Mike Alfred and his brother Ryan founded Brightscope, which researched and published retirement plan data, so that people could judge how good their 401ks were. They sold it 8.5 years later to Strategic Insight Inc. for a reported $35-$40 million.
The Alfreds are entrepreneurs through and through. They moved on to their next venture: Digital Assets Data, in 2018. It’s a data platform for crypto assets – in other worlds, a sort of Bloomberg terminal for bitcoin and other currencies, like ethereum and XRP.
I was curious about why the duo, who are rare as impact entrepreneurs in the b-to-b space, had ventured into cryptocurrences. I talked with Mike Alfred two separate times, once before COVID-19, and the second time a few weeks ago.
Most people still regard bitcoin, which is built on a technology called blockchain, as fringe development in finance. But it’s increasingly edging into the mainstream, especially in COVID time, not as a safe haven or a miracle technology or even as a replacement for cash, but as another asset. From an investors’ point of view, it’s like a bond or REIT or a mutual fund. The underlying value of those assets is, respectively, a promise to pay; expected appreciation real estate holdings; and the expected increase in productivity of companies. The underlying value in crypto is that it is a form of currency that’s not tied to corrupt or foolish governments.
“Successful businesspeople who are concerned about what (the pandemic) means for the value of the dollar are interested in bitcoin,” Alfred said. “People wonder – if you created trillions of dollars of money out of thin air, what does that say about the value of the dollar?”
He said that the investment decks Digital Assets Data shows investors start with that idea: That crypto is nothing more or less than a new asset class.
Bitcoin has historically been very volatile, with drops and rebounds of as much as 75%, but after falling sharply in 2017-2018, its value has remained between 8,000 – 10,000. It has also been volatile over the past few months, but arguably about as much as the stock market.
The ethical case for bitcoin and other cryptocurrencies is that they decentralize power, away from governments that could be corrupt or adopt flawed economic policies. “It’s a continual, global, non-sovereign store of wealth,” Alfred said. Especially in markets where it’s risky to hold assets in the local currency, such as in Venezuela or Lebanon, “bitcoin is going to be more interesting,” Alfred said.
So a store owner who converted currency to bitcoin could have been protected against the hyperinflation.
More people get the idea: searches related to bitcoin are surging, as are downloads of bitcoin wallet apps, Alfred said.
“This is a hard form of money that can’t be debased or manipulated,” Alfred said. “The narrative has become more attractive to people who weren’t interested before.”
Hedge fund manager Paul Tudor Jones recently revealed he has 1% of his assets in bitcoin; Alfred said he and his brother had talked to the Jones about the asset.
The flip side of decentralized value, of course, is that there might not be enough regulation of cryptocurrencies, leaving them open to manipulation, which is what could have happened in 2017-2018. And, there’s an argument that the process of regulating markets and currency via democratic institutions builds a stronger civil society.
In any case, Alfred said people who buy it (you can use exchanges such as Coinbase and Kraken) should treat it as a long-term investment.
The duo founded Digital Assets Data after Mike Alfred finished his 15-month stint helping Brightscope’s buyer integrate the company. In a little under two years, they have raised $9.5 million from investors including Distributed Global, Digital Currency Group (DCG), Morgan Creek, Galaxy Digital, Jump Capital, CMT Digital, and Ritholtz Wealth Management CEO Joshua Brown, according to Venture Beat. Mark Casady’s Vestigo Ventures is also an investor, Alfred said, adding that Digital Assets Data’s largest investor is Glenn and James Hutchins’ North Island. Glenn Hutchins was the co-founder of Silver Lake, a technology investment firm.
“They see the analogies to other major technologies,” Alfred said. Alfred is based in Las Vegas, Nevada, but the company is entirely remote. With about 20 employees, the company processes about 10 terabytes of data a day and has about 30 customers on its platform so far, he said.
Alfred is also involved in an activist’s shareholder campaign at Barnes & Noble, where he’s been proposed by investment firm Outerbridge as a member of the board of directors. “I’m a big fan personally of the managing partner, Rory Wallace,” Alfred said by email.
The rosy future for bitcoin doesn’t mean every company built on bitcoin will flourish, or every cryptocurrency will either. “It’s the biggest opportunity of our lifetime,” Alfred said. “Sometimes you have to destroy a lot of capital to find the winners. But if you hit those winners, it makes the whole process worth it.”
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