Like high-yield savings accounts that accrue interest, proof of stake blockchains like Ethereum encourage users to lock away their cryptocurrency for the sake of the network's security in exchange for more of the currency over time. It's a process called staking, but the caveat is that getting the ether back out can be a long and unpredictable process. Mara Schmeidt, 29, wants to solve this problem with her software company Alluvial. Alluvial works with clients like Coinbase, Bitcoin Suisse, Figment and six other crypto platforms to stake ether for their users. Thanks to Alluvial, ether owners are able to sell their cryptocurrency to users on competing platforms--increasing the pool of potential buyers. "Visa was a company that was built in collaboration with competing companies," she says. "We have the same model. We connect many different platforms together to build that market, and that is really hard to do." This also means users can un-stake their ether on a moment's notice--Alluvial provides them a receipt instead of the actual ether, which they can then use to buy or sell with others. Coinbase and Figment are also investors in Alluvial, which has raised $18 million to date.
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LifestyleTranscript
00:00 Mara, so great to be here with you today.
00:02 Awesome, it's great to be here.
00:03 So the crypto world is very confusing for a lot of people,
00:06 so I want you to break it down for me in the simplest of terms.
00:10 What does your company do?
00:11 So maybe let's start from the beginning to help break down the concepts.
00:16 So public blockchains are really public goods
00:20 that anyone can participate in and contribute to.
00:23 They're open source technologies.
00:26 Our company is really focused on enabling people in contributing and participating in networks.
00:31 And one of the most important things when you think about what a blockchain really does,
00:34 which is store and distribute data that is cohesive and preserves integrity
00:41 across different participants in a network,
00:43 the most important thing is to make sure it's secure
00:45 so that it cannot be corrupted, it cannot be hacked.
00:48 There's two types of ways in which blockchains maintain security.
00:53 It's either through the contribution of computing power.
00:57 It's called proof of work.
00:58 Really popular blockchains like Bitcoin use that system to preserve security.
01:02 And anyone can really spin up a miner or contribute their computing power
01:07 to support the network and in return earn rewards for doing so.
01:10 In more modern blockchains like Ethereum,
01:15 which is actually the second largest blockchain that exists today,
01:17 you have a mechanism that is called staking.
01:22 It's a mechanism by which a user can lock up their Ethereum or their cryptocurrency
01:27 and in return they receive rewards for securing the network.
01:31 Our technology enables a very broad set of participants to very safely and accessibly
01:37 access and contribute to the technology.
01:39 When you say like locking it,
01:41 is it kind of like putting money into a bank or a savings account like that?
01:46 It's very similar.
01:47 You can think of it as analogous to having your dollars in a bank account
01:51 and receiving interest for holding it there
01:54 because your bank actually does things with that dollar.
01:56 It puts it to use.
01:57 When you hold Ethereum or you hold a cryptocurrency
02:00 and you want to contribute to security,
02:03 locking it up in the network has the same effect.
02:05 You provide security and in return you get rewards.
02:08 So prominent blockchains like Ethereum, for example,
02:11 today issue rewards at a rate of 3.5 or so percent.
02:15 And so it's a really exciting way for people to start becoming part of a network
02:19 to contribute to it and that's quite exciting.
02:22 So that's really the focus that we've taken.
02:24 So take me back to the beginning.
02:26 What was your founding story?
02:27 I think way beginning probably just for a little bit of context on myself.
02:32 I grew up super internationally, moved around a lot as a kid,
02:36 lived in different countries, I guess got very used to starting things over
02:40 and being adaptive.
02:42 And I think that in many ways sort of contributed to me getting excited
02:47 and also feeling comfortable starting projects and also businesses today.
02:50 I ended up getting very interested in Web3 or in crypto.
02:56 I want to say just shortly after coming out of college, I'd studied economics.
03:00 I was really interested in the concept of value distribution and value creation
03:05 and how different systems can impact how value is created
03:09 and how it's effectively distributed.
03:11 And as someone who's grown up with the internet,
03:14 I was effectively part of a generation that is very used to using computers
03:20 and using the internet and also seeing its impact on the world.
03:23 I think my mom always jokes, there's like a photo of me wearing pampers
03:26 turning on an old Macintosh.
03:28 And so I got very used to that.
03:30 And I think one of the things that really drew me to this space
03:34 is that inherently the promise of having this global computer
03:38 that allows users, contributors and the network itself
03:43 to distribute value in a meaningful way was really interesting for me,
03:46 you know, coming out of a generation that has been so used to using the internet
03:50 on a daily basis.
03:51 And so, you know, in many ways, Web3 is really there to revolutionize
03:56 and reduce the cost and the distribution of value on the internet.
04:00 And that's a quite interesting promise.
04:02 So you've had quite a history in the crypto world.
04:06 Can you walk me through your background before founding this company?
04:10 Absolutely. I've worked full time in this space about seven years now,
04:13 which is many years in crypto.
04:15 I actually had, as I mentioned, you know, gotten, you know, into crypto in college.
04:22 I was at the time reading, you know, white papers about, you know,
04:26 protocols that were coming out.
04:27 And I was really curious about learning more.
04:30 And at the time I met one of the co-founders of Ethereum,
04:35 Joe Lubin, who had actually started a venture production studio
04:38 out of Bushwick in New York.
04:40 And because the technology was so new when the company was started,
04:44 which was about 2015, 2016,
04:46 the model was really try to build things and see what sticks,
04:50 see what developer tooling is needed in order for people to actually
04:54 start building on top of this new technology.
04:56 And I found the company really interesting because it allowed a lot of people
05:00 with very different backgrounds to come together and contribute to the technology.
05:04 I stayed with the business for about three years at the time,
05:08 did a ton of research.
05:10 I was involved in leading strategic partnerships and also ventures within the company.
05:14 And for me, my focus was really figuring out what the next big thing was going to be
05:19 that would help the technology continue to evolve.
05:22 At the time, Ethereum was going through a major upgrade.
05:26 And as I mentioned before, there's these two security systems,
05:30 proof of work and proof of stake.
05:31 And Ethereum was going through that transition exactly at that time.
05:35 And as you can think, a live network that needs an upgrade
05:40 across thousands of different computers at the same time
05:42 is really a difficult thing to coordinate.
05:45 And so, yes, was at the time already starting to build different ideas of things that
05:50 I thought would be very important for the industry as this migration was happening,
05:54 as it would open up a lot of new product opportunities.
05:56 At the time, I'd started research on a venture that my partner actually ended up
06:02 turning into a business that I still sit on the board of today.
06:05 But also got really excited about staking as one of the mechanisms that really
06:09 cements the security model of blockchains and what lives underneath them.
06:14 At the time, I was really keen to learn from some amazing founders.
06:18 And I met Joe and Aaron, who had started a company called Bison Trails.
06:22 At the time, they were becoming the leading blockchain infrastructure provider in the space.
06:28 And I ended up leading our business team and helping our growth.
06:32 And fast enough, we got acquired by Coinbase, which is a fairly large company in the space.
06:36 And as part of that acquisition, we ended up building a very AWS-style model inside of the
06:44 company where we realized that there was a ton of value in empowering other businesses
06:49 and other companies and institutions to offer crypto services to their users.
06:53 And so infrastructure services, payment services, data services became part of that product suite
06:59 that became known as Coinbase Cloud.
07:01 Very cool.
07:02 Now, what made you think, you know, this is it, I'm going to take the dive into
07:06 entrepreneurship myself and then go out and start a totally new company?
07:09 I think in hindsight, it felt very intuitive.
07:13 I had started writing about what our company today ultimately does around 2020.
07:19 At the time, you know, the promise of being able to build B2B,
07:24 SaaS in the blockchain infrastructure market was emerging.
07:28 And so there was an opportunity that was, you know, ripe to be developed and worked on.
07:32 One of the things within Coinbase, our origin story being a quite unique one,
07:37 because we spun out of different businesses to form our company.
07:40 And that's a quite atypical way to start a business that is early stage.
07:44 One of the things that we realized when thinking about how do we create the most value in this
07:50 open network by providing these services?
07:52 And the answer for us was very simple.
07:54 It has to be interoperable.
07:56 And for it to be interoperable, you need loads of different market participants and players
08:01 to build and to buy into a model that is inherently collaborative.
08:04 There are a few examples of businesses that were built that way.
08:08 And Visa is probably one of the most prominent and successful examples.
08:12 And a lot of people actually don't know the story of Visa.
08:14 But Visa was a company that was actually built in collaboration with different merchant banks,
08:19 competing companies that were brought together by a man called Dihak,
08:24 who wrote incredible books about the process of getting all of these
08:27 competing companies to sit around the same table.
08:29 And it's a quite challenging thing to do.
08:31 We think in many ways, it's the thing that creates a collaborative advantage for us.
08:36 And at the same time, it's something extremely difficult to do from within any given company.
08:41 You want to build that foundation that is neutral, that is collective,
08:44 where incentives are aligned for different participants to contribute to that business.
08:48 And so our founding story is actually my co-founder, Matt, coming from a competing company.
08:54 Myself, and from Coinbase with a lot of team members that I'd worked with before.
09:00 And then another company called Kraken, which was one of the biggest exchanges in the space.
09:04 We all came together to effectively fund and start that business.
09:07 And that was really exciting.
09:08 Interesting.
09:10 Now, I want to know exactly, I know you said it's a B2B company.
09:14 Who are your users or your customers?
09:17 And how many do you have?
09:18 Yeah.
09:18 So as a B2B business, we effectively have built a product that is enterprise grade.
09:23 We focus heavily on security.
09:25 And so the companies that we sell to today are mostly, you know, crypto native businesses,
09:30 large exchanges, custodians, infintechs that are looking into the space.
09:35 Today, we have platform integrations with over nine different platforms,
09:39 including market leaders like Coinbase, BitGo, Anchorage, Fireblocks, Copper, and others,
09:44 which we're really excited about because those businesses effectively
09:48 have integrated our product into the back end services of their
09:51 product suites and can offer that to their customer basis,
09:54 which in some cases are institutional clients and in other cases are retail customers.
09:58 So how do you get, you know, Coinbase and all these competing
10:02 marketplaces to buy into, you know, collaboratively come together and support your product?
10:06 It's one of the really interesting challenges, but also in some ways, I think,
10:11 a mode for us because it's a hard thing to do.
10:13 When we think about what the value proposition is of our product,
10:17 it's to ensure that different market participants and different users can access this technology
10:23 and really participate inside of blockchains in a really easy and secure manner.
10:28 For us, it was very clear that in order to accomplish that, building with network effects,
10:32 making sure that, you know, there's accessibility across a very broad range of solutions is very
10:37 important. Because of our origin story, we were very fortunate to have found early partners.
10:44 I mean, at the time I was actually still working at Coinbase when we,
10:48 you know, conceptualized this and pitched it to the executive team.
10:51 But I think there was, it resonated with participants that were trying to fix a
10:57 problem that they had seen for their customers and an opportunity space that was really compelling.
11:02 And one of the good things when you think about these collaborative models
11:05 is once you have the first three, four, five, maybe six partners around the table,
11:11 it becomes incrementally easier to build that buy-in, to build that collective,
11:16 cohesive positioning in the market. And one of the things that we found very effective,
11:21 and also why we decided to build on this model, is that a lot of the work that has to be done
11:25 in crypto today is also being progressive and being upfront about advocacy on the policy side.
11:32 And so there's a shared incentive for different market leaders to come together and say,
11:37 "Hey, this technology is really important. This particular feature is really important
11:42 to support networks more holistically. Why don't we work on this together and,
11:46 you know, really drive forward the policy discourse of different jurisdictions?"
11:49 Interesting. So how are you different than, you know, all the rest of the other staking
11:53 providers that are out there today? What sets you apart?
11:56 I would say our collaborative advantage. We've been built and integrated as a B2B
12:02 business with different platforms. Our focus has been really on security, enterprise-grade
12:08 diversification, and a compliance-focused design. And I think that's probably one of the most
12:13 important distinguishers of how we look at the market. It's hard to build for a market segment
12:18 that is still emerging because it requires you to take an inherently long-term view on the market,
12:24 especially when you think about the types of market players that we anticipate to start
12:28 really actively participating, like traditional banks, right, that might still be a couple of
12:32 years out on the adoption curve. Interesting. Now, quickly tell me about your fundraising
12:37 journey. How much have you raised and what has that afforded you and your company?
12:41 For sure. So we raised our first seed round in August of 2022. We raised capital from our early
12:48 partners, so we didn't take any VC funding at that early point in time. We raised $6.2 million then
12:55 with collaboration and participation from Coinbase, Kraken, and Figment. We later raised
13:00 a Series A in June of last year. That was a $12 million round that allowed us to really focus on
13:07 our growth and expanding some of our strategic footprint with partners in major geographies.
13:13 Our investors in the round included Ethereal and Variant, who led the round, but we also brought
13:18 in strategic institutional capital from Brevin Howard and Avon Ventures, a subsidiary of Fidelity.
13:24 And so that was really important for us in order to continue expanding our footprint in the market,
13:29 to have strategic partners in different jurisdictions, but also to have the capital
13:34 to continue building and innovating on top of the product that we had launched on the market.
13:38 Very cool. Now, does the volatile nature of crypto and Ethereum ever worry you,
13:43 or how are you looking at the market?
13:45 Having worked in the space for a couple of years now, I think you get used to it.
13:52 Market cycles being quite short and close together in crypto can be really distracting for builders
13:57 and for companies, and I've seen more often than not that these cycles can be quite challenging
14:03 for businesses to navigate. I think one of the consequences of working in a space like this is
14:08 that you become inherently quite resilient and also naturally gravitate towards a long-term focus
14:14 that ensures that when all the noise around you continues to happen, you can really center
14:19 yourself around the mission and the vision that you have for your business.
14:22 Excellent. And final question for you, what would you like your legacy to be?
14:26 I think I would love to bring more founders into the space. I found that one of the things that
14:33 has been incredibly rewarding in this journey is actually supporting and investing in other
14:38 founders, especially those that are really early stage and trying to navigate the space.
14:43 I would love to see more women in the space. One of the things that really is part of my journey
14:52 when I was about 24, I think was the first time I found something I was really excited about. And I
14:57 said, "You know what? Someone should really build this, but who's going to give me any money?"
15:01 Right? Truthfully. And I would love to be able to build confidence in this generation,
15:09 but also generations that come after that. It's absolutely something that you can do and you
15:13 should have the confidence and ability to go after it.
15:15 That is a great goal, especially in a space where there's so few women. So that is excellent. Well,
15:21 thank you so much for sitting with me.
15:23 Awesome. It was great. Thank you.
15:29 Thank you.