Crypto startups can pivot to a new business model

Hi there! Dan DeFrancesco in NYC, but I can’t stop watching this video of a car crashing into a booth where two podcasters were recording (no one was seriously injured). Check it out here.

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

In print, we’ve got stories about buy-now, pay-later companies looking to make a comeback, the best people leading venture debt deals, and what not to do when staying in a hotel.

But first we are running a special sale.

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1. Crypto clearance.

After a terrible 2022 that saw one of the industry’s high-profile 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 laid out for Insiders Bianca Chan and Dakin Campbell how tough times for crypto startups means 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 throw themselves. The unfortunate realities of the startup game. Many may end up being “acquired” in deals that will essentially function more like acquisitions than anything else.

They refocus the business and make things more efficient. One of the most common criticisms I hear about crypto is “It’s a solution looking for a problem.” The latest crypto winter may force startups to be a bit more pragmatic about the specific problem they want to solve.

They are pivoting their business to look beyond crypto. A VC I spoke to last week mentioned this as a likely outcome. In short, many of the use cases in crypto that seemed to make sense a year ago simply don’t anymore. But that does not mean that the entire company must be scrapped.

Take Alain Meier, who got into crypto while at Stanford University and had an idea to use it to help money move across borders. It didn’t pan out, but in the process Meier and his co-founder had built identity verification technology in crypto that turned out to be quite valuable.

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 a big part of that, Meier admits, is thanks to its original roots in crypto.

“If you can solve fraud in crypto, you can solve fraud in pretty much every part of finance,” Meier told Insider. “We kind of cut our teeth in that business and then expanded.”

Click here to read more about Goldman Sachs’ strategy around digital assets.

In other news:

2. A BNPL comeback story. Buy now, pay later service Sezzle had a tough time last year, with a research analyst cutting the price target for its shares to just a penny. But the company has had a much better start to the year, partly thanks to a strategic pivot. More about that here.

3. Venture debt’s top dogs. While equity investment in venture capital largely dried up in 2022, debt investment continued to explode as founders looked to extend their runway without their valuations being hammered. Meet the 10 key people structuring these debt deals for startups.

4. A startup that wants to revolutionize housing with its tiny, affordable homes faces a lot of headaches. Boxabl’s Casitas, 375-square-meter houses that sell for $60,000, have caught the attention of celebrities including Elon Musk and attracted a waiting list of 157,000 people. But questions remain about production costs, the company’s management and the spending habits of the father-and-son co-founders. Read more about the major problems facing these small house manufacturers.

5. One of Goldman’s top traders is headed for the exits. Joe Montesano, Goldman Sachs’ head of equity trading for the Americas, who was also one of the bank’s highest-paid employees in recent years, is leaving the firm with no specific plans for where he will land, Bloomberg reports. Part of Montesano’s oversight of the bank was the index rebalancing team, a type of trade that flourished during the pandemic before falling flat last summer due to overcrowding. And be sure to check out our running list of partners who have left the bank during David Solomon’s tenure.

6. The secret behind Citadel’s success in raw materials. Ken Griffin’s hedge fund hired nearly two dozen researchers and analysts back in 2018 to help the firm with its trading strategy by accurately forecasting the weather months in advance. Read more here.

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

8. Next time you stay at a hotel, avoid these common mistakes. From the best way to book a room to why you should always read the Bible, some valuable tips from a former hotel chain employee. Check out all the advice here.

9. Toblerone may need to change its logo because the level of “Swissness” is not high enough. The chocolate bar’s parent company is moving some of Toblerone’s production to Slovakia, meaning it may not meet Switzerland’s legal definition of “Switzerland”. Maybe it could start a secretive, private bank for the uber-rich? More on how to maintain high levels of “Swissness.”

10. How to not break the bank, but still impress, at your next dinner party. Private chef Meredith Hayden spills the beans on how to make dishes that feel expensive even though they aren’t. Here are some great pasta dishes you can spin up that will have your guests asking for the recipe.

Curated 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.