¶ Intro / Opening
Welcome to On the Brink. My name is Sean Judge. Today on the podcast, I sat down with Alex Wilson, co-founder and co-CEO of Cyclops. Today, Cyclops came out of stealth mode and announced an eight million dollar seed round of financing led by us at Castle Island Ventures. Alongside F prime and Shift Four. Here's my conversation with Alex Wilson.
Matt Walsh and Nick Carter are partners at Castle Island Ventures. All views expressed by them or the guests on this podcast are solely their opinions and do not reflect the opinions of Castle Island Ventures.
But only as an expression.
This podcast is for informational purposes only.
Brought down by bad mortgage investments, Lehman, which has 25,000 employees, will be
Government loans American International Group AIG$85 billion. This is a different kind of market, and the vet is asleep.
The federal government is stepping in to stabilize Fannie Mae and Freddie Mack, the two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75%.
And you print a couple trillion dollars and all of a sudden people start to worry. So out of this worry, we have something called the Bitcoin. Bitcoin.
¶ From Giving Block to Cyclops Genesis
Alex, welcome back to On the Brink.
Thanks for having me back, Sean.
I think you first appeared on the show in December twenty twenty-one, bit of a different era. At that point, you were running a different business. And before we get into the exciting news that you're going to be announcing today, maybe for listeners, if they're unfamiliar, could you just share more about what you had built at the giving block and and ultimately what ended up happening with that business.
Yeah, yeah, happy to. Um, well, can't believe it's been since twenty twenty one that I was on here. Definitely a different world in crypto and and stable coins, especially since then. Pat Duffy and I started the giving block back in twenty eighteen. The concept was we'll help nonprofits fundraise Bitcoin, crypto more broadly, including stable coins.
And at the time you can imagine in twenty eighteen telling a chair to pay attention to Bitcoin. It's not the easiest to sell to them. They were pretty skeptical. Took a while to get some traction there, but we stuck with it and ended up working with a lot of the biggest charities around the world, like Saint Jude and Save the Children and raised hundreds of millions of dollars.
encrypted donations for them. So once that took off, we ended up selling it to Shift Four in 2022. And when they acquired us, the reasoning for the acquisition was really twofold. One was they wanted to get deeper into the nonprofit space. So Pat took on leading the entire nonprofit division for shift four. So even beyond crypto, full payment stack for nonprofit fundraising. And then the second mandate, which I led, was actually building the crypto team from scratch at shift four.
So that's what we've been working on for the the last couple of years there.
That's great. And what was that experience like? You know, you were a founder, you were raising money, you were trying to sell this product into these nonprofits. It probably became easier over time as the price of Bitcoin was going up. But what was that then like being part of like a large public payments company?
Yeah, we learned a ton and it was definitely a lot different than when we were just a tiny startup with 10 or 20 people. We were really fortunate to join Shift Four. I personally actually had never heard of Shift Four until the bankers we used brought Shift Four to us for the deal. And then as soon as you hear the name, you start seeing the Shift4 logo everywhere on point of sale devices at hotels and restaurants and stadiums and everywhere else.
But one of the reasons we we actually picked Shift Four over other bidders was really because of how well aligned we felt with the company and their leadership team in particular. So the founder of Shift4 is a really cool story. He actually started Shift 4 when he was 16 in Allentown, Pennsylvania, and ran the business.
Since then until very recently, now you've maybe seen the headlines that he's actually running NASA. So he was an incredible person to work for and look up to. He was a really awesome role model for Pat and I. And we learned a lot. working under him and and working at the Shift Four team.
He really instilled some great values. Like he learned a lot from his time around SpaceX and Elon and other guys like that, in terms of instilling core values around accountability and ownership. So he learned a lot about managing bigger teams, moving quickly. So it was a really cool experience for us.
And then we had the opportunity to basically build a company within a company. When we got acquired, we were their first exposure to crypto or stable coins at all. We started by actually selling Shift 4 card processing services to different crypto companies.
So you're an exchange, you're an on and off ramp, and you want to let your users buy and sell crypto using your debit and credit card. That's actually how we started the crypto vertical there, ended up working with most of the big exchanges in the space.
Fascinating. It sounds like an amazing opportunity to get to work for someone like that inside of an organization that's kind of let you guys run. What was it, I guess, over the last six to twelve months that had you thinking, I want to get back to being an entrepreneur and I see this big opportunity here to create something in the payment space?
Pat and I always just felt like it was just a matter of time before we wanted to get back in the the startup trenches and do something new again. We're waiting for the right time and the right idea. For the last three years or so at Shift4, we've spent a lot of time building out their actual crypto products. So think enabling crypto and stablecoin acceptance for merchants, stablecoin settlement, stablecoin payouts, those types of use cases.
And to do that, we pulled together different crypto and stable coin infrastructure players in the space to bring those products to market. And honestly, it was a lot harder than we thought it was going to be. Took a lot of different vendors, took a lot of different agreements. Took a lot of even custom development work, right? We had our own engineering and product team to bring those to market because nothing we found was really ready to go out of the box for shift four.
Took a lot of work to get it there. And, you know, we basically came to shift four and said, We know we can do this better. We want to get back and and start a new entity, build this better than what we see in the market. And uh ultimately we actually got Shift War to to come on board as both a customer and investor in the new company.
¶ Cyclops' Funding, Team, and Regulatory Strategy
Yeah, and maybe that's a a good segue into obviously the big announcement today and we're thrilled to be partnering and and leading this round of financing, maybe speak more about the other investors you've touched on one as well as just what that fundraising process was like for you as a founder, having done it now a second time.
Well definitely a lot easier the second time around. That's for sure. For the giving block, we raised one round of funding. We only raised a million and a half dollars. We ended up selling the business. It was only a year and a year and a half after raising that funding. So pretty quick turnaround. This time we had a lot more to go on, a a much better story to tell, a lot more experience.
Because for that last round of funding at the giving block, I was basically sending messages on X and LinkedIn to people I'd never talked to before. I had zero network in the venture world. So this time around, right, we had some warmer intros and a lot more relationships.
And it was really nice that we could be a bit pickier in terms of who we took money from. So we were really strategic and really excited to have you guys lead the round and really excited to work with you guys since we think you guys are really the brightest minds in stablecoins. And then F prime and Shift Four were the other two investors and we ultimately raised eight million in that oversubscribed C Brown and are are off to the races now.
Yeah, well appreciate it. It was kind of a long time coming. Obviously I after you raised that million and a half with the giving bock, I spent months trying to chase you to t to take money back then. But
Yeah.
You guys were off to the races. Can you speak more? I I you know you touched on Pat, but just kind of speak more about kind of the founding team that you guys have assembled over the last few months.
Yeah, definitely. Ad and I are co founders and now we also have a third co founder, David Johnson. It's a funny story with David actually. We met him when we were living in Washington, DC still. He was a full-time lawyer at Pillsbury Shaw Whitman at the time and on the side was running essentially like a blockchain incubator and co-working space.
in DC. And Pat and I, when we started the Giving Block, were the first company to start working out of that coworking space. That's actually how we got to know David, who's the third co-founder now. Pillsbury actually advised on our acquisition with Shift Four. So David was one of the lawyers involved in that deal.
And a couple months after the acquisition, we actually convinced him to come join Shift Four and the Giving Block full time. So he's really been like our right hand man for a lot of the work we did around the acquisition and and post acquisition at Shift Four and was super involved.
in a lot of those crypto initiatives at Shift Four. And then we have some other absolute killers that we've brought over from Shift Four as well. It's about 13 people total that joined us from the Shift Four team. So we have an awesome COO, Lindsay Weisaki, who joined us from Shift Four Two. And we have an awesome head of engineering, Alexi, and a head of product, Willie, that also joined us from Shift Four, along with a handful of engineers too.
So it's really nice to have a a core team on day one, right? Rather than hiring for all those roles, which has really allowed us to move a lot faster and get these products to market.
And maybe just speaking, the story of David's super cool, um, but you're operating in a heavily regulated environment. So how have you and David and the team thought about just licensing and regulatory strategy to get going here?
David's definitely a lot smarter on these topics than I am, but overall the strategy is get licensed in the US and Europe. as quickly as possible. And those are really the focuses for getting our own licensing. We'll partner with other companies in the other regions over time keep building out the licensing. But ultimately that means getting all the MCLs in the US, getting the Mika application in Europe, which we've already started in Austria.
full speed ahead on those. It's a lot of uh administrative work, as you know, to get all those applications in, but ultimately worth in the long run because it's really important for our go-to market and our customer base of the payments companies to have those licenses ourselves. It's really key to this because
When the US, if you think about some of these payments companies, some of them might have MTLs, some of them might have some sort of banking charter, but often they aren't able or willing to use that licensing for crypto and stablecoin use cases, giving all the banking issues in the past. So they really do expect that partner they're working with to come with their own licensing that can be used for these use cases.
What products are live today and obviously there'll be other things that come down the line.
¶ Cyclops' Products for Payment Companies
So the three products we focused on so far with Shift Four are pay with crypto. So that's merchant acceptance of crypto and stable coins both at the point of sale in person or online e-commerce types of checkout flows. The second one is stable coin settlement. So a merchant comes and says, I'd rather get stable coins at the end of the day rather than an ACH or a wire. That's the second product. And and that one's really exploded in popularity.
And then the third product is stablecoin payouts. And that can really support a number of use cases. Everything from payroll to contractor payments to remittance use cases, right? Like the classic stablecoin sandwich flows. We're seeing some really cool remittance use cases there. And we've even done some tax refund work in the stablecoin payouts use case.
As you guys have been building this in stealth, has that been a challenge? with payments companies having some of these conversations or is it just really the network that you've been able to build over the last few years with inside of shift four and the understanding of what the product needs to look like to be able to have conversations with folks?
I mean, being at Shift4 for as long as we were, we really learned a lot about what a payments company was looking for. And we basically made all the mistakes and hit all the bumps ourselves so that other payments companies won't have to in the future when they go building these products. So we have a unique advantage in that sense that we sort of live those pains of trying to work with other providers in the space and making avoidable mistakes.
So everything we're doing from everything even from contracting to like the onboarding to the integration to the actual go to market is made specifically for payments companies because we're not going to work with anyone else. literally just payments companies. So every single thing we do is made to make the life of a payments company easier and bring them zero to one on crypto and stablecoin products much more quickly.
So we have a great network and we've gotten a great reception from the payments companies we've been talking to quietly while we're in stealth, but ultimately we're excited to open it up today to the public more broadly and really accelerate those conversations.
And maybe touch on are there unique things as it relates to payments companies? You've touched on it a little bit, whether it's so from a licensing perspective, but What are the things that you'd have to do to make this a turnkey type experience to just kind of enable a new payment type for some of these payments companies? Are there specific challenges or are they very unique to each different type of payments company?
There's a couple of different categories of it. One is as simple as the contracting and the procurement process and like the the onboarding, which sounds so simple, but you'd be surprised. of how like one size fits all, a lot of these companies approach everything, where you're getting asked to do something that doesn't even make sense if you're a payments company or agree to certain terms or requirements that aren't even logical for a payments company.
And then I think the place where we see the most interest and the most sort of light bulbs is really on the product integration. There's a lot of companies out there that provide great APIs, but require a lot of custom work to actually turn those into a product. So we think about it as how do we provide more out-of-the-box solutions to a payments company? So they don't need a huge team of specialized crypto engineers or product managers to build one of these products.
It should be very, very plug and play because we know exactly what use cases payments companies want, and we want to minimize how much engineering work goes into bringing those products to life for them. So everything from how the product actually gets embedded into their products to how the reporting works to how the reconciliation works, all of that we've really thought a lot about. So they're not spending a bunch of cycles on on fitting it to their use case.
Terrific. This has been a lot of fun. Again, congrats on the round. We're super thrilled to be partnered with you finally and to announce this today. Is there anything else you want to share or where could people learn more about Cyclops?
Thanks for having me on and and thanks for sticking with us too. I know we uh kept you hanging for for years. So good for you for for hanging on and and checking in every once in a while. We're really pumped to be working with you guys and it's going to be an awesome year ahead. And yeah, for anyone following along that wants to learn a bit more, you can go to our website, cyclops.io. We'll have a lot more content coming out in the following weeks and a lot more exciting announcements.
Yeah, looking forward to sharing those.
Awesome. Thanks a lot, Alex.
Alright, thanks Sean.
Thanks for listening to another episode of On the Brink with Castle Island.
To learn more.
For more about Castle Island, visit Castle Island.vc and to listen to all of our podcast episodes, please visit Castle Island.vc slash podcast or just click on the tab on our website. Thanks for listening.