David Siemer is the founder of Wave Financial. As a financial services professional, he's all in on crypto. But it wasn't always that way. David takes us through his evolution as a venture capitalist through the first tech bubble to today, where he's become a crypto entrepreneur developing crypto investment products like funds and indices as well as a treasury management business
David compares the crypto market of today to the first internet boom, where a handful of companies made it through and built large sustainable businesses. Except, with crypto, the few successes won't just be billion dollar companies. David thinks these winners will be closer to trillion dollar companies.
Massive shifts in technology
I started in venture capital back in 1995, early in the first tech bubble. I felt like it was a once in a lifetime experience. I see cryptocurrency the same way. I didn't think I would see another massive shift in technology in my lifetime.
I think the parallels between the two periods are very strong. Our main view is similar to the first internet boom: there were a handful of companies, like 20 or so, that came out of that period as massive businesses. That's how we view cryptocurrencies and the new wave of protocols: most will fail, but a few will succeed. Those that do succeed won't be billion dollar companies -- they will be closer to trillion dollar companies. That's what got me really excited.
I started an early stage venture fund Wavemaker in 2004. We managed a couple hundred millions dollars and made about 300 investments in seed-stage companies (non-crypto) mostly in the B2B software space. In 2012, some of our bigger investors, like Tim Draper, happened to be some of the foundational guys in crypto, some of the early vocal adopters of Bitcoin. They talked me into buying Bitcoin. I didn't do a whole lot with it. Then Mt Gox happened and it was clear we were going to be in a winter period for a while.
In 2016, I started relooking at the space and my same friends started to get bullish on the space again. I went down the rabbit hole and became a believer, with a view that this will change the world. This is what I have to do. At the end of 2016, I went to my venture partners at Wavemaker -- we have about 20 people there now -- and said I had to do crypto full time. At the time, they said "You're nuts, but have fun." It wouldn't hurt for Wavemaker to have a partner doing Bitcoin and blockchain.
So, I launched our first fund called Wavemaker Genesis. I never really bought into the ICO hype. Being a VC who went through a few bubbles, I didn't understand it. We focused on early stage equity investments in crypto companies. That turned out to be the right approach and had prettybig hits early on. We were early seed investors in Block.one which launched EOS, which is now the fourth or fifth token.
Wave Financial and the crypto asset management opportunity
As the space evolves and the bear market set in, I realized there was a bigger opportunity. I founded Wave Financial with a mission of creating better products for new investors to enter the crypto space. Things like, an index of top crypto products and income products which essentially sell crypto volatility.
We think there's a lot of white space in crypto. A lot of people are focused on deep tech -- our company is really an asset manager and financial services company. Our products are tokenized. If our investors want a token, they get it -- if they don't, we just leave them in contract form like any other private placement.
What's interesting for us is that we can create what would otherwise be an illiquid fund and make them highly liquid by listing them on many of the STO regulated cryptocurrency exchanges.
New investors in crypto
Our funds target new investors. It's not easy to buy crypto right now. You have to get an exchange account, figure out how it works, buy the coins. Most people know the exchanges themselves are a little risky -- there have been some hacks. So, you probably want to move those coins off the exchange into some type of hardware wallet. You'll have to manage your private keys that if lost, your coins are gone forever.
Most people aren't going to do this. Coinbase has done a good job providing training wheels for new investors. But to get broad diversified exposure, you're going to want to buy an index. We tried to make it easy to buy and easy to hold. It's our own private network so we can replace keys.
Crypto changing financial services
When it comes to how crypto will impact financial services, we see three themes playing: The first is banking the unbanked. There are four billion people in the world without bank accounts. You're seeing the rise of Ant Financial/Alipay where you have digital money, a wallet, but no bank account. This is a better, cheaper, and more flexible model than people who have low-end bank accounts.
The next theme we see is unbanking the banked. It's kind of the opposite of banking the unbanked. My friend is on the board at BoA and the bank loses money on like 90 percent of their customers. These people aren't that wealthy, they aren't buying higher end products at the bank, don't keep large deposits at the bank. These people really only use ATM and don't need a bank account and they get hit by fees all the time. For these people, a PayPal-like wallet would be sufficient in a crypto world.
A Bitcoin wallet is like a bank in your pocket and is pretty much everything you need. It's a record of all your transactions, immutable, a store of value, a wire transfer desk, remittance platform, savings account -- everything you need a bank for.
The biggest change will probably be in deposits. We see a lot of companies launching stable coins which are dollar-pegged coins that pay interest. Pretty much anyone who has savings can get a money market account.
To do this, crypto would need to work a lot better. Consumer need a different level of vigilance. I try to get hacked all the time. Every two months someone tries to port my phone number. Every person on our team has been a target of a hack. It's getting more sophisticated. There are challenges with consumer behavior that would need to change to keep them safe in a crypto world.