Under Appreciated Technology Risks for Institutional Crypto - TOKEN2049 Singapore 2022

good morning everyone I'm Luke Kerner and I'm with blockchain co-investors which is a crypto Funda fund we're invest in over 40 uh of the leading crypto VCS um and I started something called crypto Mondays which is leading crypto Meetup in the world uh and it's great to be here this is my second time in Singapore I was here for consensus in in 2019 and was completely blown away by Singapore and I'm excited to be back and Robert now this is your first time here and you can introduce yourself what you do but you're now opening up an office for your company here so that I wanted to touch on that but when we have a we have an office our first a few employees who are here in the audience um that just joined so we're we're officially in Singapore and uh and servicing customers all over all over Asia we actually have been for uh several years from the United States where we're headquartered but looking forward to doing that more materially out here and why didn't you tell them what Luca does so Lucas the an Institutional software and data provider servicing any businesses that have crypto assets on their balance sheet and so we help them be more financially responsible past Audits and manage all of the very messy data that is Created from all the Innovation that happens in the crypto ecosystem and why why are Financial audits so hard yeah it's it's interesting and I guess even traditional traditional Financial audits are can be challenging and burdensome but they're very necessary to add transparency for shareholders and any other stakeholders and so that all is uh consistent for for crypto as well however um there's a bunch of nuances that come with valuing these assets organizing the data um that make a what would usually be a traditional audit a lot more challenging and so even the Auditors are figuring out right now still how to audit crypto businesses effectively um in a more mature way and so we're very very deeply involved in a lot of those conversations at Luca with our customers and so when you generally get involved with the company I say it it varies all different stages typically earlier stage they're less interested in in our services because they're not quite ready to to invest all the the capital that they need to into their back office operations they probably haven't been through a financial audit yet um or they're considering it and then when they get to a mid-stage or a later stage where they're developing more risk processes hiring a compliance officer Chief risk officer or being required to do a financial audit that's that usually creates a uh a phone call to us where where we uh we start commercial conversations and most of the time we do like well you know obviously we're excited you're excited to start then but would they have been better off calling earlier and starting these processes so they were in a better position you know when it came time to actually need it absolutely I mean I I think most would agree particularly Auditors to be proactive in that approach the earlier that you can prepare for an audit or any other other risk processes that an organization is going to hugely pay off later you don't want to be doing all that stuff when you're scaling and dealing with with Revenue developing your products and uh much easier to do at an earlier stage if you can afford to do it and you know as a VC and a fund of fund I'm always interested in you know how companies have been funded and kind of what your outlook there is one share that little bit of that history sure we're uh so we're our latest fundraiser is series e um it was a on a 1.3 billion dollar valuation we had raised about 200 million just shy of that in the um the 18 months prior to that over four consecutive rounds and so a lot of that was over the last year there's a lot of capital being being uh provided to to various crypto businesses that I think a lot of companies benefited from and uh and then we've also scaled our our team up to about 180 people today from from 45 at the beginning of that two-year Journey wow okay so that's that's a big staff how is that distributed around the world so we're we have about 20 outside of the United States the rest are scattered all over the United States our biggest Nexus is in New York City uh that's where we started and um and we've just recently opened up an office in Zug Switzerland where we do have our first few employees that are there in Singapore that I just mentioned and then we're continuing to do that in several other locations really wherever there's a large population of crypto businesses is uh and right now with all the the scrutiny and the events that have happened particularly this year and a couple of the failures that we've seen it's created I think a new sense of urgency and appreciation for um for risk management and some of the the things that are a couple steps you typically removed from generating Revenue that these businesses are usually focused on during bull markets and it's interesting because you know on one hand obviously you know all of these failures have heightened the need for proper financial accounting on the other hand you know they've also to some degree contributed to crypto winter um so you know how is your business kind of grown you know during the kind of the crypto winter period you know it's interesting and I think I wouldn't attribute the crypto winter to those failures I would say they probably um well they didn't help worsened it right right and uh but I think the bigger bigger macroeconomic sure causes most people would agree um and I'm hoping that that crypto Market's Peg I'm sure a lot of people are depeg from these traditional markets but regardless uh when they are here um operational efficiencies are key if you can make your business more resilient and most of the businesses that have focused on that historically and a lot of these are our customers are very comfortable right now they're looking at the current conditions as just a different set of opportunities from what they what they experienced during bull markets and so I'd say um there's a lot of very successful businesses right now that are thriving during these conditions and we see some of them in the Press acquiring other businesses and things like that but um there's definitely a lot I mean we might see less marketing and less public awareness that they're that they're thriving but but it doesn't mean that they aren't so yeah no I I completely agree with you I think resilience is you know problem one of if not kind of the most important characteristic for an organization to have right because every organization goes through tough times you know and you know and and crypto winter right to you know winter is always coming um and it will again right and we're going to experience them so I think these um these businesses being more resilient it's amazing a lot of younger companies are looking for an exit they're creating um some great products but they're not trying to create a large robust mature business for the long run they're looking to be acquired or some other form of an exit and I think the few that are focusing on just building very large for businesses and they're not focused on the exit strategy um tend to be a little bit more risk mature because they have a stronger appreciation for um for the capabilities that'll enable them to last for that period that makes a lot of sense now is here you know you got such a global business how do you kind of see the the kind of global landscape for for crypto yeah I'll say it's very exciting um coming out to Singapore has been very exciting really I think there there's been very few cities that I've traveled and I've been doing it quite a bit this year where we haven't seen a ton of momentum and what's interesting is a lot of that momentum you don't notice unless you're locally actually in those cities which is oh you're you're preaching to the choir I this this is what I do going around the globe I spend six percent of my time you know going to you know different the crypto cap you know wherever the crypto capital of the world is during that week and this is obviously in the world this is it um for that for the crypto capital of the world undoubtedly and what's really surprising to me and I know I've noticed it is how few Americans there are there are there are a lot more the last time I was here was consensus 2019. and kind of it felt like there were a lot more Americans so I don't know what you would attribute that to yeah and this is my my first time here so I guess I don't have the the relative context but um but I've been surprised as well I don't know if it's pandemic circumstances it's preventing travel or um not a priority right I mean that's my assumption is you know and it's it's winter so I'm sure that's a part of it too for these companies but um were you at the mainnet in New York I was at Das and and some other events that yeah yeah that preceded it because you know because that's where I was last week and you know I'd been at near con and Lisbon the week before that and zencon uh uh uh in Milan the week before that and um mainnet to me and Das I don't know if you feel I was surprised at how subdued the whole vibe felt you know and that's because I think you know New York so you know mainnet at least there's a lot of uh investors who are more more focused on the token price I think than the builders that were at the different conferences but here um you know again there's just a lot more excitement here than I felt I don't know you know how you would you know Das historically and we've gone to that event very frequently we tend to see the same business and that's the digital asset Summit for the food right now yeah Clockworks blockworks puts on um which is a great event very institutional focused and we typically see a lot of the same businesses every year this year I'd say we saw a lot of new ones that I hadn't seen the previous year and they were primarily traditional financial institutions or or similar um which was very exciting to see so there's definitely uh a lot of that a lot going on that's that's definitely a theme that I and you could get where a lot of them actually kind of actively aggressively pursuing the opportunities or are they more kind of putting their toe in the water um I'd say they're feeling it out some of them are going through regulatory approvals many traditional financial institutions are already regulated heavily so they're not going to get into crypto without doing it by the book and ensuring that they have all the the proper approvals um and and their businesses are much more uh regulated in a straightforward way so I'd say there's there's a lot of observing but those those organizations they take a long time to to mobilize new pipelines and new offerings so um I think they've been at work for a while many of them are launching some of their offerings now and the others that aren't quite ready to launch are definitely hard at work behind the scenes well and I imagine those kinds of customers they've got to start engaging your services from you know day one right they can exactly begin to have do any business without yeah it is it's a you know there's vendor risk assessments there's rfps requests for proposals there's all kinds of uh processes that are very lengthy that are really designed to mitigate vendor risks um which are more important than ever when dealing with a lot of the very young companies that are that are catering to to all the crypto Innovation so um so it is it is tricky sorting through all of them and we we take great pride at Luca in um trying to make that process as easy as possible for those organizations and so we we try to demonstrate a lot of those processes even though we're a relatively small company compared to them and if you think about um other companies in the industry that you know are overlapping with you that you plug into um you know I got you know the before Milan I was in Tel Aviv and I visited the fire blocks office there wow that was buzzing so I assume you've got a work with fire blocks absolutely yeah we work with with fire blocks with copper with with a lot of their peers um we share a lot of overlapping customers with our capabilities so um it's it's very natural to do business development to do events um we're doing some events out here with with a couple and we just announced a partnership with Talos who I know is here as well they're doing some great things and uh it is it's important for a lot of these organizations um servicing crypto to partner together and to support each other and and there's a lot of very uh complementary products that they have and you know when when you're looking at and there are a lot of great companies there's a single one you go you know here's one company that's really coming up that maybe people in the audience aren't as familiar with sure that's tough I'd say um big fan of solidus labs uh there's um and uh and there's some very early startups what do they do uh so they're trade trade surveillance uh so they'll um they've got their SAS company that offers trade surveillance capabilities and products and so serves a lot of government agencies and other businesses that are managing counterparty risk and other other trade risk activities um and uh and all the logos that you mentioned I think are all all great examples of of companies that are really thriving and doing some great things and are have very mature Global strategies which not not all of them as as you mentioned earlier sometimes we see that Regional effect um a lot of those companies are they they realize that I mean crypto inherently is is global in nature right it doesn't really see borders um we see the borders form a little bit due to the regulatory restrictions um but the underlying technology doesn't have those limits so um and I think it's very natural for the businesses to do the same and when you see the regulatory restrictions do you see a lot of kind of regulatory Arbitrage between the different jurisdictions absolutely I mean I think we we see that a ton we'll see companies that don't want to deal with regulation in the U.S or in in Europe um which are two of the more more regulated areas um tend to form you know entities outside of the United States I think that that's temporary in nature and that ultimately the markets are too big in those other regions and um and so in in contrast to the other companies that are maybe starting off in a heavily regulated area and that are going global I think are going to have more long-term benefits for sure makes a lot of sense so we're down to our last minute what's the last thing you want to leave the audience with uh about Luca yeah I'd say and and I I say this pretty pretty frequently events that the the importance of operational risk and a lot of the things that a CO or a CFO or or someone um doesn't want to deal with today such as Financial audits uh or hiring a chief risk officer or a risk team um I can't say it enough that it's important to actually do those things do them proactively do them before you need them and uh and start thinking about all the things that could catch up to you later uh and the cost to do those today is far less than doing them when you have to later yeah I don't think anybody ever said you know the biggest mistake I ever made was focusing too much on risk right it's kind of like cyber security as well right exactly let's give Robert a big hand thank you and thank you