Crypto startups could switch to a new business model

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Good morning! Dan DeFrancesco in New York, but I can’t help but watch this video of a car hitting a booth where two podcasters were recording (no one was seriously hurt). Check it here.

We also have an upcoming event hosted by you! Join us on March 23 for “Finance Meets Its Future”, an event presented by amberdata. Learn how finance professionals are addressing digital transformation through digital assets, frictionless payments, ESG investing, and more. Register here for the live event.

On tap, we’ve got stories about a buy now, pay later business looking to make a return, the best people leading risky debt deals, and what not to do when staying in a hotel .

But first, we’re having a special sale.

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1. Cryptographic Authorization.

After a terrible 2022 that saw one of the industry’s most prominent figures implode, the crypto market is looking for a rebound.

But as Mathew McDermott, global head of digital assets at Goldman Sachs, told Insider, there’s still “a little more pain” for the industry.

McDermott explained to Insider’s Bianca Chan and Dakin Campbell how tough times for crypto startups mean more realistic valuations and, in some cases, a reassessment of the business model.

In short, crypto is about to have a long, hard look in the mirror.

I see one of three outcomes for most startups this year:

They run out of money and fold. The unfortunate realities of the starter game. Many could end up being “acquired” in deals that will essentially work more like acquisitions than anything else.

They refocus their business and streamline things. One of the most common criticisms I hear about crypto is “It’s a solution looking for a problem”. The most recent crypto winter might require startups to be a bit more pragmatic about the specific problem they are looking to solve.

They are pivoting their business to look outside of crypto. A VC I spoke with last week mentioned this as a likely outcome. In short, many crypto use cases that seemed to make sense a year ago simply don’t anymore. But that doesn’t mean the whole business has to be scrapped.

Take Alain Meier, who got into crypto at Stanford University and came up with the idea of ​​using it to facilitate the movement of money across borders. It didn’t work, but in the process, Meier and his co-founder had developed a cryptographic identity verification technology that turned out to be very useful.

The company eventually expanded beyond crypto and was acquired by Plaid in 2022. Now, it’s a key part of the fintech’s growth plans for 2023, as Insider reported.

And much of that, Meier admits, is down to those quirky roots in cryptography.

“If you can solve fraud in crypto, you can solve fraud in pretty much any part of finance,” Meier told Insider. “We kind of cut our teeth in this industry and then we grew.”

Click here to learn more about Goldman Sachs’ digital asset strategy.

In other news:

Meredith Hayden; Jeff Gritchen/Digital First Media/Orange County Register/Getty Images

2. An BNPL back story. Buy now, pay later Sezzle struggled last year as a research analyst cut its price target for its shares to a penny. But the company has had a much better start to the year, thanks in part to a strategic pivot. More on that here.

3. The best risk debt dogs. While equity investing in venture capital largely dried up in 2022, debt investing continued to soar as founders sought to expand their runway without having their valuations knocked down. Meet the 10 key people who structure these debt deals for startups.

4. A startup that wants to revolutionize housing with its affordable tiny homes faces a lot of headaches. Boxabl’s Casitas, 375-square-foot homes that cost $60,000, have caught the eye of celebrities, including Elon Musk, and attracted a waiting list of 157,000 people. But questions remain around production costs, corporate governance and the spending habits of father and son co-founders. Learn more about the big issues facing these tiny home makers.

5. One of Goldman’s top traders heads for the exits. Joe Montesano, head of Americas stock trading at Goldman Sachs, who was also one of the bank’s highest-paid employees in recent years, is leaving the company with no clear plans on where he will land, reports Bloomberg. Part of Montesano’s oversight at the bank was his index rebalancing team, a type of trading that boomed during the pandemic before collapsing last summer due to overcrowding. And be sure to check out our list of partners who left the bank during David Solomon’s tenure.

6. The secret to Citadel’s success in raw materials. Ken Griffin’s hedge fund hired nearly two dozen scientists and analysts in 2018 to help the company with its business strategy by correctly forecasting the weather months in advance. Learn more here.

7. FTX just took a shot at a huge crypto asset manager. FTX trading subsidiary Alameda has filed a lawsuit against Grayscale Investments over its fees and how it allows investors to redeem their shares. Read more about the lawsuit here.

8. Next time you’re staying in a hotel, avoid these common mistakes. From how best to book a room to why you should always read the Bible, some valuable advice via a former hotel chain employee. Check out all the tips here.

9. Toblerone may need to change its logo because its level of “Swiss” is not high enough. The chocolate bar’s parent company moves some Toblerone production to Slovakia, which means it might not meet the legal definition of “Swiss” in Switzerland. Maybe he can start a secret, private bank for the wealthy? Learn more about how to maintain high levels of “Swissness”.

10. How not to break the bank, but still impress, at your next dinner party. Private chef Meredith Hayden explains how to make dishes that seem expensive even though they aren’t. Here are some must-make pasta dishes that will leave your guests asking for the recipe.

Organized by Dan DeFrancesco in New York. Feedback or tips? Email [email protected], tweet @dandefrancesco or connect on LinkedIn. Edited by Jeffrey Cane (tweet @jeffrey_cane) in New York and Hallam Bullock (tweet @hallam_bullock) in London.

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