Redefining an Institutional Approach to Crypto Asset Management

Welcome to Hivemind’s corporate blog . Here, you can read commentary about our business, our space, and the key milestones taking place in both. From time to time, we’ll also weigh in on some of our investments. Above all, however, our goal is to make our thoughts and insights on web3 and crypto accessible to a broad range of audiences.

In part, we hope our content will serve as a counterpoint to the hype, misunderstanding and volatility often associated with digital assets. We also want to help our investors, partners and others better understand our approach to an opportunity set that’s as broad, if not broader, than the internet itself was, in its early days.

In this first post, we introduce ourselves and our business, generally. While we launched and raised our first fund in late 2021, we’ve been fairly stealthy as we defined and built the first stages of our organization and business. Now that much of the early groundwork is set, we’ll be formalizing our public identity in a variety of ways, from ongoing investments, to new fund launches and of course our new corporate website, as well as this blog.

Welcome, then, to Hivemind. We’re one of the few web3-native, scaled, multi-strategy investing platforms set up to provide institutional-grade asset management across the entire crypto economy. Yet, to understand what we are and how we raise, allocate, and generate returns on capital, it helps to start with the space we’re in.

Our Domain

It’s beyond the scope of this blog to offer an overview of blockchain’s entire past, present and future. What we can say briefly - and others have articulated even more fully - is that we’re still at the beginning of a massive shift from “web 1” (read) and “web2” (read, write) into “web 3” (read, write, own).

This shift reflects a long-term transition away from both the physical, offline economy that’s driven by scarcity economics, and from the platform-based internet and its more universal-but-centralized economics, into a crypto economy that’s protocol-based rather than platform-dependent. Zooming out and at its best, crypto offers a decentralized, open source infrastructure whose economics are genuinely more communal and distributed than what the world has had previously.

This shift into crypto is happening, and we believe it is inevitable - the fuse is lit and the adoption curve is by many measures steeper than what we saw with the internet.

That said, while much has been written and discussed in this vein, much has also been blown out of proportion. From our perspective as asset managers building a multi-strategy business across a wide range of risk profiles, we want to state clearly that we’re focused on an investment philosophy, not philosophy itself.

While we believe the space has huge potential, we’re not here to evangelize about a new world order.

We’re aligning more traditional investment disciplines with brand new tools and building a new asset-management model, in order to run a for-profit business. And from this more mature perspective, it’s frankly easy even for us to understand the crypto naysayers.

An enormous amount of early and even current investment activity in the space has been immature, disorganized and overly speculative. In these terms, “crypto market” and “crypto investing” can be misleading phrases, and are too narrow to properly describe Hivemind’s business and operations. So how should you think about what we’re building?

When we speak of digital assets, we mean any kind of investment that’s built on a programmable platform that can enable, record and track transactions - vs. traditional assets where the asset is separated from documentation of transactions that determine its value. And when you think about investing in terms of programmable assets, vs. traditional ones, you have a radically different perspective on how to create that value.

Specifically, you can consider generating returns not only at those assets themselves - e.g. blockchain as a currency application - but also from any business that might be able to grow profitably by applying web3 technology to commercialize itself in a superior way.

Unlike many others in this space, our performance isn’t purely dependent on crypto as a “tradable” asset. Our focus is value propositions that revolve around crypto as a programmable protocol - including, but not limited to, sectors like gaming and music.

However, a less well understood reality is that a lot of the thrash, uncertainty and boom-bust dynamics in crypto to date reflect the fact that traditional asset management models don’t fit well within web3. That is:  generalist approaches with siloed strategies, sourcing driven mostly by humans, a lack of technology-driven due diligence and infrastructure never set up to manage digital assets.

Add to this lack of a fit with web3 a whole series of unmanaged risks and a lack of discipline, and you get crypto up to this point. There’s generally been no real investment process that any institutional investor would recognize; minimal controls; and plenty of bad behavior as well as regulatory ignorance. This all drives uncertainty, which destroys value and related credibility.

That said, given the large volume of activity and the space’s long-term potential, a higher caliber of investor and investment managers have been entering the space over the past 3-5 years. Yet even these participants face some significant challenges, because for the most part they aren’t built from the ground up for crypto.

In many cases, they manage traditional assets or do traditional investing as well - and therefore they have to manage risk and measure returns in traditional ways. And of course, people are creating an ever broader set of web3-native businesses, some of which are investment platforms. For the most part however, these are either largely trading-driven models or they are more focused, single-strategy funds.

That’s why Hivemind is built from the ground up to be something different:

• A web3 native asset management business model that has domain expertise as well as a best-in-class sourcing network;
• A literally engineered approach to crypto investing that has state-of-the-art infrastructure specifically geared towards the management and performance of digital assets; and
• A multi-strategy approach across the entire risk spectrum, in order to capture and build enterprise value based on a diverse, sophisticated set of investment activities.

We’ve established and structured ourselves to be a bridge from traditional, institutional-grade investing to the emerging world of entrepreneurs, businesses and developers experimenting with and growing web3.

Hivemind

At this stage, it’s important to state plainly that we’re not trying to institutionalize crypto. Instead, we’re seeking to institutionalize the relationships between capital and business models in the web3 space.

Bringing an institutional-grade level of service to crypto investing means that we can attract and serve a massive amount of existing capital. As more institutions come to the space, they can look at Hivemind and see a level of professionalism, discipline, risk controls and infrastructure they would recognize.

They also will see a level of opportunity and digital assets that will be new. In other words, Hivemind is set up to have a recognizable set of processes for a traditional buy-side institutional investor - and also a recognizable set of technologies and domain expertise to a crypto-native business. Because crypto isn’t an “add on” we have credibility and options that legacy asset managers don’t.

Among other things, what this approach means is that Hivemind’s growth is not - as is the case with many other crypto-facing companies - dependent on returns in the digital asset space going endlessly higher. This is an important aspect of our model.

Instead, our success correlates with the digital asset space becoming much, much bigger.

Returns and value will always fluctuate, and we’ve seen an extreme example of that over the past eight months of 2022 in particular. What we’re set up to capture, however, is not just value based on currency or individual asset returns, but also value from the simple, steady expansion of the entire digital asset space itself.

In terms of overall structure and strategy, our multifaceted model starts with two pillars: a private investment strategy including venture equity (like Napster), mining and staking, as well as a liquid trading strategy including both token investments and public equities. This allows us to remain extremely nimble and to focus our resources on emerging opportunities as the market quickly evolves.

Over the next 18 months, we’ll be steadily expanding our operations against the organization and risk control infrastructure we’ve put in place so that we can move into other strategies. The ultimate goal is an entire ecosystem of funds and investment capabilities - which include both closed and open ended funds, private and public sectors, passive and active strategies which cut across the entire digital assets spectrum.

By participating in all aspects of the digital asset landscape, we can capture value wherever it’s created, and without being overly exposed to the kind of volatility we’ve seen in the traditional financial sector and overly-leveraged trading operations. We can mine and stake, we can invest and operate, and of course we can and will trade. But we can also do fund administration, manage custody operations, incubate early stage projects, as well as content creation such as what is taking place in the gaming and NFT spaces.

If this sounds complicated? It is. That said, from the founder on down, Hivemind has a team that blends risk and compliance expertise developed at some of the largest technology and financial institutions in the world, with blockchain native developers and engineers.

This means rather than growing purely organically or opportunistically, we have mapped out a clear go-to-market plan and organizational structure in significant detail that is literally years ahead of operations. We can still make rapid shifts to capture value - but when we do? We are making decisions for ourselves and our investors against the backdrop of an ambitious, but methodical expansion plan.

It’s not every day, or even every 20 years, that you get the chance to raise and deploy an institutional-scale pool of capital against a set of markets that are coming out of a murky, dubious early stage - but are far from any kind of maturity. Hivemind is fortunate to create for itself and its partners just such an opportunity - and we have the structure to manage it. We look forward to sharing more about our journey, going forward.