Bloomberg Línea — The sky-high interest rates worrying the financial markets are something “marginal”, according to Brazil’s André Vellozo, the Palo Alto, California-based CEO of DrumWave, and who says the economy’s next ‘megacycle’ will be a world in which big banks and big tech collide.
Vellozo launched data platform DrumWave in 2015, providing data management services to large companies including big banks and telecom carriers. He ran the company with his own money and investment from friends and family before bringing in a new CEO, raising a $5 million Seed round with the participation of DGF and Bossanova’s João Bezerra Leite, and scheduled the launch of its data wallet in March 2020, just around the time Covid-19 hit.
“We received a big ‘no’ from the universe, ‘not now’. And I was no longer the CEO, I was chairman. Our business plan was cut to survival mode,” Vellozo said in an interview with Bloomberg Línea.
Amid the pandemic, the new CEO fell out with the backers because the fund and board wanted to pivot the company to focus on data privacy and sell that.
“I said that wouldn’t work, because DrumWave wasn’t built to do that, it was built to do the opposite of that. I said, ‘if you guys want to run a data privacy company, launch another one. I’m here to do data monetization’.”
Vellozo brought on board Fernando Teles, former CEO of Visa in Brazil, to invest in the company. Also on DrumWave’s board is Scott McNealy, former CEO of Sun Microsystems, which was bought out by Oracle, and Lawrence Levy, former CFO of Pixar.
McNealy is the author of the decades-old line, “you have zero privacy anyway. Get over it”, and DrumWave starts from that premise, that it is not after privacy, but rather harnessing the power of the user to monetize their own data for the companies that use it.
Monetizing data in the financial sector was advocated by Brazil’s Central Bank chairman Roberto Campos Neto last year, and DrumWave’s rapport with the Brazilian government became clear when it struck up a cooperation agreement in June with Serpro, the leading provider of technology solutions for the Brazilian government.
Now, the company is negotiating a new round with new funds, but on terms that are still being debated, especially following the corrections in valuations that tech companies have been experiencing amid rising interest rates.
“When I look at things like Andreessen Horowitz investing in Adam Neumann, with the biggest crypto fund... I’m not saying I’m right because I haven’t got it right yet. But either Marc Andreessen is right, or I am,” Vellozo says.
Vellozo’s is focused on money, but data-related, and DrumWave will launch a digital data wallet, d-Wallet, in September in Brazil, and Vellozo expects it to scale as Pix did, Brazil’s instant payment system, powered by the central bank.
DrumWave’s API will operate inside bank applications, and in which users will be able to request their data from companies - which today can already be done, but DrumWave will act as a ‘proxy’ for the user - creating a data savings account, and monetizing it for investment - like a company that needs a large database to develop an algorithm, for example, and shares the revenue with whoever sold the data.
The idea is that the owner of the data uses the data as they wish, and benefits financially when large companies use it.
DrumWave earns a fee for each transaction using the data, and operates on IBM’s cloud.
The next megacycle: the data economy
Vellozo says the five biggest data companies - Meta (META), Amazon (AMZN), Apple (AAPL), Netflix (NFLX); and Alphabet (GOOG) - are together worth $7.2 trillion and, generalizing, process almost all of the world’s data.
The world’s five biggest banks, meanwhile, are worth $1.5 trillion, and process almost all the world’s money.
“Between the two there’s a $6 trillion difference, it’s an asymmetry. That asymmetry is showing up now because the world of big tech and the world of big finance are colliding,” he says.
“I believe in megacycles. When you get to the end of one, you really despair, then you have the metaverse, Web3, Web5, and a lot of things to try to make you migrate to the next step,” Vellozo says.
“If not, the generation changes, and the companies disappear. They go to the bottom, they become utilities. In the same way that Oracle, and Cisco, go down the stack, banks are also going to go down the stack because they are going to become part of the process of turning that into earnings.”
“I have never believed in cryptocurrencies. To me they are social media from the financial market,” he says, explaining that, just as social media removes the middleman (newspapers) for information, cryptocurrencies aim to remove the middleman - the banks - from the financial market.
“The discourse of ‘let’s decentralize’ is valid, it creates value, but to be able to do that you have to have a place where trust is preserved. It has already happened with the media and it will happen with the financial market. The difference is that the financial market has a central bank, a big regulator up there, and the media doesn’t.”
Banks are already platforms in the sense that they connect peers. But, according to Vellozo, the infrastructure will clash with technology companies because the user is the same and the value is shared.
“Central banks are going to become big techs. Banks will become marketplaces and marketplaces will become banks. Paper and plastic money are about to disappear. It’s not crypto, it’s data. Data is the new proxy for value. Data is the only thing that can have ballast. All we do is generate data; sleeping, waking up, walking. Doing something or not, just existing, you generate two things: value and data,” he says.
Data cap is the new market cap
DrumWave intends to monetize data to provide divisibility, transportability, and resistance to fraud.
“We are talking about infrastructure and users, bringing the two ends together so you can print your own currency. We pay to process 50% of the planet’s data. It’s not a philosophical discussion, it’s a financial discussion.”
For Vellozo, the companies that dominate the first leg of the new megacycle, of data ownership, will have the chance to go through the whole megacycle, as Apple and Microsoft did through the past megacycles.
And those companies didn’t die, he points out.