Michael Bodley

Venture capitalists are paying attention to cryptocurrency to fiat payroll processing solutions again — in at least one recent instance.&nbsp;



The latest indicator: Rise Works, which bills itself as a “web3-enabled payroll &amp; compliance solution,” has closed its seed round, the startup told Blockworks exclusively. The US-based startup works with DAOs, including the crypto staking specialist Lido (<a href="https://blockworks.co/price/ldo" target="_blank" rel="noreferrer noopener">LDO</a>), as well as a number of other types of decentralized organizations looking to compensate their personnel via digital assets.&nbsp;



The 2023 demise of a number of traditional Silicon Valley banking solutions, including Silicon Valley Bank (SVB), left crypto industry participants and their backers still holding dry powder with what they viewed as an opportunity to capitalize. Results have been mixed.



Read more: <a href="https://blockworks.co/news/silicon-valley-bank-meltdown-has-little-to-do-with-crypto">Silicon Valley Bank Meltdown Has Little to Do With Crypto&nbsp;</a>



In late March, on the heels of SVB’s collapse, <a href="https://blockworks.co/news/svb-contagion-rippling">contagion from the venture capital favorite bank spread to Rippling</a>, one of the top solutions for crypto companies when it comes to payroll and other back and middle-office operational and financial needs.&nbsp;



Around that same time, Rippling <a href="https://www.rippling.com/blog/rippling-raises-500m-in-series-e-funding" target="_blank" rel="noreferrer noopener">raised</a> a massive $500 million Series E round, according to the company, which described the round as “an unusual financing” in a March 17 <a href="https://twitter.com/Rippling/status/1636820635505786880" target="_blank" rel="noreferrer noopener">tweet</a>.&nbsp;



Enter Rise Works.&nbsp;



Its recently closed round was co-led by Sino Global Capital and Polymorphic Capital, CEO Hugo Finkelstein told Blockworks in an exclusive interview.



Other participating investors included Draper Associates, Hashkey Capital, Paradigm Shift Capital, WW Ventures, P2P and Cosmo Capital.&nbsp;



<h2 class="wp-block-heading">How Rise Works… works</h2>



The company is looking to capitalize on voids left for solutions in the wake of the series of prominent collapses of both traditional finance and crypto-native firms in that particular line of business, Finkelstein told Blockworks.&nbsp;



The startup’s differentiators, Finkelstein said, include its focus on DAOs. Decentralized organizations like DAOs have unique compensation structures for contributors or in-house employees, and are often headquartered or based in various jurisdictions — whether in the US or abroad.



“The fact that we’ve built ourselves on the blockchain,” is Finkelstein said is what makes Rise unique. “We can onboard DAOs very efficiently, very fast. That&#8217;s how we’ve won deals compared [to] our competitors over time, because we have the infrastructure ourselves.”



One of the prominent voices in the Lido ecosystem — who goes by the pseudonym “adcv” and holds the title of “<a href="https://steakhouse.financial/bios" target="_blank" rel="noreferrer noopener">chef</a>” at Steakhouse Financial — told Blockworks that Rise Works is “handling all of the compression of crypto to fiat payments for people who need it,” adding that “some of these [traditional] technologies are unfortunately still a few steps behind.”&nbsp;



Lido is a Steakhouse Financial client. Adcv described the Steakhouse as a “a consulting firm that acts as a CFO-for-hire for DAOs.”



Finkelstein said Rise is intended to straddle the “Web 2.5” line in a manner that appeals to both crypto native types and traditional companies. The startup’s solutions for payroll work with both fiat- and crypto-based treasuries and corresponding internal accounting systems.&nbsp;



The startup’s on-chain solution is built on the Arbitrum (<a href="https://blockworks.co/price/arb" target="_blank" rel="noreferrer noopener">ARB</a>) blockchain and fits <a href="https://erc725alliance.org/" target="_blank" rel="noreferrer noopener">ERC-725</a> token standards for <a href="https://blockworks.co/news/what-is-decentralized-identity">decentralized identity</a>, Finkelstein said.&nbsp;



Crypto firms looking for compliant payroll processing solutions often run into a series of thorny problems when it comes to setting up the right backend solutions for the right jurisdiction under the right regulator. The <a href="https://blockworks.co/tag/sec" target="_blank" rel="noreferrer noopener">SEC</a> and <a href="https://blockworks.co/tag/cftc" target="_blank" rel="noreferrer noopener">CFTC’s</a> series of crypto enforcement actions against crypto companies with US business has placed the industry on edge so far in 2023.&nbsp;



US regulators <a href="https://blockworks.co/news/sec-boost-crypto-enforcement">have also been staffing up</a> in terms of personnel with crypto experience. Crypto market players as a result have been especially on edge when it comes to setting up compliant solutions, solutions that match know your customer (KYC) and anti-money laundering provisions, especially.&nbsp;



And not just in the US; countries including India <a href="https://blockworks.co/news/india-crypto-kyc-aml">have amped up their own compliance standards</a> for crypto players that fall under their jurisdiction.&nbsp;



Tim Draper, the managing partner of his Draper Associates, told Blockworks in a statement that “work is becoming borderless, and more people are looking to be paid in cryptocurrencies.”



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Built ‘On The Blockchain’ DAO Payroll Processor Rise Works Gets Sino’s Dollars

Old Street Digital, a London crypto asset manager that has quietly assembled a team chock full of deeply credentialed investment veterans, has hit a snag: raising the kind of institutional capital its traders are used to trading.&nbsp;



Old Street Digital (OSD) has less than $10 million of assets under management — a drop in the financial bucket from what OSD Chief Investment Officer Gary Clarke handled at <a href="https://blockworks.co/tag/blackrock" target="_blank" rel="noreferrer noopener">BlackRock</a>, where he headed up the traditional finance giant’s global equity team.&nbsp;



From 2014 to 2016, according to Clarke’s LinkedIn, he oversaw a team of US and United Kingdom portfolio managers running more than $30 billion at BlackRock — otherwise known as the world’s largest asset manager.&nbsp;



Old Street has been pushing to raise the kind of external money its team is accustomed to, according to two sources familiar with the matter, confidential firm marketing materials obtained by Blockworks and United Kingdom FCA regulatory records.&nbsp;



Read more: <a href="https://blockworks.co/news/uk-tougher-on-crypto-companies">UK Denies Crypto Companies the US Lets Operate</a>



Even as digital asset markets have stabilized and bounced back from near historic lows in the fourth quarter of 2022, that effort evidently hasn’t been easy.&nbsp;



The firm’s latest pivot: recently tapping perFORM Due Diligence of London to conduct a review of its operations and trading functions. Run by Quentin Thom and James Newman, perFORM, started out as a traditional finance due diligence firm. But it’s since expanded into conducting reviews of crypto service providers and funds.&nbsp;&nbsp;



In an exclusive interview with Blockworks, Old Street Chief Executive Officer Paul Ridley said the crypto industry is “still in the super early days” when it comes to the level of limited partner dry powder that has fueled the rise of traditional finance fund managers for decades.&nbsp;



The core team Ridley works with at Old Street are all used to trading or overseeing the back and middle-office operations of a slew of strategies deploying north of $1 billion, Ridley said. The Old Street head’s resume includes stints at investment bank Nomura and Boston Consulting Group, and he has personal experience in the crypto sector.&nbsp;



And Chief Operating Officer Nic Basson joined the firm after spending nearly four years at alternatives giant Invesco, where he worked in senior roles focusing on emerging markets, including retail products, according to his LinkedIn.&nbsp;&nbsp;



“We’ve all had to adjust our definition of small,” Ridley told Blockworks.&nbsp;



He declined to comment on investor communications and the marketing materials obtained by Blockworks, citing regulatory restrictions in the United Kingdom.



<h2 class="wp-block-heading">Top backers, not top capital&nbsp;</h2>



Old Street, named for the historic mile stretch of London that has been a hotbed of hedge fund traders and their courting service providers for as long as anyone in the city’s traditional finance scene can remember, has no shortage of brand name backers behind it.&nbsp;



It’s the kind of firm that doesn’t need publicity and doesn’t seek it out. It’s the kind of firm that shouldn’t have this tough of a time raising serious dollars and pounds from pension advisors, top family offices and endowments.



Ten million dollars under management these days is no small sum for upstart crypto funds looking to take on the industry’s deep rooted native players — the likes of Pantera Capital and maybe even Grayscale Investments or Galaxy Digital one day.&nbsp;



Ridley’s team locked down a $2.8 million seed round in August 2022 led by Draper Associates, according to a <a href="https://www.prnewswire.co.uk/news-releases/old-street-digital-announces-2-8m-seed-funding-round-led-by-draper-associates-876490141.html" target="_blank" rel="noreferrer noopener">statement</a> from the time. It included participating investors like Plassa Capital, plus “prominent venture capital and angel investors across Europe, Asia and the U.S. as well as senior executives from the U.K. Asset Management industry,” the statement said.



Tim Draper, the near household name venture capitalist who founded Draper Associates, then said in the statement that Old Street’s team brought a “unique approach” that “applies traditional fund-management expertise to the world of crypto.”



That approach has yet to fully mesh, at least when measured by outside limited partner capital raised so far. But Ridley told Blockworks he and his team are playing the long game in an industry that has been beset by a lack of traditional finance understanding and regulatory hurdle after hurdle.&nbsp;



“What we wanted to do was take a bunch of traditional finance asset management [types], bring them together and try to build a really reputational product that would be the sort of thing that BlackRock would build, that T Rowe [Price] would build,” he said. “The kind of really clear, focused product which is the kind of thing institutions should be buying — pension funds, endowments, sovereign wealth funds.”



Asked the difference between an institutional investor in traditional finance and an institutional investor in digital assets, Ridley said that his London financial circle “have been talking about exactly that” on and off in 2023.



“No one knows what a real institutional investor is in this space — still,” he said.&nbsp;



<h2 class="wp-block-heading">Stablecoin yield for TradFi types</h2>



That said, the team has operational capital from its $2.8 million seed round, and Ridley is projecting patience in terms of really getting things going.&nbsp;



One of Old Street’s core strategies, which it dubs in investor marketing materials as the “Old Street Digital Crypto Cash Management Solution,” had delivered a gross annualized return of 11.7% from its inception in the fourth quarter of 2022 through the end of February.&nbsp;



It targets an 8 to 15% annual return, per the same materials, by following a strategy that makes stablecoin investments across DeFi protocols. There’s monthly liquidity under the commingled structure, which the marketing materials say has had zero down months.&nbsp;



It’s intended to appeal to both traditional finance backers and crypto native investors looking for yield in the wake of Silicon Valley Bank (SBV) folding — as well as the likes of Signature Bank, two of the sources said.&nbsp;



It invests in “blue chip” pools of DeFi assets, engaging in collateralized lending, also known as yield farming, and it’s been marketed in a way that might appeal to credit investors with an appetite for risk beyond plain vanilla bonds. Old Street isn’t exactly going after the distressed debt TradFi crowd here, sources said.&nbsp;



The marketing materials list a number of US stablecoins, including <a href="https://blockworks.co/price/usdt" target="_blank" rel="noreferrer noopener">USDT</a>, <a href="https://blockworks.co/price/usdc" target="_blank" rel="noreferrer noopener">USDC</a>, <a href="https://blockworks.co/price/busd" target="_blank" rel="noreferrer noopener">BUSD</a>, <a href="https://blockworks.co/price/dai" target="_blank" rel="noreferrer noopener">DAI</a>, <a href="https://blockworks.co/price/fxs" target="_blank" rel="noreferrer noopener">FRAX</a>, <a href="https://blockworks.co/price/tusd" target="_blank" rel="noreferrer noopener">TUSD</a>, <a href="https://blockworks.co/price/usdp" target="_blank" rel="noreferrer noopener">USDP</a>, <a href="https://blockworks.co/price/usdd" target="_blank" rel="noreferrer noopener">USDD</a> and <a href="https://blockworks.co/price/gusd" target="_blank" rel="noreferrer noopener">GUSD</a>.&nbsp;



It’s intended to be the safe play that limited partners with billions of dollars at their disposal ought to be able to grasp: low volatility, at least so far, coupled with the inherent transparency of blockchain technology. The crypto cash play doesn’t take directional bets and prominently states in its marketing materials that it has “zero exposure to Bitcoin, etc.”&nbsp;



And it’s being shopped around to investors as combining quantitative elements with fundamental research — the kind of “quantamental” language that Wall Street types ought to be able to grasp, might be able to get behind.&nbsp;



It holds assets held by Old Street on-chain, which the firm says results in “access to opportunities not possible off-chain.”&nbsp;



Crypto custodian Fireblocks, as well as the FCA-regulated TrustVault, have been put in place as counterparties on Old Street’s multi-signature solution to safekeeping client cryptoassets, according to the materials.&nbsp;



<h2 class="wp-block-heading">The crypto long haul</h2>



The collapse of FTX and the crypto meltdown that marked the end of last year didn’t help the grand capital raising aspirations of Old Street and its competitors.&nbsp;



Macro conditions and regulatory concerns aside, though, Ridley said that the disconnect between household crypto names and household finance names is still frustrating, at least at times, across the board.



In describing Clarke’s credentials, Ridley said he was “pretty much at the top of the profession…in the equities world” when he was running $30 or so billion at BlackRock.



Clarke is 54 and is a “fund management nerd first, but he’s alternative enough to have a cool haircut, and spend his time thinking about tokens now,” the Old Street chief executive said.&nbsp;



“I always argue that he’s a bigger name than [Mike Novogratz, the founder of Galaxy Digital] is,” Clarke said. “It’s just that no one gives a shit about equities. And we’ll stand on a stage and yell and scream and sweat or whatever, right…To make a long story short, we&#8217;re trying to approach crypto in a different way that we think is going to be much more attractive to be the biggest kind of investors out there. Despite everything that&#8217;s going on in the crypto market and whatever.”



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Former BlackRock Global Equities Head Running Crypto Fund

<div id="highlights-block_620596f2ad029" class="highlights">
 <ul>
 <li>The platform has its own native token, MPH</li>
 <li>Morpher now has more than 50,000 monthly users and has settled more than 1 million trades</li>
 </ul>
 
</div>



A blockchain-based platform for trading synthetic exposures to real-world assets has earned the backing of venture capitalist Tim Draper as the firm builds out its business.



Austria-based Morpher raised a $6 million Series A round led by Draper Associates, with participation from RTP Ventures and APEX Ventures, Morpher CEO Martin Froehler told Blockworks. The round brings the startup to a post-money valuation of $33 million.



Morpher employs the <a href="https://cms.blockworks.co/tag/ethereum/" target="_blank" rel="noreferrer noopener">Ethereum</a> blockchain to create virtual versions of stocks, commodities and currencies — without having to hold the underlying asset or transact through intermediaries. One potential application, Froehler said, would be to create an index of housing prices within a specific zip code in the US, without owning any of the property outright.



The trades are executed in the company’s virtual currency, MPH, which the company mines to turn a profit. The company operates its own non-custodial wallet. The idea is to democratize access to investments for those outside of or underserved by traditional capital markets.



“In a nutshell, it’s about access to the markets and liquidity in the markets,” Froehler said.



The platform now has more than 50,000 active monthly users from 100 countries and has executed more than 1 million trades. Froehler plans to use part of the fresh capital to hire eight new staffers on the product and marketing front, aiming to bring staff size to 20 by year-end from its current 12 employees. A mobile app is also in the works.



The plan is to also roll out investments in exotic corners of the financial markets, such as the spot price of cannabis. Morpher doesn’t charge fees on its trades but profits from its tokens.



Froehler, a former quantitative hedge fund manager, said the intent is to ease some of the pain points of traditional finance by offering 24/7, commission-less trades.



“Regardless of where you are in the food chain, trading is always burdensome,” he said. “It is costly. And it is very unfair.”



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Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



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