Ethan Vera’s finance career spans the range of experiences out there, from staid pension funds to the erratic crypto market.
Vera started in asset management, helping to handle pension plans and investment funds for the Royal Bank of Canada. Prior to that, he was an investment banker at Goldman Sachs, where he covered the blockchain, fintech and semiconductor industries. He has advised on a number of cross-border Asia M&A (sell-side, buy-side, take private, private placement) transactions across industries, including energy, industrials, technology, media and telecommunications.
Today, Vera is the CFO of Viridi Funds, a Seattle-based registered investment advisor and emerging fund manager providing environmentally focused crypto investment products. He spoke with StrategicCFO360 about why he believes in crypto despite the challenges, how to manage assets in a bear market and who he expects will get into crypto going forward.
How does managing a company, through the role of a CFO, in the cryptocurrency space differ from other industries?
The crypto industry is one of the quickest evolving industries globally, and one that has a very strong presence amongst both retail and institutional participants. In order to build products and services of value and staying power in the space, it’s critical for management teams to have their boots on the ground and use various products in the ecosystem to see what critical infrastructure is missing and what can be improved.
Because the crypto space is moving so quickly, companies need to remain flexible in their products and be ready to iterate on them as the rules of the game change and so do the players. One area we have been hyper-focused on at Viridi is providing crypto products that cater toward existing institutional infrastructure such as ETFs. We believe there is a lot of capital and potential market participants that have been sidelined until better rails get built between the crypto and old financial world.
In turbulent equity markets, how do CFOs of asset management companies stabilize their businesses?
Frequent and significant bear markets are a function of the crypto industry, and one that management teams need to prepare for. When it comes to our company, it’s a function of forward planning, budgeting and fundraising. Having a strong balance sheet with cash flows helps allow us to not fundraise from external capital in bad markets. Some business models take longer to develop cash flow, however we have prioritized a model that does.
In regard to asset management, during turbulent crypto or equity markets it’s important to remain focused on your mission. In our bitcoin mining ETF, our mandate is to invest in bitcoin mining equities. Although the market has been very difficult the past couple of quarters, we are hyper-focused on the active management piece, giving it our best to outperform the index of market-cap weighted miners.
Which areas of the crypto industry are the most interesting given the current macroeconomic backdrop?
We believe there are multiple areas in crypto that have a high potential for growth and innovation. One area we are particularly interested in is the crypto mining space. It’s really a pick-and-shovel play that investors can get exposure to underlying assets but through more consistent and defensible avenues.
In our experience it also provides a bit of torque on the underlying commodity (bitcoin), similar to gold miners on the value of gold. The challenge many of these operators face right now is their large capex cycles, so finding the names that can successfully navigate capital markets and deploy it in a pragmatic way is key to getting the winners.
How has the bitcoin mining space evolved since joining the industry four years ago?
2017 marked the year that bitcoin mining hit the mainstream; the first few bitcoin miners went public in Canada, ASIC manufacturing became a billion-dollar industry and the industry captivated millions of people around the world. That period was short lived with the downturn in 2018, with much of the capital and attention fleeing the space.
Over the next four years we saw a gradual recovery of institutional adoption and technology improvements. Today there are cities like Fort Worth, countries such as El Salvador and asset managers like Fidelity involved in the mining space. We expect this trend to continue with more energy companies, governments and institutions joining the space.