Tal Zackon Of Tres On The 5 Things You Need To Understand In Order To Successfully Invest In Cryptocurrency
An Interview With Fotis Georgiadis
Know your risk appetite. Do you know what you are getting into? Are you a trading firm who wants to create alpha by engaging in yield farming or a company simply managing its treasury that just wants to stake stable coins or ethereum for example? Or are you an individual who wants to dip your toe in the crypto waters? In that case, your risk tolerance might be a lot more conservative.
Over the past few years, the Cryptocurrency industry has been making headlines nearly every week. Many people have gotten very wealthy investing or leading the cryptocurrency industry. At the same time, many people have lost a lot investing in the industry. In addition, more people have been scrutinizing the ecological impact of crypto mining, as well as its potential facilitation of illegal activity. What is being done and what can be done to address these concerns?
In this interview series called “5 Things You Need To Understand In Order To Successfully Invest In Cryptocurrency” we are talking to leaders in the cryptocurrency industry, as well as successful investors, who share insights from their experience about how to successfully invest in Cryptocurrency.
As a part of this series, I had the pleasure of interviewing Tal Zackon.
Tal is CEO and co-founder of Tres, which launched in September 2022 as the first financial data lake for Web3 companies. Previously he led the F2 Venture Capital investment team and also served as the General Manager at The Junction. Having served as a Captain in the Israeli Special Forces, he is on the board of Combat Ventures, a non-profit organization assisting IDF veterans’ integration into the Israeli startup ecosystem.
Thank you so much for doing this with us! Before we dig in, our readers would like to get to know you a bit. Can you tell us a little about your backstory and how you grew up?
I was born in South Africa, and partly raised there until later moving to Israel. Eventually I was recruited to the Israeli Army and served in their Special Forces for six years. That’s where I met my company co-founder Elion Lotem.
After serving, I studied business in Israel and during that time did various diplomatic projects with the Israeli government and also worked with a business intelligence company. During my third year, I joined an early stage venture capital firm called F2 Venture Capital and remained with them for four years, running the Fund’s accelerator and investing in several companies including a blockchain firm. Overall, I learned a great deal about startups during my tenure.
Is there a particular book, film, or podcast that made a significant impact on you? Can you share a story or explain why it resonated with you so much?
A book that really impacted me was Atlas Shrugged by Ayn Rand. I think I read it when I was in the Army, or just before, and it changed my way of thinking about the world in terms of innovation, technology, and building something important. It made me realize that what drives the economy and the world forward is innovation and striving for excellence and hard work.
The book made me realize that I wanted to be an entrepreneur and create something that will impact the world in some positive way.
Is there a particular story that inspired you to pursue your particular career path? We’d love to hear it.
My dad was a financial advisor and built himself up with his own ten fingers, exposing me to the start up mentality and technology scene. I think that I’ve always had the need to build something; create something from nothing. And that is what pushed me forward to go and build my own company, Tres, a financial data lake for Web3 companies, along with Elion (more details are below about Tres). I also think my leadership service in the Special Forces Unit in the Israeli Army made me believe in myself and understand that anything’s possible.
As I said, my first entry was as an investor, and I got to see first-hand founders go on to build great companies. They would go from two people with an idea, and a funding presentation, and go on to grow businesses into 20, 30, 50, or 200 people and build a product. That was really inspiring to me. I felt it was time for me to stop sitting on the sidelines and watching the action happen, and become one of the players on the field.
One company I invested in while at F2 was called AVO, a grocery delivery service. When they started they had about five employees. I remember joining them one day for delivery as part of our due diligence process, and seeing the founder do the hard sweaty delivery work on his own was cool. Two years later they grew so much that they had a warehouse with 600 people — that’s the most inspiring thing I’ve seen recently from a start-up perspective.
Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson you learned from that?
I can’t really think of anything that is terribly humorous, although there I’m sure there have been funny moments and missteps on the way. I guess you could say that in the beginning it was very “garage oriented” in that we were working out of my co-founder Elion’s apartment, or other team members’ apartments in Tel Aviv.
The one thing I’ve learned is that an idea is one thing but execution is everything. If you don’t bring your idea to life and have people interact with a product — you don’t know if it’s a good idea or not. Your friends may say “oh, that’s a great concept, you should definitely go and build it,” but until you meet real life customers who will give you real feedback — you don’t really know. Is someone actually going to pay for your idea?
I guess what’s funny, in a way, is that you can have an amazing idea for a new feature as well, in a vacuum, but then when you show a client they don’t think it’s useful or relevant. What I learned is not to spend too much time on an idea until you can shop it around in the field.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?
There is still so much yet to come on Tres’ journey, but when I was thinking of building a company, I wasn’t quite sure exactly what that would look like yet. I was consulting with a lot of different and inspiring people and had all kinds of offers, but nothing felt quite right.
Then Elion, my co-founder and I, went for lunch and he showed me what he was working on, and what he wanted to build, which was a data platform in the crypto space. And I knew right away that it was something I wanted to help build.
For me, Elion was the perfect partner because of his skills and expertise in technology, and because we came from the same army service — so we spoke a very similar language. I knew that our values were aligned and his ambition and hard work would be invaluable.
Truthfully — I never thought I would find someone who would work as hard as I do. And suddenly I’ve got a partner who is constantly pushing and showing me what excellence and hard work really looks like.
I haven’t really been able to match him or kind of reach his levels. But he is the person who inspires me every day to be better, and that’s been a huge part of building Tres.
Are you working on any exciting new projects now? How do you think that will help people?
Elion and I were thrilled to launch our new company Tres recently — the first financial data lake for Web3 companies — along with a $7.6 million seed round. A data lake is essentially a large repository of data stored in a raw format, which is then used to make the data actionable for reporting, visualization, analytics and machine learning.
Nowhere is this more applicable than in the world of cryptocurrency. Web3 businesses (you can read more about Web3 here), are struggling to manage the exponential growth and complexity of financial data across digital assets. Tres’ financial platform provides an unparalleled level of visibility, monitoring, alerting and automation to Web3 finance teams and seamlessly translates high volumes of raw blockchain data into actionable information.
Tres does this by collecting and aggregating data across disparate crypto wallets, accounts and platforms, reducing the workload of manual spreadsheets — a process prone to human error — by 80%. The data is organized and enriched and allows finance teams to work with it the same way they handle fiat data, making the user experience seamless and familiar.
If you’re so inclined, you can read our press release here and our debut in TechCrunch here.
Ok super. Thank you for all that. Let’s now shift to the main focus of our interview. The cryptocurrency industry seems extremely dynamic right now. What are the 3 things in particular that most excite you about the industry? If you can, please share a story or example for each.
- Its massive potential — The global crypto market cap is $1.06 trillion as of August 1, 2022. Approximately $112 billion is traded in cryptocurrency per day, and there are more than 6,000 different types of cryptocurrencies. The global blockchain market is predicted to go up to $23.3 billion by 2023. At this rate, analysts forecast that the cryptocurrency market will triple in size by 2030 at a valuation of around $5 trillion.
- Greater mainstream adoption — Most professional investors think that crypto will become increasingly mainstream. Recently, the United States’ oldest bank, BNY Mellon, became “the first mainstream bank to offer cryptocurrencies alongside traditional products on the same platform.”
- Stable coins — which are “cryptocurrencies whose value is pegged, or tied, to that of another currency, commodity, or financial instrument, providing an alternative to the high volatility of the most popular cryptocurrencies.” (Investopedia) I think that stable coins are going to be a real game-changer, as they’ve already boosted mass adoption. They will enable companies to de-risk themselves while still staying part of the crypto ecosystem
What are the 3 things that concern you about the industry? Can you explain? What can be done to address those concerns?
1) The growing complexity of managing crypto assets across platforms, protocols, accounts and wallets. There’s been a movement happening in the Web3 space in the last couple of years. If you look backwards, you’ll see that most crypto operations interacted with Bitcoin or Ethereum and businesses held maybe one or two wallets. Today, with the influx of protocols and exchanges, the companies we engage with have such a large variety of endpoints where they store value and crypto assets. There is so much more diversity today, and financial management is becoming more of a challenge.
There are just so many transactions, both internally and with third party “smart contracts’ (or terms of agreement between buyer and seller). There’s just a massive influx of data for the middle, front and back office — and it is very difficult to grasp the big picture, to know the company’s net worth, and see where the money is flowing to and from. Analyzing all these financial movements is very, very difficult.
If you compare that to the Web2 world — what we have traditionally been used to — we have everything pretty much in order moving between bank accounts. It’s much easier to see what is happening.
But when it comes to the blockchain, crypto and Web3, that’s a much more technological ecosystem. It’s much more code oriented, and therefore it’s very difficult for financial teams today to get their arms around it.
Fortunately Tres makes this easy in one central dashboard in a format finance professionals are used to. We’ll take all that financial data and parse, cluster and enrich it in order to enable treasury teams — and any person in an organization — a clear visibility into their financial operations. We can leverage that data for compliance, reconciliations, audit and accounting, and also so finance teams can analyze their revenue and optimize their internal operations.
2) Scams and Security — These two concerns go hand in hand. The amount of scams that happen in the crypto universe is quite concerning and that puts the spotlight on security, or how to protect one’s crypto assets.
I think that until we clean up the industry from this mess, and have good enough tooling to help us avoid the scams and protect our assets better, we will still be regarded by many people around the world as an industry they don’t want to be part of. It’s hurting the branding and the reputation of our industry. And that is something that we have to help move forward and progress. I think the Web3 rebranding was a great idea — it signifies a fresh start.
3) The Web3/crypto Echo chamber. There are another two or three steps that we need to take in order to position Web3 as the future of finance. Most in this Web3 ecosystem are trapped in an echo chamber, and drinking our own kool aid.
There needs to be another level of accessibility, sort of like Apple Pay. Right now you can’t buy a hamburger with crypto, and you can’t order groceries or purchase a couch. Apple Pay took some time to take off but now they are ubiquitous. We still need to get there, but there is another layer of technology that needs to be built.
Circle, an investor in my company, is the primary issuer of USD Coin (USDC), which is a blockchain-based token pegged to the dollar also known as a stable coin. It is considered to be the top challenger to market leader Tether, in fact. I think they will help bring more accessibility to the ecosystem which we need.
What are the “myths” that you would like to dispel about cryptocurrency? Can you explain what you mean?
One myth, that many people I speak to believe, is that crypto is mainly used to launder money for terrorism and drug deals. While that may happen, these same groups also do nefarious things with fiat. It’s not a rogue community, the Web3 ecosystem itself has totally changed with the type of legitimate investors, VCs, founders, engineers, finance teams and more that interact and engage in the ecosystem.
How do you think cryptocurrency has the potential to help society in the future?
A bankless society is really more of a cliche, but crypto does have the potential to optimize the financial world through capital, job creation, and technological advancement. It may be very similar to the Industrial Revolution and how it changed the world — that I do believe.
Think about something as simple as sending an invoice. If I send one in USD (US dollar) it can take two weeks for money to get into my account — or even arrive by check — if you factor in bank holidays, weekends etc. But with USDC (a crypto stablecoin), from the minute you send an invoice the money will be wired to your wallet. That’s revolutionary.
Recently, more people have been scrutinizing the ecological impact of crypto mining. From your perspective, can you explain to our readers why the cryptocurrency industry is creating an environmental challenge?
Yes, many have grown concerned about the environmental impact of “crypto mining” which can be an energy-intensive process using massive servers. But when you compare that to the environmental damage caused by airplane travel — that is much more damaging than a server helping to mine bitcoin.
From your perspective what can be done to address or correct these concerns?
Of course, the industry is still sensitive to sustainability efforts which was one of the big reasons to move towards Proof of Stake (PoS) vs Proof of Work (PoW) when validating crypto transactions on the blockchain.
There’s so much to read about that, your readers can find a lot of information about the differences with a quick search! Basically PoS requires much less energy and no special equipment.
Recently, more people have been scrutinizing cryptocurrency’s impact on illegal activity. From your perspective, can you explain to our readers why cryptocurrency, more than fiat currency, is seen as an attractive choice for criminals?
Cryptocurrency has no central authority, such as a traditional banking system — hence the term DeFi (decentralized finance) — which is the entire point. Eliminating a central bank and operating on an accessible blockchain was meant to democratize access to currency.
Digital assets are a brilliant concept, but because this money is virtual it can be more vulnerable to criminal activity and hacking — and with billions of dollars at stake, nefarious activity is almost inevitable. Bad actors can stay anonymous, route crypto around and then disappear very easily.
From your perspective what can be done to address or correct these concerns?
There is a lot of attention to this problem, and countries around the world are responding with Anti-Money Laundering (AML) and Counter-Terrorist-Financing (CTF) legislation with the end-goal of Know Your Customer (KYC).
One really big story back in May was when Bitcoin blender was closed down by U.S. law enforcement for laundering money for North Korea — which is scary stuff. So you can see that serious measures are being taken to curtail rogue activity.
Ok, fantastic. Here is the main question of our interview. What are “The 5 Things You Need To Understand In Order To Successfully Invest In Cryptocurrency?”
The information provided here is not specific investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
- Set a goal and have a strategy. Have a goal, and when you achieve it — know what is next. Think steps ahead, in other words. Generating as much yield as possible is not a strategy. Many experts will say it’s best not to exceed 5% or 10% of your portfolio in crypto. Pick which percentage feels comfortable to you within this range. You can’t time the market, so stick to your strategy. Don’t feel uncomfortable returning to base (hold where you are).
In Hebrew there is a saying ”a small pig eats a lot, but a big pig gets slaughtered.” You want to be a small pig.
2. Know your risk appetite. Do you know what you are getting into? Are you a trading firm who wants to create alpha by engaging in yield farming or a company simply managing its treasury that just wants to stake stable coins or ethereum for example? Or are you an individual who wants to dip your toe in the crypto waters? In that case, your risk tolerance might be a lot more conservative.
3. Do your due diligence. Investigate and look into all the opportunities carefully. Look at the website, talk to other investors, do your OWN due diligence, and don’t blindly trust the “picks” of others or any media hype.
4. Avoid fluctuation risk. If you are in a transitory position, i.e. if you are moving between coins and exited positions, try to move back to stablecoins to avoid fluctuation risk. Don’t forget to go back to your base (eg take a breather). For example, staying long on ethereum or moving back to stablecoins could be a risk averse approach.
5. “Not your keys =not your coins.” This is a very common phrase in the crypto world. If you don’t control the keys, the coins don’t really belong to you. Take Celsius as an example in which users found out they had no control over its business activity or its assets. Know who controls the coins and know what your level of access is. Will you still be in control of your own assets?
What are the most common mistakes you have seen people make when they enter the industry? What can be done to avoid that?
Believing stories about people getting rich quickly through crypto is a mistake; that is extremely rare. For every one person who gets rich, there are 100 who lose their pants.
When investing in crypto, be thoughtful, build a strategy, and do your own due diligence. Don’t make media hype guide your investment strategy. This bears repeating: always return to base periodically (i.e. stay put for a while) and don’t go down a rabbit hole of new opportunities and projects. Stay calm, know your risk appetite and don’t be afraid to cut losses.
Do you have a particular type of cryptocurrency that you are excited about? We’d love to hear why.
Aptos, the Cosmos Network, and Polygon have all received a lot of media attention (some good, some not). We are seeing an uptick in engagement, especially among builders, so I’m very excited to see the future and how things develop. I would definitely keep my eye on those.
We are very blessed that very prominent leaders read this column. Is there a person in the world, or in the US with whom you would like to have a private breakfast or lunch, and why? He or she might just see this if we tag them 🙂
I would have absolutely loved to have dined with — or even met — Nelson Mandela. I was actually born in South Africa and my parents grew up there during Apartheid. Just as it was ending, my family moved to Israel — but my roots are there and Mandela looms large over my memories.
His greatness is just super inspiring to me — he changed the lives of so many people and brought peace through compassion, love and compromise to a huge country. An exceptional leader with no comparison, in my mind, and I have no doubt that a conversation with him would have been priceless.
Thank you so much for these excellent stories and insights. We wish you continued success and good health!
Tal Zackon Of Tres On The 5 Things You Need To Understand In Order To Successfully Invest In… was originally published in Authority Magazine on Medium, where people are continuing the conversation by highlighting and responding to this story.
