186: Money Maker | Eczodex | Bridging TradFi to DeFi | Michael Quartey and Lukas Bruell

0:11 Hey there, I'm Pete Townsend, and this is money, never sleeps. We look inside the minds of entrepreneurs, and at the crossover of startups, Enterprise Finance, technology and Life. As We Know It, This episode of money, never sleeps is sponsored by Phillip Lee one of Ireland's fastest growing corporate law firms and expert advisors at the heart of the Dublin in London, start-up fintech in crypto communities on the show this week. Week, we've got. Hello, I'm Michael corty founder and CEO of exid X, and I'm Lucas Grill. And I'm the co-founder of X text X attacks are enabling investors to unlock more returns with their existing Investments through defy or decentralized Finance exit, X or the ninth founding team for me. The launch pool with three textures, accelerator class of 2020 to that we got on the show in the lead into demo, Day on June 30th in this episode.

0:55 I want, it's Gerald and I talked to Michael and Lucas about how their backgrounds uniquely prepared. Them to bring X at X to life, how x and x are bridging real-world assets. And to defy what the opportunity set looks like. What enabling yield enhancement strategies to real-world investors and the crossover between web 3 and violin virtuosos. All right here on money. Never sleeps. Geysers Blood on the streets. The last couple of days in crypto, don't you think? Yeah, tell me about it. Yeah it awful times but I'm sure we're going to learn from from from the lessons at the moment and recover and build back better. That's my view on it looking for the upside. Yeah, absolutely.

1:39 I'm kind of feel like the bank, this guy's Express themselves quite well, on this emergency bear Market episode. They did earlier this week. That was the long-term sign of Success of crypto is not prices, it's time, right? And are we still here? Are we still existing, are we still progressing that, you know, the shorter term Market Cycles driven by all sorts of unique situations that were in from a macro perspective right now it's just completely unprecedented, we never seen this before. I mean, just understanding where the real value is that there's a lot of value that crypto brings and its potential to revolutionize many Industries and And taking that long term view. Yes.

2:21 Then you're 100% right that whatever short-term gyrations, we're experiencing in the market right now in the grand scheme of things, it will not stop us from from achieving the disruption that blockchain definitely has potential to do in Denver. All right. Cool. Listen guys, why don't we just jump right in and get started? And where I like to start is with your backstory Michael and how you got to this point may bring us up to speed with what got you to the point of finding X attacks. Well, how much time have I got Pete? Yeah, well I could take the whole you're going to have to cut me short on that one, but now I'll try and be as brief as possible. So, I mean, where should I start? So, born and bred in London to Immigrant parents, really good, stable, family upbringing in which allow me to navigate school and uni.

3:08 And certainly my first graduate job with CSC Financial Services, which is probably the best place to start. So yeah, I joined CSC. Each now there now dxc back in the late 90s, it was the time of the internet. Boom. I always as an entrepreneur at heart. I always had this ambition of not wanted to try to make my way up the corporate ladder. I always wanted to do something. So even a year or couple of years into to my graduate job, I was thinking of ways in which to build a business at the time than an e-commerce startup Venture was what I was working on with my brother and similarly, to now and Market crashed that Had the.com bust and perhaps we weren't as far as vast as we are.

3:54 Let's say with respect to X at X. So at the time, my brother and I decided to stop but that led me into Contracting. I built on the skills. I had learned through is through CSC to work for over 20 plus years in the financial services space. And that really is one of the drivers for for exid exes, the experience that I gained working in financial services and understanding later on On, it didn't happen immediately but there was an epiphany where I realized once I understood what was going on with decentralized Finance, how much better the infrastructure could be? How much more efficiently things could run using all of the innovation of blockchain technology and decentralized finance which is building on top of it. So that's one of the the sources of inspiration behind exit X and the other one is a little bit more personal. The other one is actually just down to my own inadequacies as a financial investor.

4:49 Specifically, with with stocks and over the years, I've experienced the highs and lows of investing and that probably was another spark behind this idea with respect to trying to find out if there was a better way to invest a better way to invest in products with more predictable, return patterns. And that was the origin story of the specific concept that I started with exid X. Once I That within the crypto, there were many projects also, trying to address similar issues around risk and volatility. In their markets, I started reading their project papers and then realized, oh, not only are.

5:32 There are other people trying to solve similar problems, but there's all this amazing Innovation going on. Why not? Look at this space more closely and try to build something here. So that's the backstory behind X of X and certainly how I pitched it to Lucas. What I love about this, That startup Founders are so. Unique that what you set out to do is just an output of you as an individual, looking your background, Michael and seeing how many complicated technical change projects, you went through over those 20 years. That repetition that you've gone through. If figuring out really hard problems, really hard, technical problems and financial markets and insurance, and doing that alongside your own investment Journey. It just seems like it's a perfect recipe for what you guys are setting out to do with X at X. My read into that properly.

6:17 Yeah, that definitely. Lee definitely paid some couldn't agree more and just one drawn point on that. Certainly over the years that complexity has just got increased and increased in traditional finance and I certainly feel that there's so much opportunity to do it better in this new world or be it that it comes with its own challenges, which will touch on shortly, Gadget, and Lucas, we're going to move over to you. It was awesome that you and I met at the defy live conference in London, after that intro, from Christian Davy shadowed Christian, he's great guy. So, maybe tell us how you got to that point of meeting me that day at defy live. At London, obviously haven't got together with Michael and number of months back before that. Yeah, sure, absolutely. So, I mean, my story starts in Vienna, actually, I grew up in Austria was very lucky to grow up in a city with, you know, lots of opportunities.

7:05 Beautiful city, went to high school, played some tennis B, late some violence, or threat of different things, but kind of was convinced that it's time to leave after school with 1819 around and Yeah, headed to the UK, hated the UK to stop my studies over there. The last five years, I've got the opportunity to really study a broad range of degrees. I sort of Finance but then also get low analytics business. So went to universities including Cambridge Imperial College in London, worry University and people o school. But next to University, I I also started to experiment experiment a bit with traditional industry. So I interned Investment Banking it low and Consulting. So what's with Crispy squabble will speak. The kings of profile and also with Lickin Watkins, but also then realized, that my personality is is all about entrepreneurship.

7:55 I want to build, you know, Ventures and being my first experience by setting up. A research Mentor, students community over to side with my roommates first roommate at University, which basically helps students to understand what's happening in French markets. Particularly Emily private Equity because we had, we realize there's a big problem for students to be understand And why deals are happening, what the synergies are, what the risks and uncertainties appeals are and yeah better than you know finding that as a business we just literally came to solve a problem and we did that by concisely publishing reports about those fields and found a lot of people that found that really interesting helpful and that was the first time where I realized there is incredible opportunity to solve problems out there and nothing more exciting doing that.

8:43 So that kind of then let me to realize, I want to be an entrepreneur ship for sure. I got to Cambridge and when I got to Cambridge I realized the incredibly powerful leader of crypto to an even greater level. I mean, I was interested in it for a while. I was reading about it. I was resting bit in it, but I'll certainly wasn't involved in a venture building crypto. But then yeah, I'm at my pool. You know, he had an initial draft of equip, the solution. I made a lots of people in the blockchain club in Cambridge. And that's when I started to dig deeper and deeper ended up in a rabbit hole and yeah, finally ended up in his face full time now. So yeah, we kind of started a wolf more traditional industry experiences but then move closer and closer to. He not good entrepreneurship journey and that's where we're at now.

9:30 Yeah, it's fascinating seem like really quickly got quite a number of immersive experiences that have told the enriched your view of the world. Old. Yeah, I mean, I appreciate it. I mean, I was just really trying to get experience in as many fields as possible. I think the role nowadays is more complicated than anytime before. I think it's all about you know having a good understanding of different fields, connecting the dots and yeah having a diverse background of skills. Ultimately and that's that was my main focus. That was my main goal. I think I did a decent job in doing that based on industry experiences but also the grease but now it's really all about bringing it all together and leave Reaching those experiences skills to build the, a great business, and I think we all do exactly that.

10:14 We'll listen, let's shift gears a little bit now and talk about X at X tell us where you got 2 of X at x. What it is, why it's Unique, why it makes so much sense of the two of you to be working on this right now. Yeah, I'll go and jump in Lucas as well with, if your views on its butt next X. I mean, as, you know, P we came in to textiles all about building the next generation of financial products. And leveraging or that, that exciting innovation in the defy space to build on top of that and create products that ultimately, in use the commode service, the mass market. And I think we're still very much staying true to that that General Vision. But certainly one one lesson learned coming into textiles, was that while we had spent a lot of time really working on product Concepts and designs, and kind of locking ourselves in the room and focusing primarily on what we could offer, what sort of products we could build. Hadn't done enough of of sort of customer Discovery and really getting out there and talking to as many people as possible about what they oppress and needs are.

11:16 And what would be an ideal first product for, for our customer base. So something we certainly have done really well on textiles. And we've learned a lot along the way talking to, as many people as possible to, really refine our offering. And as such now what we've certainly realize is one of the biggest pain points is that there is this sort of separation between the Worlds of traditional finance and decentralized finance and completely different worlds. And dare, I say this present point in time, different mindsets with both worlds, not really sort of connecting to each other and ultimately, that is where the value-add can come from building that bridge between between the two worlds and in doing so, creating products that deliver real value leverage in both that the best of traditional finance and decentralized finance.

12:07 So That is what we're looking to do right now. We have taken the lessons from and the feedback from our customer Discovery sessions. We are looking to build a product that will allow customers to leverage their traditional financial investments. Be it stocks ETFs bonds, what will or whatever? And to leverage those Investments to then get into the world of defy without having to spend additional cash in doing so they can use those Investments, as collateral and thereafter. We will Execute strategies on behalf of our customers range from sort of low risk, medium risk all the way up to high risk strategies where they can benefit from all the yield enhancing opportunities that are now available in defy. So, that is the broad brush idea. I'll pause there for such that Lucas. You can jump in and, and put your spin on it on it as well. Yeah, no.

12:59 I think you did it. You did a great job. I mean, we just explore that. In a lot of detail. We had conversations with pretty much almost fruit Institution. Ranging from smaller, family offices, to some of the biggest financial service companies in the world and it just was pretty clear pattern after well to see that this bridge doesn't exist, right? And that is a problematic thing for particularly those more traditional family offers they used to traditional financial instruments and yeah that's that's what we get more and more convinced that there is a great opportunity to tap into that and yeah that's it. That's what led us to the current product design.

13:39 I also think that particularly looking at the market right now where you can borrow cash with crypto for the cannot bar crypto with all those trillions of traditional Financial assets. That there is a massive opportunity to tap into that space. And that's where we, you know, it's not, it's going, but when did that direction afterwards? And guys, it's great to hear that because obviously, I met you back to start of the textures program and you were one of the names of the men. Repeat, after, you know, that I was particularly interested in seeing how you kind of progress through it. Because my own view would be that, you know, obviously Peters far deeper down the rabbit hole on web 3 then I would be and I'm somewhat of a skeptic to some degree but mainly because I think it's a bit too Innovative currently and there needs to be that Gap.

14:28 There's people who are willing or interested in kind of, you know, making the jump across. But that, you know, the pathway needs to be, there needs to be something in the middle that allows me to continue to operate. A date with my existing kind of Investment Portfolio, whatever, and allow me to Dan kind of dip into defy space and a crypto World in a more kind of structured way. Let's go. It's great to see that, that's kind of where things have ended up versus when we talked even. I don't know how many weeks ago was back in April. I think it was feels like donkeys ago, but now certainly and and that certainly was the sentiment from a lot of the discussions. And and one other thing is what we've learned as well is A lot of people are busy, they've got their everyday lives to deal with, you know, raising the kids paying a mortgage working full time and whatever else they've got going on. So as much as they might be interested in this exciting new world, it's just impossible to keep up to date with the pace of innovation and and that even whittles down to understanding why there are additional yield enhancing opportunities that defy offers over traditional Finance, so it's really kind of with that mindset.

15:37 In sort of those pain points and shape in a product around it. That is really the journey we've been on and how we've settled on this value. Proposition at this point in time. Hey everyone, this is p. Let me tell you about the folks at Phillip. Lee few years ago is that my first Venture Capital industry dinner in Dublin and honestly I felt a bit lost I bumped into Android Cazale. One of the partners at Phillip Lee. He bought me a pint introduced me to the team and they took me under their wing that at take you under their wing approach has been what I've heard consistently from fintech. And crypto startups who I know have worked with Phillip Lee in Dublin and London to help them wrap the right legal framework around their business, fundraising and Regulatory needs, and I can't recommend them enough. Get in touch with a team at Phillip Lee dot IE or on money, never sleeps.

16:25 That IE /. Phillip Lee to learn more. I'm glad you guys got to this point because I had a bunch of experience in the past and securities lending, or at least in the framework Securities lending in that, or you got a big pension fund that is holding assets. They're able to reuse those assets or lend them to investment Banks to other lending programs. And then they generate yield off of those inventory of assets, but that's only really been available to the big Pension funds, and big institutional, mutual funds. It's really costly to put that type of program in place for smaller. Funds wealth affluent investors, family offices. Whatever that only have much smaller inventory of assets. Why can't we make that available for others? You know, when it's complicated.

17:11 So even in my 401k that I still have, I've got assets. I'm holding for the long term, I'm not putting them to work. Would it be possible to actually earn further yield on those? And I think that, you know, it's very much needed in the world. Like you said, it's great case study for bring together, traditional finance and the mechanisms that I just talk through and the opportunities to actually generate yield. Those assets the defy market. So you guys definitely on the right track here. Yeah, thanks Pete. So with all that in mind, what's the longer-term vision? Right? How big can this get, you know, what does it look like when you've got say, a critical mass of individuals or institutions or family offices? That are leveraging X attacks, generate more yield on their Investments through defy. What other Innovations does, this open up? Where else can I go?

17:58 Yeah, it might sound cliché, but I really think Think that the sky's the limit purely when you look at the size of the markets that we're talking about. So defy has done phenomenally well, it's grown to around 140 billion dollars as in Market size and literally a few years, but that's just the pin drop when you compare it to to the size of traditional finance and markets in, in stocks, in ETFs in mutual, fund in the funds, Pension funds, you name it. So there's going to be a Tipping Point where You build sort of products like this, the sort of bridge products. As I went, as you rightly said, that can bring those two worlds together, they will ultimately be a Tipping Point where that Capital starts to flow in.

18:44 And so really, we're talking about trillion dollar markets in years to come. It's how big? This could be. So trillion dollars worth of capital from institutions, but of course, individuals as well. Consumers opening up the opportunity for them to leverage their Investments. Certainly in all the conversations, we've held them. There's a high desirability for this type of product, people seem to get it, and they can see the benefits of putting putting their assets to work so. Yeah, in a nutshell, I really think there is a huge upside huge value add for customers, and that obviously translates to then, really big Market size and potential Market in the future.

19:24 Yeah, I'm with you, you know, and I was thinking about the other side of it, right? We heard the news about Celsius in the last couple of days, right? On Archer. If you saw the Use. But yep. Following the bad news. Yeah well it feels like that's all there is right now right? So unless you think for the long term and it's been it's just wonderful, good news. So I read a little bit about Celsius this morning, I saw what was going on and it all felt a little bit Lehman, Brothers, ish to quote, someone on Twitter with the ReUse and reuse and reuse of assets over and over again. And there was some sentiment that you shouldn't be able to do that with crypto. But the reality is you can it's just that the differences between crypto and traditional Finance with reuse of assets is that it's traceable. You could see based on assets moving from one block chain to the next on what's Happening.

20:11 So in looking at how you guys are going to be doing this with X at X and taking custody of people's assets, you going to be holding them in custody and leaving them there or you going to be reusing them. Now that So the plan is certainly with the traditional assets, hold them in custody and then basically using the Innovation and defy create assets that we can then leverage in defy, but now it's certainly one. There are lessons to be learned and we are learning every day around you know the potential pitfalls of some of the business models that are out there. There is no doubt that while there's all this amazing Innovation there are also some experimental business models that may not be sustainable and the trick is to learn as much as possible about that and avoid that path because our vision is genuinely to deliver a sustainable business that creates real value in a long run.

21:02 And that has a solid foundation and such that it will not crash overnight in the macro downturn. So yeah that there are lessons to be learned and I think Lucas you've certainly done a lot of reading as well on with respect to two recent events so I'll let you have your say here as well. Yeah I know I mean I could not see better than you did the think particularly markets like this at the moment you realized that we were looking for the for the real Bali, right? Still looking for opportunities that are robust against you know once in our makes and against models that are out McLean not, not sustainable, subjected to massive shocks for sure their bull markets in the bear markets. At that has always been the case in the continue to be the case but, you know, people are looking for trusted looking for credibility, they looking for a tation and I think there is a great opportunity, particularly in crypto, the build adventure around those vans.

21:52 And that's why, you know, around all these great product design sessions for Mike and I had our key, Focus always has been to create something around those values that popped up over and over again. Again particular over the last couple of weeks with institutional Esters as much as food for retail investors. Yeah, we do strongly believe that it's not just about the product. It's about what the product wants to express. What he wants to sold, and that obviously includes such as some fancy product designs that are stable. But it also very much is about security credibility, trust reputation, and all of those things are here, looking up. Exactly in this market, it becomes more apparent power important. That actually, this Guys, what do you say? Would be the biggest challenges in the next kind of, let's say 12 to 18 months as you look to scale the business. Well, sadly, I mean given recent macro events that that's, you know, we've the market downturn.

22:44 It is going to be a lot harder. Despite all the Innovation and that new projects can bring to raise funding in this environment. We're fully aware of that. We believe we've got a fantastic proposition so we're very confident there. But those conversations that would have happened a lot faster. They're random decisions made a lot quicker. Probably going to take a little bit longer now. So we're we're aware of that given given the current micro climates at the moment next to that. Obviously, that the legal / regulatory landscape for this field is a Minefield. We are working very closely with our lawyers to navigate this path and we do internally have a reasonably good understanding of the complexity.

23:28 So we're pretty confident there. But nevertheless, it's a fast-moving. Case different proposals in different markets. So we're going to have to keep tabs not just in Europe which is where we are intending to start. But certainly the US market in particular also Asia those markets. We just need to keep tabs with what's going on and the change in legal and Regulatory climate. So for me, those are the ultimately the biggest challenges that we want need to address in the near future. Yeah, I agree with that, but I think, at the same time, you know, we look look at the markets, a positively, it's all about the long run. And if you look at the, the last crisis, biggest bigger crisis of the last centuries, you will find that some of the most valuable companies were built in Bear markets, where it was time to build.

24:13 And I just see that as a repetition of that, there are still a lot of capital out there that needs to be deployed. Obviously, it will be more diligence, the capitalist Pig deploying projects of great real value. The good thing is that's exactly what we do. And from that perspective I'm looking at it, very positively to build Now, to create get a great team around It and to make sure, you know, we will execute on that. And then when the time is, right, and it will be right again, you know, then then then many people out there will realize the value. That was great over the few months of the bear markets, maybe more than females, whatever. What matters is the badly grade and that's what we certainly do. Yeah exactly. You just don't know, I mean the bear Market is the bear market and people are saying build the dip but little bit more than that right now it's Build The Bear right?

25:02 But You know, I see the focus that you guys have that. Listen, this is a plan, this is what we're going to build. This is what we're going to achieve with. It is how much money we need for, you know, regardless of what's going on in the market. Will it be more difficult to get funding? Yeah, well, it will be, but it depends really on the Angela what you're building. You're in grow seeds right now and you're looking for a series B or C Ricci. Well, you know, you might have a little bit of trouble given that this is seed stage that you're going for, like you said, Lucas, there are plenty of funds with capital to deploy. It's finding the right ones to have the right conversations in order to get this funded. Yeah. And just want to find a point though. I mean, I draw inspiration having experienced the.com bust and looking at some of the Giants, the tech Giants That Grew after the.com bubble, burst the YouTubes, the Facebook's the Twitter's of this world, you know, they all follow the after the bubble burst.

25:48 So for me, I, you know, I draw parallels to those times and I think we certainly have a massive opportunity ahead of us. Yeah, absolutely. You know, you just kind of, put your head down and build, sometimes like you said, Michael, some of the most important. Check some of the most important businesses that enable information flow around the world. Right now. The internet in general came out of the.com burst and people just putting their ideas in motion and building. So with that Owen to want to take us into the final question that we asked everybody on this podcast. Yes. Absolutely guys, it's been a pleasure actually chatting away and find out about how you've been getting on the question. I always love to ask at the end is to tell us something people wouldn't expect to know about you.

26:32 That's a good one. Oh that's the hardest question but I think yeah, we did discuss this beforehand so we both play the violin or played the violin because obviously that that was a number of years ago for me. But yeah Lucas and I have done that. So that's something we have in common. That's probably unusual. I would say the interesting thing about that is that we actually found that out as part of the the textures introduction session so we never talked about that before but then we Did the painting? We realized at the page that seemed to be exactly the same thing that we do. That's cool thing. But I mean, it's again, it's a great great experience to you, to have a think, you know, when it comes to teamwork communication and just general helper, there is there's nothing that can beat playing in an orchestra playing instruments. So, and I think that is also what we can see in working together.

27:21 A lot of those values of love that those experience that we've gained many years ago, they still here and have shaped us to the people, we are now. So, yeah. Yeah. It's a great experience to have had and certainly share a lot of atoms from that perspective and what would be each of your favorite songs to play on the violin? Oh that's a difficult one. Now, do we even know if they're the same? If your vote at the same level? Is there a vast acreage grateful quality? Okay, that's pretty good. But yeah, generally, a big fan of of concertinas actually wouldn't be able to pick one because I love Many of them, I would need to actually think about which one will it take? But a lot of the concertinas Mozart concert inos, are a beautiful to play and are not just complex but also can just Express Sphinx that, you know, difficult to express with others. So enjoy those the most but equally hide and you know, was supposed one of my favorites but Mozart and Haydn probably would pick.

28:16 Yeah. Yeah. Much. Like now all that's it. I mean, you remember the pieces? I just remember the notes Lucas. That's as far as I can get a bethoven piece. I'm sure Sure, I played one of those in my time, but yeah, it was a great experience in it being in an orchestra, as well, and having the opportunity to play at the Royal Albert Hall. That was my highlight. Well, my eight-year career. Yeah. Wow, as a violinist, very good, very good. Well, you know, all eyes on you guys. So move ahead right? Just like you're at the Royal Albert Hall. So lots more to come. I expect listen, thank you guys for coming down to the show. Fantastic, thank you Pete, thank you. Thanks so much guys.

29:04 That does it for this week folks. Thanks to Michael and Lucas for opening up their minds to help us figure out why they do what they do links to get in touch with Michael and Lucas learn more about X at X or in the show notes on our website money, never sleeps, that IE. So check us out online. Also, thanks to Conan Brophy, from create sound for mixing and editing. This episode Conan is an excellent medium and you get in touch with when you're thinking about launching your own podcast. As for me I'm an early stage startup investor and Visor focused on working techniques crypto and crypto meets web 3, you like to talk to me about your business, drop me a line on info at money, never sleeps that I eat finally till next time. Thanks for listening. See you