Ikigai's Investment in Digital Assets Data

We recently announced that we invested in Digital Assets Data’s latest $3.2mm round led by North Island (the investment firm launched by prominent technology investor and Silver Lake co-founder Glenn Hutchins and his son James Hutchins). Morgan Creek Digital, Digital Currency Group, Amidst Capital, CMT Digital, and Vestigo Ventures also participated.

The Problem

Here at Ikigai we are large consumers of crypto data. Ingesting, synthesizing, analyzing and drawing investable conclusions from the host of quantitative and qualitative data generated by the crypto space on a daily basis is at the core of what we do. The quantitative data can broadly be bucketed into on-exchange and on-chain data (although there are other categories, like sentiment). About a year ago we began building the infrastructure to ingest and synthesize this data, and we immediately began running into problems. I won’t go into too much detail around those problems because they have been well-documented in the ecosystem – poor quality exchange API’s; historical data with holes in it; broken websockets; difficulty running nodes and extracting data. And it was expensive – we immediately found ourselves paying thousands a month in AWS bills, not to mention the manpower to deal with it all. In the meantime, we were also evaluating many third-party data providers. So, by early 2019, we had a firsthand, comprehensive understanding of the crypto data landscape, it’s challenges, and its players. We were acutely aware of how hard it was to handle crypto data really well in-house. Some of the data service providers were good, others were not so good. None were a one-stop shop.

The “Data Chassis”

In February we began having discussions with the Alfred brothers - Ryan and Mike, and their COO Kurt Fenstermacher, about their soon-to-be-launched platform Digital Assets Data, or DAD. From the beginning, we were incredibly impressed with the team. Not only were their backgrounds stellar, but their attitude, approach, responsiveness and character were exactly what you would want to see in a partner. DAD was pitched to us as a “crypto data chassis” and took a fundamentally different approach than anything else we’d seen from third-party crypto data providers. DAD aimed to entirely remove the need to store data and analysis ourselves. Instead, they would ingest, synthesize and store all of it, and make it available to customers in a detailed and easy to use callable Python library. Their pricing structure relative to our AWS bill + manhours was compelling, and they came with a lot in-house expertise to help with product development and rollout.

The Team

In May we came on as a customer. We worked closely with many members of the DAD team and stayed in constant contact with Ryan and Mike. The product was relatively bare bones when we joined in early May, which we were expecting. Ryan and Mike told us from the beginning that a bet on DAD was a bet not just on what they had, but what was coming, the quality of those products, and how quickly they would ship. We have been impressed with their pace of rollout and their ability to set delivery dates and stick to them. The product is meaningfully more robust today than it was May 1st, June 1st and July 1st. DAD is currently storing more than 15 terabytes of crypto data. We expect the product to be meaningfully more robust by year-end, Q1-20, and so on. In June, Ryan and Mike told us they were doing a follow-on equity raise to their $3.2mm seed raise, led by Silver Lake co-founder Glenn Hutchins, and invited us to invest.

We have a simple but unique hurdle for considering venture investments in crypto – the investment needs to beat the expected returns of BTC over the holding period on a risk-adjusted basis. I’m not sure how many crypto funds think about it like that, but our mandate allows us to deploy 100% of our capital into liquid crypto if we don’t find anything compelling on the venture side – that flexibility in strategy was important to us when we formed Ikigai. We also want to find investments where we have expertise. We felt we knew DAD’s market as well as anyone, we believed their value proposition, and we experienced the product for months firsthand. To be clear, our base case is not that our DAD investment outperforms BTC on an absolute basis over the investment period. If BTC does 6x over the next three years, we are not expecting a 10x on DAD. Instead, we see the level of certainty of a path to an attractive rate of return compelling. We believe in DAD’s value proposition and its ability to scale to a massive addressable market. We believe in the team to deliver that. 

Learn more about Digital Assets Data here.