Arthur Hayes’ Fund Wants to Avoid Regulatory Conflicts With Decentralization

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Mael­strom is the debut fund from Bit­MEX founder Arthur Hayes’ fam­i­ly office. Just five months old.

BitMEX’s for­mer CEO is serv­ing as Mael­strom chief invest­ment offi­cer, with Akshat Vaidya — pre­vi­ous­ly BitMEX’s vice pres­i­dent of cor­po­rate devel­op­ment and strate­gic finance — oper­at­ing as the fund’s invest­ment head.

Hayes, who’s still on pro­ba­tion as a result of Bank Secre­cy Act charges, has indeed been active in cryp­to since his case was finalized. 

But Mael­strom must find its foot­ing as cryp­to expe­ri­ences tight­en­ing across its ven­ture cap­i­tal land­scape, along­side dimin­ished late-stage funding.

There are signs of revi­tal­iza­tion. Still, star­tups should avoid secur­ing funds at exces­sive­ly high val­u­a­tions in order to mit­i­gate the impact of any sub­se­quent bear market. 

Block­works caught up with Vaidya to learn more about how Mael­strom nav­i­gates that nec­es­sary real­ism, while main­tain­ing focus on tan­gi­ble returns.


Block­works: Can you pro­vide an exam­ple of a start­up you’ve invest­ed in that you believe is doing an excel­lent job in build­ing decen­tral­ized infrastructure?

Vaidya: Our debut invest­ment in Jan­u­ary was in Obol Labs, a dis­trib­uted val­ida­tor tech­nol­o­gy mid­dle­ware com­pa­ny that allows Ethereum val­ida­tor keys to be “split” among mul­ti­ple node oper­a­tors, effec­tive­ly reduc­ing sin­gle points of fail­ure for Ethereum staking. 

We like star­tups like these for a few reasons: 

  1. The team has a mis­sion-crit­i­cal offer­ing address­ing a poten­tial­ly huge market. 
  2. It’s led by high-qual­i­ty founders build­ing strong tech/operational moats, mak­ing it dif­fi­cult for com­peti­tors to enter the sector. 
  3. Its busi­ness mod­el is com­ple­men­tary — and sticky with prof­itable pro­to­cols or busi­ness­es in Ethereum stak­ing — rather than competitive.

Block­works: Giv­en your focus on decen­tral­iza­tion, how does Mael­strom see the cur­rent reg­u­la­to­ry land­scape affect­ing the future of decen­tral­ized sys­tems and blockchain technology?

Vaidya: We like to invest where there is no con­flict between reg­u­la­to­ry con­cerns and decen­tral­iza­tion. There have hon­est­ly been cas­es in the past where reg­u­la­tors right­ful­ly called out coun­ter­par­ty and ecosys­tem risks of cus­to­di­al busi­ness mod­els in our indus­try that would have been mit­i­gat­ed or elim­i­nat­ed entire­ly by greater decen­tral­iza­tion. This is where we like to play.

Block­works: What strate­gies does Mael­strom employ to ensure that invest­ments are both tech­no­log­i­cal­ly inno­v­a­tive and finan­cial­ly viable in the long run?

Vaidya: Our finan­cial, oper­a­tional, legal and tech dili­gence is root­ed in our DNA as founders, builders and oper­a­tors our­selves. [Hayes] built one of the first prof­itable uni­corns in this indus­try, and hence Mael­strom has a knack for select­ing win­ning teams and products.

Block­works: How does Mael­strom sup­port founders after ini­tial investment?

Vaidya: [Hayes] is one of the few investors out there in any indus­try who has ever built a prof­itable uni­corn from the ground up him­self. Many investors out there are excel­lent at back­ing win­ners; but [Hayes] is also excel­lent at build­ing them. Founders tend to view his expe­ri­ence, rela­tion­ships and advice as hard to come by. 

And giv­en our check size ($100,000 — $250,000), we rarely crowd out oth­ers on the cap table. Hence, oth­er like-mind­ed investors tend to invite us to deals as well, as they see us as com­ple­men­tary, not over­ly dilu­tive or redundant.

Block­works: How do you antic­i­pate the future of decen­tral­ized prod­ucts, ser­vices, and mar­kets to evolve in the next 5–10 years? How does Mael­strom posi­tion itself for these changes?

Vaidya: With­in our life­times, a non­triv­ial amount of glob­al GDP will be direct­ly or indi­rect­ly cleared on blockchains (pub­lic, state-per­mis­sioned, and pri­vate). We expect this change to come about the same way it did for Zoom — pri­or to Covid, Zoom spent near­ly a decade build­ing infra­struc­ture for a world that didn’t exist yet. Lega­cy in-per­son work­place infra­struc­ture worked just fine until sud­den­ly it wasn’t an option. 

That’s when new, alter­na­tive work­place infra­struc­ture (like Zoom) turned out to be vision­ary, prov­ing indis­pens­able for the world it pre­dict­ed would even­tu­al­ly come. Nowa­days, if you don’t use Zoom, Hang­outs or Teams you basi­cal­ly don’t exist. That seis­mic behav­ioral change came about in a span of just six to 18 months. 

Blockchain too will have its “Zoom/Covid” cam­bri­an explo­sion moment some day, when lega­cy finan­cial infra­struc­ture starts to fail us (for any num­ber of geopo­lit­i­cal, eco­nom­ic or tech­no­log­i­cal rea­sons). When that hap­pens, our port­fo­lio will be posi­tioned to cap­ture mean­ing­ful value.

Block­works: Giv­en Arthur Hayes’ back­ground, does Mael­strom focus specif­i­cal­ly on blockchain-based finan­cial products?

Vaidya: Mael­strom is open to any busi­ness mod­el that mon­e­tizes the inter­net in a new way pre­vi­ous­ly impossible.

Block­works: Could you elab­o­rate on Maelstrom’s long-term man­date? How does this affect your invest­ment deci­sions com­pared to oth­er funds that might pri­or­i­tize quick­er returns?

Vaidya: Our fam­i­ly office struc­ture allows us to invest with a longer hori­zon in mind than typ­i­cal ven­ture funds, which are boxed into deals with three- to five-year exits. Of course we’ll do those deals too; but we’re also build­ing a long-term port­fo­lio of decen­tral­ized infra­struc­ture companies/protocols that will serve as build­ing blocks of the future.

This inter­view has been edit­ed for brevi­ty and clarity.


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