Hayden Hughes - Alpha Impact

Hayden Hughes is the co-founder and CEO of Alpha Impact, a crypto copy-trading platform. Previous to this he worked at Crypto.com and Techemy and is an experienced founder. We talk about how he got into crypto, starting Alpha Impact, how to balance token and equity investors, DeFi and more!The podcast is also available on your favourite podcast sources like Spotify, Apple and Youtube! NA: First of all, thanks for jumping on. Appreciate your time. I want to get started with talking about how, and when you got into crypto and the story behind that. HH: Sure. Boy, it was a long time ago; it feels like several lifetimes! So I'm a lawyer by training and finished law school and didn't really want to actually practice law. It didn't seem that appealing to me. I started working in Venture Capital, and I remember working on a small transaction and I came across some entrepreneurs who had done an ICO and raised $15M in minutes, in mid-2017. They later did a public sale for $80M and it occurred to me that given the scale of funds being raised, crypto was here to stay. So I started going to events in New Zealand, where the landscape is dominated by just a few companies. I ran into some execs from one of the large companies including my former employer, Techemy. Techemy is a regulated investment bank that raised $500M USD in 2017/2018. I had the chance to join the business and I was tasked with building a due diligence framework for the many token transactions we were investing in and syndicating. I knew nothing about crypto and had impostor syndrome… but given the number of deals that were coming through I had to learn very, very quickly. Before long I was running deals and they moved me across to Asia in 2018. So that's the abridged version of how I got into crypto. NA: Nice. How did you move to the other side from being on the side where you're helping companies raise money and investing to going towards and starting your own crypto company? HH: I mean, I've never really left crypto, right? I moved on to start my own advisory business and later joined a large crypto exchange. I always knew I’d start my own crypto company, and I just didn’t feel like I had a use case or a strong idea. In 2020 I was actually making more money trading than I was at my day job. I had a vague ambition to start a company and joined the Antler accelerator. Antler is a really great place to go in that situation because you don’t need an idea. My Co-Founder is an engineer and evidence driven, and had done thousands of hours of research on 20 tokens including DeFi and NFT coins like SNX and DeFi. He had a thesis that seemed too good to be true. I asked if I could send some money and have him invest for me, and the idea was born to build Alpha Impact. We sent a survey to 100 people asking if they could generate a 2000-3000% annualized return, would they want to copy a top trader. More than 80 of the respondents asked us then and there if they could send us money so we knew there was demand. NA: Got it. Yeah. That's a great story. What would you say would be the biggest challenge that you faced setting up this type of business compared to your previous experiences? HH: Well, one of the challenges has really been people. We've made a conscious decision not to go remote with our development work. What that has meant for us is that we have local developers here in Singapore and it's been extremely difficult to find. It's easy to find offshore devs, but we've decided that we don't want to deal with different iterations of codes, backdoor codes, and a lack of bonding. I think the most difficult part has been scaling the tech capacity. We have seven local developers in Singapore. It has been hard bringing foreign talents to Singapore. Getting a work visa approved for a foreigner is tough on new businesses. It gets easier over time, but COVID hasn't made that scenario easier. The real big challenge has been scaling the tech team. Surprisingly, one thing that has not been challenging for Alpha Impact has been funding. We're solving a really important problem in crypto, and we're really grateful to have had investors who share that vision, solve this problem with us. NA: That plays really well into my next question, which is how was the journey fundraising for your token round? HH: The idea of raising capital for any business is really centred around, “Can you find investors who share your vision? Can you find investors who understand you as a founder?” When we had our first capital raise, it was an equity round. We did it with Antler and raised $100K. We had nothing. We had zero lines of code built. As you move forward, you have more of something, but you're still not there yet. Investors want to see some form of traction, users and growth and revenue, stickiness and customer acquisition costs, and channels and unit economics. It's very difficult for investors to evaluate a very early-stage opportunity. Imagine, if you're copy trading me, you're some university student, you have a hundred dollars. The fee might be less than a dollar, right? We're not going to charge your credit card 82 cents and split the fee to traders, insurance, and company treasury. The transaction costs would be very high. I think the interesting thing about doing this in a bull market meant that we were able to create IMPACT token, which would accelerate payments within our ecosystem. We had the opportunity early in the market cycle because we saw what was happening obviously. Having worked in this space for many years, I had some existing relationships and it really started with a conversation with our lead investor. I can't say the name of that lead investor because of confidentiality, but it's an international high-frequency trading firm that has an interest in crypto. We had the chance to chat with those guys and we shared what we're doing, and they really believed in us. They have a big-name brand, and after that conversation, we had done due diligence and they said, “If you do decide to go ahead with this token, we'd like to be your first investor and we'd like to give you some cash.” After we had them on board, it was easy. Before that, we were having conversations with a few people. There was some hesitation but as soon as we had that big name brand on board, everyone fell in line quickly. We were actually in a position where we could, and I know it sounds crazy, but we could choose who we wanted. You know, you have only so much allocation left and you're saying, okay, well, what could you do relative to what that investor can do, which is perhaps a sign of the interest in crypto. NA: Yeah, that's always a great position to be in. And you mentioned you did an earlier equity round. So how do you think between the two, having token investors and equity investors? How does the alignment between those two different investors work? HH: It's a great question and we're kicking off another equity capital raise. We just had the Antler demo day and dozens and dozens of VCs reached out to us. So, we're just kind of going through that process and answering this question almost on a day-to-day basis. One of the things that we said early on with Antler, who is our founding investor, they didn't give us a ton of cash, but they believed in us and they gave us something when we had nothing, we had a pitch deck and no lines of code yet. We wanted to make it fair for them and we actually didn't think clearly at the time of equity investment what the crossover would be. We decided that we would include them in the tokens that we have. Now, we're raising a seed round, kind of a pre-series A. Those investors will have some exposure to the token. There are different ways to do that, whether it's some kind of a conversion. So, if you buy X dollars’ worth of equity, we'd give you Y dollars’ worth of tokens or you just hold a lot of tokens in your balance sheet and then you’re on the company's balance sheet which gives investors who are uncomfortable settin… This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit theinquisitivevc.substack.com