The Dawgs of Digital Currency
Foster alumni and advisor demystify cryptocurrency for institutional and everyday investors
Cryptocurrency arrived on the scene more than a decade ago. But a group of alumni and supporters of the UW Foster School of Business stand ready to deliver on this promise: It’s not too late to be early.
“Three years ago, the conversations were always, ‘I don’t really get cryptocurrency, it’s confusing,’” says Sadie Raney (MBA 2014). “Now the questions are about how to invest and who to trust. That matches what we’ve built.”
Raney and her co-founders sought a way to address the complicated nature of crypto. First, they launched the enterprise trading and management platform Strix Leviathan in early 2018 with a focus on institutional investors. Three years later, members of this same core group launched Makara, an automated online crypto advisor and mobile app for casual investors.
“We created a huge advantage for ourselves through the software platform we built in-house, and it’s evident in the Strix Leviathan fund performance and now with the launch of Makara,” says Raney.
Before they could build out these innovative solutions however, they first had to navigate the challenges of the space and gather a team ready to adjust on the fly. What they didn’t fully realize was the role the University of Washington would play.
Buy the ticket, take the ride
Think of the rise of cryptocurrency as if it were a Christopher Nolan time-hopping movie—exciting, yes, but also challenging to understand exactly what you just saw. The MacGuffin is blockchain, a database that keeps secure records of transactions. The deeply technical and mysteriously founded Bitcoin plays the role of chief protagonist. Over time, thousands of other digital assets arrive on scene.
Enter Jesse Proudman—a board member and mentor for the Foster School’s Buerk Center for Entrepreneurship. “Investing in this asset class is akin to early-stage technology investments,” says Proudman. “The huge difference is that these markets are open to everyone.”
His interest in crypto preceded the co-founding of Strix Leviathan with Raney, who would later serve as CEO, and the co-founding of Makara. Proudman believed crypto was in the same place the Internet was in the mid-1990s. Raney, who worked with Proudman at his cloud computing startup Blue Box, said the early nature of the space made it tougher for their potential to be recognized.
Taming the Wild West
“When we got into crypto it really was the Wild West. So many people looked at us sideways and said you’re doing what?” says Raney. “But from the get-go, we’ve done things the way that Foster teaches you to do it. You set up a business, a structure, and we’re compliant.”
The benefit of that education extends to fellow Foster grad Matt Heater (MBA 2013) who leads the business development and investor relation functions at Strix Leviathan. “Foster was a tremendous place to develop the skills to work in Seattle and operate in the startup environment,” says Heater. “Some of the most innovative and successful businesses in the world have come from this region.”
Investing in this asset class is akin to early-stage technology investments. The huge difference is that these markets are open to everyone.”
Heater says the unique software platform that serves as the basis for Strix Leviathan made the launch of Makara a “natural extension” of what they were already doing. “We’ve taken advantage of years of development to roll out a product in rapid fashion that is here today for the average investor to use. Makara couples perfectly with Strix Leviathan. It’s a beautiful pairing.”
Timing the market
Timing, however, would also prove to be an early obstacle for both startups.
Proudman and Raney built Strix Leviathan after IBM acquired Blue Box in 2015. At that point in its history, Bitcoin (and cryptocurrency in general) was just six years old. For two straight years (beginning in December 2013) Bitcoin valuation had slumped from a then all-time high of $1,156 to just $315. It bounced back with a fury until December 2017. Over the next year, it would again plummet 84% in value, taking most of the market with it. Strix Leviathan launched a few months into that dip with its first seed round of $1.625 million and has only grown since.
“The 2017–2018 market cycle for crypto currencies was an existential moment for this asset class,” said Proudman. “We are now beyond the question if this asset class has a place in the future of the world.”
However, in a bit of irony, Makara would face a similar launch environment. On April 13, 2021 Bitcoin hit another all-time high of $63,588. Less than two months later, Makara went live, and bitcoin sat at $36,000.
Still, that dip wouldn’t last (Bitcoin once again topped $50,000 in August), nor would it stop rapid growth around the world.
Not too late to be early
Global cryptocurrency adoption skyrocketed (up 880%) from Q2 of 2019 to summer 2021. The SEC, Congress and the White House all declared, for better or worse, for better or worse, that regulation would come to the space. Countries in South America and Africa embraced crypto alongside fiat as currency. Meanwhile, expertise in the space became a premium. Walmart recently emerged as another example from the list of Fortune 500 companies looking to hire crypto experts.
“The crypto space and everything we are doing within the Strix Leviathan and Makara entities is just rapid fire. There are so many opportunities,” says Nico Cordero, the chief investment officer of Strix and co-founder of Makara, who earned a finance degree at UW-Tacoma. “Crypto is such a multi-disciplinary space from cryptography to financial markets to financial history to technical security. It’s a lot for someone who has a full-time job and isn’t focused on this space.”
So, Makara utilizes thematic baskets—a way for people to invest intelligently without being overwhelmed by the size and complexity of the crypto world.
“The metaphor that we’re going for with Makara is that we’re serving as a coach for people,” says Nick White (MBA 2012), another Foster grad who serves as Makara’s vice president of growth. “Whatever direction people want to go, we want to offer them a path.”
The startup isn’t just educating those outside the company, but within as well. Financial controller Amy Van Groningen (Certificate of Accounting 2019) helps manage the books for Strix and Makara. “It’s packaging in a way where I can digest it,” she says. “In the past, when I tried to learn about cryptocurrency, it was by reading long articles or watching 50-minute-long videos.”
Van Groningen worked with both Raney and Proudman at Bluebox and said it was a no-brainer to join them again at Strix and Makara, alongside UW political science graduate Liz Fong (BS 2003) who was there at the beginning. It’s a sentiment held across the board.
Two teams connected through product and shared experiences inside and of Foster and UW
“Everyone is smart here. Everyone is high energy. Everyone is kind,” says White. “Put those things together and you get a really great company culture that also gets stuff done.”
UPDATE: Makara announced on February 8, 2022, that it was acquired by investment advisor Betterment, which raised $160 million in September 2021 and was valued at nearly $1.3 billion prior to the acquisition.
Cryptocurrency: a glossary of terms
Airdrop – A free distribution of coins from a new asset not yet on exchanges.
Altcoin – Any coin that’s not Bitcoin.
Cold Wallet – A hardware or offline wallet that stores cryptocurrency that cannot be compromised.
DCA (Dollar Cost Averaging) – Investing an equal or steady amount of money on a regular basis.
Decentralized – A form of crypto finance that is meant to exist outside the control of governments and traditional financial authorities.
Diamond Hands – Popularized on reddit, this is a rallying cry to not sell in order to drive up the price of an asset.
Fork – When the users of a blockchain change its rules causing two new paths (i.e. Bitcoin + Bitcoin Cash).
FUD (Fear, Uncertainty, Doubt) – Commonly used phrase to describe any news that could impact cryptocurrency negatively.
HODL – Holding a coin/token no matter what.
NFT (Non-Fungible Token) – Tokens of value assigned to a unique digital item like art or collectibles.
Paper Hands – Popularized online, this is an investor who sells at first sign of profit or trouble.
Smart Contract – Programs stored on blockchain that execute an agreement with certainly of the outcome.
Stablecoin – An asset that ties its value to a non-digital currency or commodity like the U.S. dollar.
To the Moon – Popularized on reddit, this is a declaration of belief that an asset is going to 10x or 100x.