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In this conversation, we chat with Jessie Proudman, the VP of Crypto Investing at Betterment, who was also the co-founder and CEO of Makara. Proudman shares his journey of building a web-design business, which eventually morphed into a cloud computing service and was later acquired by IBM. He then explains his interest in blockchain and the business he built to manage crypto portfolios, which led to the creation of the private cloud product. He discusses the challenges of the public internet versus private internet, public cloud versus private cloud, and public blockchain versus private blockchain, and how the industry has evolved since the ICO collapse of 2018.
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Timestamp
1’28”: The entrepreneurial journey and the influences that led Jesse to becoming a founder
3’04”: Connecting the dots between designing websites for the local dentist to running cloud-as-a-service and getting acquired by IBM
7’41”: Public technology vs private technology and whether they solve for a similar answer
10’36”: Building an accelerator for IBM Ventures and how this drove the inspiration behind Strix Leviathan (a quantitative crypto hedge fund)
16’16”: Building a quantitative crypto hedge fund in the first crypto bear market and the investment strategies needed for it to work
20’32”: The trigger(s) that led to founding Makara (a cryptocurrency robo-advisor startup)
24’58”: The acquisition of Makara by Betterment, the combined offering as a result, and the psychographics of who this offering is for
30’26”: Custodial vs non-custodial holding of crypto assets, and the regulatory mine field of providing investment advice in the United States
33’53”: Betterment’s approach to modelling the full user journey/financial picture combining the traditional asset allocation with a crypto asset allocation
39’38”: The strategic vectors within the digital asset advisory business and what the future looks like for this industry
43’07”: Channels to use to connect with Jesse & learn more about Betterment
Sneak Peek:
Jesse Proudman:
…we started Strix in 2018 and kind of continued to build that technology platform for the preceding years. Our biggest challenge in that business was raising capital for the fund itself. So that was a traditional hedge fund sort of GPLP structure. So, our investors, we were limited to qualified purchasers, so effectively $5 million in investible assets and up, which is sort of a small pool. It's basically family offices, high net worth, extremely high net worth individuals, a lot of fund to funds, that was our clientele in that business. And it was, I mean, it's just a challenging sales cycle. We did well raising money, but it was a lot of work. Through all of that we consistently would get questions from accredited investors, from our friends and family, from people in the industry, "How do I go invest in the asset class? How do I get started?"
We didn't feel like there was a great way for those people to go participate here. Sort of your options are to go to Coinbase and open an account and then go pick between 150 different things that are all named peculiarly names and you don't understand what any of it does. It didn't feel like a logical or sane way for people to get involved here. And so, we really felt this desire to build something better and to build something that was accessible to everybody and to leverage that technology that we had spent the preceding years building to do that, to be the foundation for something new. So, let get my years right, at the end of 2020, we had this belief that there was a market opportunity and that we had the technology platform to go do it.
It's the classic entrepreneurial process where…
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