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The F.B.I. strategy of Tokenization

I recently dropped a post called Why Large Financial Institutions or Startups Backed By Them Will Dominate the Tokenization Space. It was perhaps a controversial take, but whether you agree with it or not, go-to-market and customer acquisition challenges are unavoidable subjects for builders in the space with consequences leading to either successful scaling up or death of a startup.

In the post I left the reader with a question “...what do you do if you are a startup founder?” faced with an uneven playing field.

Let’s dig into that existential question in this week’s newsletter.

Setting the scene

Important advantages institution backed startups have over crypto VC backed startups I mentioned in the post include:

  • Access to customers and their pain points

  • Readiness from customers to support and engage

When it comes to B2B customer acquisition in the early days of a startup, it is important and,  often works out to be the case, that a startup acquires one or two corporate clients and focuses on building products that solve their specific needs. 

A common reason for big institutions to write a check for a startup is to utilise the product/solution it is building. Here are 2 examples include:

  1. Fnaltiy - backed by a who’s who list of financial firms around the globe including Goldman Sachs, BNP Paribas, Santander and Mitsui Banking to the tune of $165 million.

It aims to become the infrastructure provider for cross-border payments, tokenized wholesale cash deposits and various other capital efficiency gaining use cases for institutional players.

So far it has run trials with backers/customers on repo transactions, cross currency payments and been recognized by HM Treasury as a systemically important payment system.

  1. ADDX - backed Asia’s heavy hitters including Temasek, KB Securities, OCBC and SGX to the tune of $140 million. 

It has a tokenization product that has partnered with Hamilton Lane on fund share tokenization, and did $100 million tokenized bond issuance with Singtel and piloted commercial paper tokenization with CGS-CIMB. It also has a wealth management product that offers a plug and play solution for traditional brokerages when it comes to 70+ tokenized investment opportunities as well as lifecycle management. 

These players have the inherent advantage of access and interest alignment when it comes to onboarding corporate customers. 

In comparison to the ready-to-go customers and capital base, crypto native startups are still busy solving for capital sourcing. You can read more on the difference between the two in my deep dive research report “The Role of Securitization in Tokenized Assets”.  

So what can startups do?

When faced with a challenging competitive environment, there are 3 approaches tokenization startups can take:

1. Focused Market: choose a single market and become the vertically integration solution

2. Bespoke Solution: can't beat them then join them

3. Infrastructure Highway: build the tooling that expediates the tokenization process

The F.B.I. go-to-market strategies.

Focused Market

As I talked about many times before, tokenization space is currently separated in two buckets. One is efficiency focused (the more institutional route) and the other is capital markets focused (the crypto native route). 

If the project wants to focus on onchain securitization issuance, it faces the problem of having a very limited capital pool. Apart from a few big projects such as MakerDAO and FRAX, there are very few sources of capital of $100 million+ size. Sure this number will increase as the general digital asset market expands, but we are not there yet. 

So in the meantime, instead of trying to bootstrapping an entire onchain market across multiple assets, which means selling multiple products to a challenging customer base, focusing efforts on finding best issuers and investors of reasonable size and build a vertically integrated product that saves them cost and/or allow for greater efficiency may prove to be more sustaining than chasing products to sell.

This will prove to the world that you have a concrete and complete use case with benefits measured in bottom line changes instead of conceptual hyperboles. And there is nothing more persuasive than improving bottom lines to a risk-averse manager in a big corporate setting whose downside is getting fired and upside is getting praises from upper management. 

Bespoke Solution

Financial institutions are run on their own particular technology stack - an amalgamation of different software providers and their own codes from years ago. Of course they all still want to either save money or make money. 

If you agree that the pie is much bigger with institutions as customers, then why not join the early wave of building out bespoke solutions for them? That is how institution backed startups are approaching their GTM. If you can’t beat them, then join them. Figure out your pitch but do the execution cheaper or faster. 

Not all financial institutions have the resources to write checks to startups whose founders boast of decades of financial services experience. But even if they don’t, they still want, and deserve, to enjoy the benefits of tokenization. 

So map out the market, spend more time understanding everyone’s priorities and nail down on specific pain point solutions you can tackle. You may start with small pilot programs but they are the entry doors to bigger engagements.

Infrastructure Highway

I have argued many times before that the code that creates a smart contract and assigns a token to represent an offchain asset is a commodity. Just look at the number of tokenization as a service startups that have sprung in the last 2 years.

The real value add is not one’s ability to write a smart contract. The real value add is to build an entire environment that allows for easy customizable setup. In other words, making the technical setup process as easy as possible while offering a whole suite of integration options when it comes to legal, regulatory, operations aspects of asset management lifecycle.

Endeavour to build such a product is akin to building a tokenization specific blockchain with its own security guarantees and features. To this date, many well funded development teams have tried to bootstrap their own tokenization focused development environment, think Polygon and Avalanche. But none have achieved wide adoption in which financial institutions form a consensus on which blockchain technology is the best.

One thing to note. Despite being in a position with sufficient funding and resources to execute on this infrastructure angle, startups likely need to have an initial focus that targets one or two specific use cases which requires you to adopt one of the previous two GTM strategies.


Tokenization may be the hottest and most exciting technology evolution to happen to financial markets in the last 100 years but tokenization startups are not made equal. The few winners will become key players in the new financial paradigm. The losers… well they will burn through millions or billions of capital and fade into oblivion. 

The difference between the two will depend in a large part on their go-to-market strategy. Acknowledging strategic strengths and shortcomings is the first step in avoiding inefficient, or worse ineffective, utilization of resources or focus.

For every institution backed startups, the greatest advantage they have lies in their backers support. For every crypto native startups, the greatest advantage they have lies in their scrappy nimbleness. But the only measuring stick that matters is whether you are bringing value to your customers and what they are willing to pay for that.

I will assume a mentor role in the upcoming Outlier Ventures Tokenization cohort, if you are building in the space or want to talk about GTM strategy. Feel free to contact me. 

Additionally, I will be working with tokenization industry bodies to present a new series of successful tokenization use cases around the globe. If there are interesting tokenization startups catching your eyes, drop me a line.

Disclaimer: This content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.


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