokens upon success of an ICO.

BLOCK TRIBUNE: How do you select companies that you’re going to be working with? Is there a board process, or is there a numerical system? How do you do it?

MAC MCGARY:: There’s about 22 data points I collect, and then we rate them as high, medium, large. We don’t have it to a numeric indication, but that’s just a way to bring discipline to the valuation. We reach a consensus with two or three of our executives at the very least. If it’s a technical product, then we have to have our technical team first review feasibility and architecture and the competency of the team.

That would be preliminary process. Ultimately, once we have a candidate, we go through the spreadsheet and nominate them. Of course, they don’t get to that process unless there’s already compatibility on the solution footprint as we see the market we’d like to buy in the future.

BLOCK TRIBUNE: Anything that you want to bring up that I didn’t ask you about?

MAC MCGARY: Well, just one theme, and then one comment on my background. One comment is that we philosophically believe that open source is better than proprietary software, that models in the cloud or in the blockchain are better than behind firewalls, and that really, we’re talking about a hyper collaboration market versus a hyper competition market. That means that competitors are more likely to collaborate in this new world order, if you like, of technology and open source.

What you want to do is get as many people to contribute to open source development. Maybe these people will be private citizens. They might work for multiple companies, but that’s one way to get rapid adoption. If you look at Linux and some other projects, they may have started to pioneer the road, but I think what we’ll see in blockchain adoption is that with open source, you’ll go from having five, 10, 20 people working on a protocol to thousands. I just think that that speaks to our philosophy, and it’s very different in the models that we probably exercised in the ’90s and even in 2005, 2010.

The last comment on my background is that I’ve always believed it’s an ecosystem place. Supply chains are complicated. I remember Nike, they had 3,000 key suppliers. When I worked with Caterpillar, they had 11,000 key suppliers. It takes a bit of experience to understand how you get hundreds of organizations to adopt a platform. It’s about aligning incentives and making it easy.

We think token economics is the magic sauce. It’s a big change. It’s not just blockchain as a distributed ledger that is transparent, and communities will commit to share information through that model because it’s not controlled by any one person, but through non-profits and open source consensus building.

I also like the idea of bringing this economic framework to bear, and that’s really the unifying source in our alliance movement is two things. We’re focused on supply chain, and secondly, we’re focusing in on a very specific set of principles around token economics, aligned behavior, and incentivizing people to adopt a technology on a community and ecosystem basis. Does that make sense?

BLOCK TRIBUNE: Yes, it does. Let me ask you this and play devil’s advocate. Does the shared number of tokens that are in the market make it hard for any particular firm to get traction? In other words, it’s almost like the consumer loyalty programs. You’re overwhelmed with the number of tokens and how to use them and what to do and things along those lines. How big of a barrier do you see that?

MAC MCGARY:: The paradox of choice, the proliferation of choice, is a dilemma for all industries. There’s like 45 types of toothpaste, right? Which one do you choose? This is a common problem, but specifically around the token economy, I do believe that there are 1,000 tokens that have somehow been used in the crowd sale format.

If you break them down, there are four kinds of tokens. There’s a utility token, there’s a security token, and an app token and a work token. If you start breaking those down, they come into different categories even within that. What we care about is if you talk about cryptocurrencies specifically, there’s 10 or 15, but there aren’t 100. Those 10 or 15 are going to compete for specific market segments.

We think we’re one of the only tokens that’s really competing for global trade, trying to satisfy the needs of large channel masters like a Cisco, Apple, Amazon, Procter and Gamble, Nestle, Unilever. Therefore, our design for the smart money, programmable money, is very different than bitcoin, for instance, which is meant to be ubiquitous and the best across really a consumer market. The high value applications are really about moving money from one country to another or being a store of value in a high inflation economy, like Argentina.

A bitcoin is not going to be adopted by Apple as a way to do commerce. They may accept it in stores at some point, so I don’t mean to say it won’t have a consumer application. In our experience, we’ve not really found people who are focused on that same dual currency system that we believe large corporations globally will adopt. We’re also seeking collaboration from governments.

I guess to answer your questions, we see the market as definitely confusing, a lot of different tokens with different purposes, but in our segment of trade, we don’t really see strong competition today. Bitcoin we don’t believe is a competitor. It’s a proof of concept. It says there’s validity to this thing called blockchain and cryptocurrency.

We are aggressively seeking relationships with certain governments, and we’re aggressively seeking relationships with large enterprises. The moment you have a company commit to do $20 billion in direct procurement on our platform with their supplier community, we will get validation. Then, we’ll develop an early mover advantage and we’ll become, we believe, if not the defacto standard, we’ll become one of the leaders in that market segment.

BLOCK TRIBUNE: Some countries have indicated that they intend to develop their own digital currency. What’s your take on that? Do you think it’s going to happen? Will it be widespread, or will it just be a few experiments here and there?

MAC MCGARY:: Oh, I would say over a seven-year period, they’ll all have derivatives of fiats in the digital world, in the seven or eight major economies. The funny thing is, the minor economies will probably do it first to be relevant and innovative and create differentiation. I see a world where there will be a digital version of the dollar, definitely. I think that’s good for us in Sweetbridge.

We developed BridgeCoin to be that transitory coin between the physical world and the digital world. It’s a stable coin. It’s tied to fiats. We don’t encourage people to buy it for investment purposes. It’s a bridge from today to tomorrow, and we wouldn’t do it if the seven major economies had already digitized their currency. If we have to fade it out over time because digital currencies pay a role, it’s hard to predict what exactly would be the use case in seven years, but I do see that as happening and I think of that as a positive move.