185: Diamonds Dancing | Your Diamonds | Tim Goodman

This episode of MoneyNeverSleeps is sponsored by Philip Lee, one of Ireland’s fastest-growing corporate law firms and expert advisors at the heart of the Dublin and London start-up, fintech and crypto communities.

Your Diamonds are the eighth of the founding teams forming the Launchpool Web3 Techstars Accelerator Class of 2022 that we’ve got on the show over the next month.

In this episode, Tim Goodman talks with Pete Townsend about:

- Having diamonds flowing through his veins

- Scaling by surrounding yourself with smart people

- Cashflow finance as the problem to solve in the diamond industry

- Building fintech first before moving into DeFi (decentralized finance)

- Providing a venue for lenders and borrowers to negotiate

- Creating scalability by pairing NFTs as digital twins of real-world assets with smart contracts

- Letting nature work out the ups and downs of crypto markets

HIGHLIGHTS:

Tim Goodman on getting started in the jewelry business:

“I've got diamonds flying through my veins. I come from a family that founded a jewelry business in colonial Sydney in 1864, and my uncle was the last diamond merchant. He died about 15 years ago.

“I started out sweeping the floors and cleaning the lavatories in an auction business in Sydney, and I guess it took about 30 years, but I ended up owning and operating the largest art and jewelry auction enterprise in the Southern Hemisphere encompassing brands like Sotheby's Australia, Bonhams and Goodman, and the license agreements with their head offices.

“The jewelry business was something that I was always focused on and I employed other people for art collections, cars, coins, stamps, music and other memorabilia. But I was always very closely associated with the jewelry business as that had been my heritage.”

Tim Goodman on driving earlier lessons learned into the Your Diamonds business:

“I've been involved with the launch and operation of numerous online businesses. Originally, with art, I had a couple of failures due to technology issues - failures that I learned a lot from. In recent years I realized that if I gathered a really good team around me, like I did back in the day when I had the auction businesses, then I would succeed.

“So, in the last 12 months we've raised some seed capital and we've built five really cool apps for the diamond industry, all around diamond pricing, benchmarks and measurements of market sentiment, basically providing information for the diamond industry.

“The thing that I learned in my last career was that to scale, you must surround yourself with very good people. You can't be great at everything. We all know that. So, if you're going to scale and launch into areas to take market share from your competitors, you must surround yourself with the very best.

“These people have been absolutely vital to get Your Diamonds to where it is today.”

Tim Goodman on cashflow finance as the problem to solve in the diamonds industry:

“There is a massive problem in the diamond industry that’s been evolving over some years: cashflow finance is very difficult to obtain.

“The traditional banks have reduced their exposure to the diamond industry from $16 billion to $8 billion per annum in recent years.  The mid-supply chain operators, of which there are many thousands, are finding it very difficult to fund their cash flows.

“So, we have conceived a concept whereby the borrower, a diamond merchant, can use the very thing that the merchant is borrowing the money to acquire - a diamond - as collateral for a loan. It just makes common sense and it's like a diamond mortgage.

“I struggled for about 18 months to work out how to do this, and then in October of 2021, I came across blockchain technology, and I totally immersed myself in it.

“But all the projects out there focusing on the digitalization of real-world assets in preparation for trading them, they lack valuation engines. They also lack an understanding of the valuation and sale of secondhand valuable assets. And, so lucky me, these are the things that I understand because of my 40-year career.”

Tim Goodman on creating digital twins of real-world assets with NFTs (non-fungible tokens):

“You create a digital twin of the asset and the blockchain-related process enables this to be automated. And when you have automation, you get scalability. NFTs are misconceived at the moment because the world thinks non-fungible tokens are these mad things.

“The true value of an NFT is the ability to create a digital twin of any asset that enables people to actually trade that physical asset with all sorts of good things. One of them is the history of that asset, as you can track and trace its history. The second thing is that you can attach that NFT to a smart contract and then the world opens up with so many options.

“Not only does the NFT give you provenance and traceability, but it gives lenders the ability to obtain security, because the NFT is attached to a smart contract.”

Tim Goodman on what Your Diamonds looks like at scale:

“So, you've got a borrower, and you've got the lender - people who want to get a return on their [liquid] assets, and at the moment, they're not getting a return. The borrower is a diamond merchant who wants to buy a diamond from a third party.

“We're creating a place where lenders and borrowers can negotiate a deal along with the terms of the loan. It will be like a stock market order book, and once there's agreement, that triggers the next steps.

“Firstly, it triggers the lender to stake a stablecoin into a liquidity pool. Secondly, the auditor - a human auditor - takes possession of the diamond and checks it out, and parties undertake KYB processes (know-your-business). Thirdly, an insurer enters the frame like Lloyd's of London - a species insurer - who provide insurance against default.

“Once the auditor checks all aspects of the borrower as required by the diamond collateralized loan protocol, then the loan funds are transferred to the borrower. Then the NFT (evidencing title to the diamond) is then attached to the smart contract (representing the loan agreement) and the diamond is handed over to the borrower.

“The NFT is in the name of the lender until the completion of the smart contract, so the lender has title to the diamond until such time that the lender completes the contract.  If the lender defaults, then the species insurer provides the lender with cover against not being able to recover the collateral if the borrower has defaulted.”

Tim Goodman on the bigger vision of applying the Your Diamonds concept across multiple asset classes:

“There is no reason why we can't apply this to collectors’ cars, wine, coin, stamps, art and other weird things like water rights and carbon credits, providing there is a marketplace for that asset, whether it be a spot market or a semi-spot market, and the ability for us to create a valuation engine based on those markets.

“This concept could apply to shiploads of petroleum, shiploads of gas - anything that somebody needs to borrow money against to buy or to trade.”

Tim Goodman on bringing it all back to real life:

“I think it was Confucius who once said that if you choose a job that you really love, you'll never have to do another day's work in your life. I work 7 days a week, and I punctuate that with a bit of surfing, but even that gets in the way.  It's full-on and I'm 69 years old, but I feel like I'm 29 years old - it just makes me happy.”

LINKS:

Connect with Tim Goodman and learn more about Your Diamonds

Episode title inspired by ‘Diamonds Dancing’ by Drake & Future

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