Tim Ogilvie is Co-founder and CEO of Staked, a startup which provides institutional investors with the technical infrastructure for non-custodial staking services. Staked helps holders of cryptocurrency earn a 5-50% interest rate on their holdings by running nodes on their behalf, allowing them to earn the staking rewards offered by proof-of-stake currencies. The company’s seed round was backed by leading investment firms including Multicoin Capital, Pantera capital, Coinbase Ventures, Global Brain, Digital Currency Group, Winklevoss Capital, Fabric Ventures, and Blocktree Capital.
Previously, Mr. Ogilvie spent 20 years starting and operating technology companies. Most recently, he founded Y-Combinator-backed Think Gaming, a SaaS data platform focused on mobile games. Before then, he was founder and CEO of AdBuyer.com, an early demand side platform (sold to Mediaocean), and was a pre-launch employee at two successful consumer internet companies, Interactive Search Holdings and Pronto (both sold to IAC/InterActiveCorp). He graduated from Yale University with a B.S. in Computer Science.
The Politic: What’s your background?
Tim Ogilvie: I’ve been out for 20 years. For the first 10 years of my career, I helped other people start businesses. I’d join the founding team before the product launched. I’ve been doing it on my own for the last 10 years. Generally speaking, I explore a bunch of different businesses as I think about where I want to start. I was looking at a couple of different blockchain-related businesses, specifically related to staking. The concept of “staking” was at the heart of every hot project getting funded by the VC firms and the broader crypto community.
Everybody wants to earn interest on their crypto, so we started Staked 18 months ago to help them accumulate those rates. Staked is an alternative to the “proof of work” model used by Bitcoin to secure the network and determine how each block is created. Blockchains are generally a series of sequential blocks, and there’s a reward, in the form of a new currency, for the person who mines the block and the Bitcoin. Roughly $6 billion is spent a year trying to solve these mathematical puzzles for the right to mine the next block. I looked at that model and thought it was a useless exercise.
So-called “Proof of Stake” is an alternative to that model. Instead of using a puzzle to assign block-mining rights, our model assigns those rights proportionate to one’s stake in the network: You get a 10% proportional right to mine the blocks and keep the reward. What does that involve? Running a bunch of technical node software. Investors want to make financial allocation decisions– not solve mathematical puzzles and mine cryptocurrency. So, we run the technical services to let them accrue the rewards from “Proof of Stake.”
Nodes are servers that are online all the time, recording all the transactions that pass through a network. When I send money to you, or you send money to someone else, we’re sharing those transactions in a peer-to-peer (P2P) framework which involves a network of other nodes. This P2P framework is how Bitcoin or any other network work: It’s a group of nodes running all over the place, compiling the blocks, and sharing that data with the world.
How big is Staked?
We have 12 people working at Staked. We probably have thousands of customers. Our most prominent are the big crypto funds: Multicoin, Pantera, Blocktree Capital, and so on. Those are the leading funds in the category.
Yale recently invested in two crypto funds: Paradigm and Andreessen Horowitz (a16z). Mind explaining that a bit?
Andreessen Horowitz and Paradigm are the two leading crypto funds. They make early-stage investments in teams that are building new cryptocurrencies, or services in those cryptocurrencies. Yale made an investment for Andreessen and Paradigm to essentially invest on Yale’s behalf. They’re an LP in the crypto funds of Andreessen and Paradigm. If Yale’s moving into that space, I think they’re probably going to do some stake-related work soon.
What are your thoughts about crypto at Yale more broadly? How different is the environment today from when you were there?
Yeah, I think the environment in the last 20 years has changed a lot, where Yale grads weren’t really knowledgeable of alternate paths beyond banking and consulting. It was one of those things where I didn’t get to see a whole breadth of opportunities. I think students get exposed to a lot more of these things nowadays, as they should, and working for a startup in a hot category is going to yield more interesting work and more responsibility than the alternatives.
What’s your reference point for this tech?
I think people have compared it to HTTP and other core internet protocols. The reference points are revolutionary technologies, whether that’s the internet, mobile, or any of these things that fundamentally represented a new and better way of doing things. You’re going to see the same revolutionary applications with crypto as you’ve seen in the other generational shifts.
There are over 2000 different coins. How do you cut through the BS?
I think the market does a pretty good job of that. Yes, there are 2000 coins or whatever, but if you look at the market caps outside the top 10 or 20 coins, it’s percentage points and you shouldn’t buy those. If you look at the top 10 or 20, there are probably 4-6 core use cases that represent key benefits of crypto.
One of them is store of value as an alternative to the inflationary fiat currencies. Crypto is a better version of gold because it’s easily transferrable, it’s easily divisible, and it can’t be forged. I think there are a lot of people interested in smart contracts and disintermediation. Finance driven by publicly available, on-chain solutions is much more interesting because it’s democratized and takes a lot of the rent seeking out of investment banks. I think privacy coins are interesting, too.
The smartest investors are looking at those four to six use cases and the potential winners, each of which represents a different market cap. Facebook is going for payments, which is not very easy or efficient with Bitcoin.
How liquid is the market? Can you actually get your money out?
It’s easy to deploy money. Most crypto funds–and funds in general–are designed to deploy capital over a five-year horizon, so they’re looking to spend those funds over time. Andreessen Horowitz is putting almost $3 billion into the space.
As to how you deploy a fund of $400 million if you’re Paradigm… The game in venture is looking for a small percentage shot at very large outcomes. Bitcoin is a $200 billion market cap. If you think you have a cryptocurrency that has a two percent chance of being Bitcoin, you would value that on an expected value basis of $4 billion. So, you can basically take your one shot and say, “I’m going to take 10 percent of that company for $400 million.” The math works reasonably well, and by the way, getting 10 percent of early stage projects is a whole lot less than getting $400 million. That’s what these ventures funds are doing: owning 10 to 20 percent of projects that they think could be worth billions, or hundreds of billions, over the next five to ten years.
I believe that crypto is the future of finance and money, that it represents a generational change in the way that people will interact in the financial services sector, and that working in crypto-related companies is an order of magnitude more interesting and promising than other fields.