Castle: Automating Bitcoin for Small Businesses

Hi everyone and welcome back to Stephan Livera podcast brought to you by Bold. Now rejoining me on the show is, you know, a long time Bitcoiner and, friend I've known for probably six, seven years now, Stephen Cole. For people who don't know, Stephen Cole, has been an angel investor in the past, I think worked in tech. And, now has a new venture. And so for people who, you know, long-time listeners, you might know Stephen. we did a podcast maybe five, six years ago about Bitcoin meetups, so it's been a while. Welcome back to the show, Stephen.

It's a fun, excited to be here. Thanks for having me. it's wild how much time has passed since we chatted meetups. I think that must have been 2020. we talked about community building, which ended up being a very important time to talk about that kind of stuff in hindsight. and, yeah, it's, it's crazy how much time passes and things develop in this space. So excited to connect again, dude.

Yeah. Right. And I know you've got a new thing going with Castle, so obviously we're gonna get into that. I guess just kind of, kind of what's going on in the Bitcoin world? I'm curious. obviously the super hot topic right now is the whole treasury company thing. some people love it, some people hate it, some people are in the middle. where are you at on this phenomenon? I think

it's awesome. I, I think, you know, companies upgrading to Sound Money is fantastic. sure, like, you Lines and the buzz are around these corporate behemoths that are going all in, and so far it's worked out super well for a lot of the big ones, right? Like Saylor, MicroStrategy, Strategy, they've, they've done incredibly well at this. they've clearly crafted a very thoughtful financial structure and capital structure around their business, so they're not just, you know, thoughtlessly yoloing into this new asset. I do expect I think that we'll see a range of approaches there and, and risk management approaches specifically when it comes to this, and maybe there'll be some companies that get out over their skis and, you know, it ends up going sideways for them. But I think overall, it's a healthy trend. I do see it as companies upgrading to Sound Money. as Lynn Alden has talked about recently, a lot of the types of leverage that these companies are using are lower risk forms of leverage than, you know, Retail individuals or smaller businesses would have access to, right? That it's like corporate debt with ten year maturity, there's not really much in the way of like a margin call price or, that, that a downturn in Bitcoin price could turn against them in a devastating fashion at least in the short term. So, you know, I think it's healthy. I think the real thing to watch for and to be avoided will be copycats, not so much of like Bitcoin treasury companies popping up in other capital markets. That's already happening, I think that's a good thing. But I think we will see more companies attempt this with other cryptocurrencies. I'll run like

Shitcoin Treasury companies. I think, and I, and I know some of these already exist, and maybe some of them done well, some of them done poorly. I know there was one example where, I think it was like a company who had both ETH and Bitcoin, and then they sold some Bitcoin to buy more ETH, and then they tanked. Yeah. So it was kind of like-- I don't know if that

was BitDigital or another

Responds immediately to, you know, let those folks know that that approach is, is not the direction to take. I can see that ending up lucrative in the short term in some instances, but, you know, hopefully anything there is short lived, 'cause I do think that is dangerous bubble, unsustainable stuff to be avoided. And companies that just stay on the straight and narrow with Bitcoin will generally be in a good place.

Excellent. And so obviously, I think this ties in well with what you're building around Castle. So I think let's start with you, like, what, what was your interest in this? Because I know you've been an angel investor and kind of advising people and stuff like that. What caused you to actually go more active and decide, okay, it's time to start? And, you know, what's the need for this company? Why did you decide this?

Yeah, love the question. I'll do a little quick background. So, you know, as you mentioned at the It's in tech, computer science in school. I spent ten years in Silicon Valley, got really obsessed with startup companies while I was there, so I, I actually spent my first four years at eBay, back when eBay and PayPal were one big happy family. And so I was in the room, you know, when they were putting firewall rules in place to block WikiLeaks, transactions back in the day, and it's, it's really funny to reflect on that now, You know, with, with Bitcoin and the censorship resistance angle and the importance of all of that that I didn't appreciate as much at the time. but yeah, became really interested in startups, just a small group of people on a shared mission, no bureaucracy, going really hard at something they believe in. And so I had a couple journeys as an early employee at companies in the cloud computing and AI space, and, and then around twenty fifteen and sixteen, that's when I started Reading the Nakamoto Institute and that made me appreciate Bitcoin through a monetary lens and sound money and econ and, and so that really just made a light bulb go off in my mind of, "All right, this isn't just a tech thing, this is a, a monetary thing." And at, at that point, you know, sold all the other cryptocurrencies I had, Bitcoin only, and I kind of tried to build a, a brand as a Bitcoin focused angel investor, so kind of being a person And that, you know, founders could go to if they were taking a long-term focused approach on Bitcoin and, you know, even being intentional about, not going into some of the, the altcoin, shitcoin routes, and so got to, got to interact with and meet a ton of great people through that, you know, learn a lot of company building, made eighty or so angel investments over the last five years, and Bitcoin has been enormous focus of that, so- Very, very blessed to have, to have learned a lot there and got to meet great people. And then my, my now co-founder, Joao Almeida, who you've had on the show, before previously. so he was previously CTO and co-founder of OpenNode, Lightning Payments Company. And we met back in 2018 through the, Los Angeles Bitcoin meetup scene where we were both living at the time. And, you know, became friends, kept in touch over the years. He actually started this company, about a year ago, and we connected around that time, and I quickly invested, loved the concept, and kind of thought it was just gonna be, you know, another company in the portfolio that I would try to support as an investor, but just found myself really obsessed with, with the concept and the business, and we were trading text messages every day on, you know, sales and product and, and, and go-to-market strategy. And so eventually we decided to partner up and co-found this thing together and, move to Miami recently to do so from Phoenix, Arizona. so the, the, the company has been called Orchestra until yesterday, and as of yesterday, we've rebranded, we are now Castle, and, we are an automated Bitcoin treasury solution. So we aren't so focused on the big corporates, we're really, building something with purpose For small and medium businesses, businesses that, you know, maybe have some profits and cash flow and they're not looking to go all in and lever up or anything of that nature, they just really wanna carve out some profits, put those into Bitcoin and kind of take a responsible long-term allocation to this asset. So we build software that basically helps them put that on cruise control. You can kind of define the what you want your Bitcoin treasury to look like, and then our software inter- interfaces with, you know, exchanges, storage solutions, custodians to, to kind of automate the process of making sure your treasury always looks that way and you never end up more or less exposed to Bitcoin than you want to be.

Okay, gotcha. And so, I guess obvious question that most people will ask is, why not send small to medium enterprises over to the Bitcoin only brokerages that already exist? I'm sure this'll be the obvious question, so might as well answer that.

Yeah, and I'll start by saying we love those companies. you know, like River, Swan, the, the, the companies that have been for so many years now, you know, helping move Bitcoin forward, e-even when it was a lot less clear that Bitcoin- Bitcoin was really going to be, the, the one that is relevant for businesses. They've, they've had to do a lot in terms of evangelism and education to help people understand what sets Bitcoin apart from other assets. So, you know, we're definitely, grateful to be alongside great companies like that and stand on the shoulders of giants, and so forth. that we still send a bunch of people to companies like that all the time. And I think if there are companies that have more- let's say straightforward needs around Bitcoin allocation, or maybe your revenues are super predictable and, if you set up like a fixed DCA buy somewhere, that's just kind of gonna get the job done, and you don't need to babysit it, you don't need to change it. Those solutions are fantastic. what we're really trying to accommodate are, you know, not only ways to buy Bitcoin manually and do DCA buys, you can do those through our platform. We also- Also want to, to kind of integrate with the, the software platforms that small businesses and medium businesses use to enable some dynamic types of, of purchase strategies, that haven't really been possible before. So examples of that, today Castle integrates with platforms like Stripe, Shopify, PayPal, Square. on the bookkeeping side, we have QuickBooks, Wave, Xero. And so if You are a small or medium business and you're using those platforms, you can basically just link up the, the systems that you already use, that you're already comfortable with, and then you tell us, for example, percentage of revenue that you would like to put into Bitcoin. And then even if your revenues fluctuate a lot, maybe things are seasonal, maybe, there's a lot of volume one month, not so much the next, and things like a fixed BCA buy might have you, you know, might be a small percentage of revenue one month And a big chunk of revenue the next month, the transactions that we're capable of kind of allow your, your Bitcoin acquisition strategy to adapt dynamically to that. we also allow you to set parameters around the, the holdings that Bitcoin represents. So for example, that could, could be, you know, don't, make sure there's never more fiat in this, bank account than, than a certain threshold. So you could say, if there's ever more than twenty-five thousand dollars in our Bank of America checking, then automatically sweep the excess into Bitcoin, make sure that it's put to work, and then the inverse Of that. So if, you know, if the balance ever drops below a certain amount and you know that you need to be able to pay wages, pay expenses, then do the right thing there. Maybe that means liquidate some Bitcoin. and, and similar on the, on the, the percentage of holdings side as well. there's, there's kind of a parallel product where maybe you know that you always want Bitcoin to be at least five percent of your balance sheet, but never more than ten percent, then you can put those limits in our- software and it will detect if you ever bump up against those limits, kind of looking at balances across potentially many different accounts, and then allow you to take action and do the right thing.

Okay, gotcha. So as I'm reading it, then it's really, I guess the USP, the unique thing here is the automations and integrations with what many of these people may already be using, whether that's, you know, Stripe and PayPal and Gumroad or whatever, and then it's the automation aspect of- You know, buy this much percent of my revenue or maintain this particular dollar balance or even maintain this percent allocation, I guess. Like, so theoretically, it's like an auto-rebalancing tool as well. Like, let's say hypothetically, the business owner wants to maintain a seventy-five percent allocation out of, you know, his, you know, cash and cash equivalents, let's say, that this is, I guess, you could sort of automate that using this kind of tool. That's the main difference then.

You nailed it. Yeah. and- And what, what especially struck us were a couple things when we were building this. one is, you know, especially on the smaller end of businesses, they're hustling, right? Like they're so busy. A restaurant owner is scrambling to, like, get the sushi ready, get the sandwiches ready, the-- so something that really kind of lets them set it and forget it, and they know that it will adapt to whatever the reality is so that their treasury looks the way that they want, that efficiency game And that time save is something that we were excited about and is pretty important to us. we also saw a lot, I mean, I've, you know, been excited about Bitcoin since twenty thirteen, and there were years, like ten years ago, where I was stomping around San Francisco to my doctor and my dentist and my barbershop saying, "You've gotta take Bitcoin, you've gotta take Bitcoin." And even in some cases where they would get excited about Bitcoin and they would accept it as payment It was just, it was still so early, and we probably are still so early, that it's pretty rare that a bitcoiner walks into your business and is, you know, holding Bitcoin and would prefer to pay in it. It's wonderful if it does happen, and I do think that's the future, but right now we're still, we're still just pretty early for that. And so this is also a way where the merchant can really just kind of define on their side, you know, what percent of their revenues they want to be in Bitcoin without being dependent on Bitcoin or Coming through their checkout flow, walking through their, the door of their store.

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yeah, you, that's exactly right what you just described. so it's, you know, it's sort of ACH driven, we interface with the, the fiat rails, and then also the Bitcoin rails, and, what we're really attempting to do is kind of be this, this middleware, where you can think of us as software that, you know, vets Next, the exchange

and the fiat account and the Bitcoin ca-custodian, yeah? Yeah,

exactly. So, so you know, we work with multiple exchange partners, there's kind of dynamic routing to make sure that the fees are as low as possible, working towards the same on the custodian side. So, of, of course, security is paramount, when you're dealing with Bitcoin. So, we only deal with fully regulated US custodians, billions of dollars of assets under management and you know, adding more options there, in our backend, but really we don't want that to be something that a business owner who's brand new to Bitcoin has to figure out on day one, because we don't want that to be a barrier to entry. So we want to have safe defaults to let them get started stacking and get some price exposure to Bitcoin. we let them withdraw to any arbitrary Bitcoin address at any time they would like, so that could be your own multisig, it could be another- Other custodian if you as a business owner have a strong preference there. but what we hope is to, is to just give kind of safe defaults so that there is that, that, you know, onboarding to Bitcoin and then they get that, that starting point in their journey there through us.

Gotcha. And then,

what's the fee? What's the fee you charge? No monthly fee right now. So, the, we went live yesterday. the state of things has been, we, we onboarded our first set of customers in October of last year, so about eight months now. we've had customers and businesses onboard the platform, kind of in a private alpha sense, to make sure that it's a great experience, that everything was, was solid with the Core product. so since that time, there have been, you know, restaurants, accounting firms, e-even some startups, aboard our platform. Every time that somebody's walked through their door, swiped a credit card to pay in Bitcoin, you know, some percentage of that, typically between five and ten percent is, is what we're seeing with some of our customers, has just been automatically going into Bitcoin. and now, as of yesterday, rebranded to Castle, and we are opening Our signups up more broadly. we are live today in forty out of fifty states, and we will be live in all fifty by the end of twenty twenty-five. And, and our waitlist is open, so even if you're not in a state, like we don't support New York yet, but if you are a New York business and this is interesting to you, we'd love to have you sign up, because we hope that in just, you know, two or three months, we'll be able to, to start rolling out across more and more states as we, More and more partnerships, with, with technology companies.

Gotcha. Yeah. Alright. And so,

yeah, I guess those are kind of the main, kind of obvious questions that most people would have. And then From here, it's more just sort of like, what does this mean for, you know, more and more businesses, right? If, if we're gonna start to see-- Now, I don't know, I, I'm curious to hear what you think as well, because the, the common perception is, hey, retail hasn't shown up yet, right? Like it's kind of been a lot of institutional, it's been like ETFs and all this crazy excitement about the treasury companies, as in like the leveraged ones because of how, how crazy the numbers and the returns are, And so, but I'm sure kind of under the hood there has been actually, you know, a decent number of s-smaller companies who aren't necessarily doing the leverage playbook, but they, but they are stacking, and so, you know, we're seeing, we're seeing all these announcements and things like that, what are you seeing so far in terms of? This, you know, this dynamic or this, demographic, let's say, this small to medium enterprise, level.

Yeah, it's, it's definitely early days. it's hard to know how many companies there are out there doing this. You know, there's, at least five thousand just based on, you know, numbers that have been shared, but, but the upper bound is kind of uncertain. I, my sense is it's somewhere between five thousand and fifty thousand companies in the US, are, like in terms of small, medium- Private companies are, are doing this, and that's out of a total of over thirty-four million small and medium businesses in the US. And so to give you a feel for how early we are, that's not even one

percent.

Yeah, yeah, that's the state of things. the, you know, small businesses, that, that range of SMBs represents forty-three percent of US GDP, that's a hundred and thirty billion dollars annual-- So it's thirteen trillion annually, in revenue terms. So just one percent of that would be a hundred and thirty billion. so, you know, there, there's a significant amount of implication for Bitcoin as a lot of businesses really start to think about this, and we believe they're going to simply because they're waking up to this being a better way to save. it's, it's kind of sad, if you think about it, that small and medium businesses have had to largely bear the brunt of inflation in the ways that they have for The last fifty or so years. they, even though it affects all businesses, the big corporates are very sophisticated and they have relationships with capital partners and, and primary dealer banks, and they've got entire treasury departments dedicated to mitigating the impact of inflation on what they do. But the small and medium folks often don't, and they just have to, you know, they're, they're trying to make ends meet and the price of eggs and the price of their supplies go up Up and they're kind of the furthest away from the spigot of, of new money creation. And so that's something that we think about every day in, in terms of why we're starting where we're starting in this and, and excited to serve the SMBs first is because we think it, it really empowers them. It finally makes it possible for them to save again, where they're not really getting- Pushed further down the risk spectrum and forced to do things that are really investing and really these financial gymnastics when all that they want to be doing is saving. They want to be protecting what they've already worked so hard to earn. and the, the savings accounts products that they use don't really, I think that's, you know, that's something that we, we just need to meme into everyone's heads, savings accounts don't. They, they've just been fundamentally broken for a while now, and we're finally realizing it. So the numbers look fine in terms of nominal returns, you know, you, you might be using a high-yield savings account that gets you three to five percent annually, and that- Looks fine enough on paper, you might think you're getting ahead, but once you factor inflation into that and you start to look at the real return, the numbers don't look so good. you realize you're not actually getting ahead, at best you're typically just staying in the same place. Yeah, exactly.

Yeah, yeah. I mean, this is like, you've seen that work from, Matthew Mezinsky, right? And he's got the base money expansion rate, and it's like calculated since like 1969 globally, I think it's like twelve point seven percent. I think that was from like one quarter ago, but still, I mean, this is-- If you are losing twelve percent of your money every year that you put in a savings account and you're earning three to four percent, well, really you're losing nine percent, right? So it's

Yep. And, and thanks to the internet and, you know, X and Noster and education, you know, podcasts like yours, people are learning about this. They're learning about not only how they're being shortchanged and how the playing field has been tilted against them for a while, but also about this new option that they have to really opt out of a lot of that nonsense and not just stay where they're at, but actually get ahead.

Yeah, and I'm reminded here, now this is like everyone's heard these numbers or maybe some people haven't, so I'll just, I just had a quick search. This is small business failure rates in the USA, right? So this is like a super- I don't know, you're probably familiar with these numbers, right? Approximately eighteen to twenty-four percent of small businesses fail within their first year. Within the first five years, the failure rates are more like forty-five to, to fifty percent, and within the first ten years, sixty-five percent of small businesses fail by their tenth year. So, I mean, that's brutal, right? Like, so it just shows you how much turnover and churn there has been, in that small business segment, and how much more powerful and valuable would it be if people could be using Bitcoin as As their savings asset, as their capital asset, whatever you wanna call it, and actually have a chance to survive. 100%.

There's a, a, a very important empowerment angle to it there. And, you know, anecdotally, I've had friends from the, the tech and the startup world, you know, kind of do big shifts and go like, quit tech, go open restaurants, go open gyms, things like that, and it's eye-opening, you know, the-- when you- Have people close to you in your life, who tell you about that, and they say, "You know, I've never worked so hard." Like you really have to love it, otherwise it is grueling. The failure rate is so high, the, the churn with like the, you know, the wage expectations of all of your employees go up alongside inflation, and, and so you really have to hustle it. It is exhausting, and I've had friends say, "You know, I've never-- I've had to work ten times as hard." Going and opening this small business as I did working in big tech for, you know, not nearly the same compensation. So it's, something is amiss and, and I think fixing the money will be not all of it, but a very important part of it.

Yeah, and it just makes you wonder if all the small and medium-sized businesses actually could save and were saving with Bitcoin, and not just kind of piddly five, ten percent, but like actually going hard, with Bitcoin as their reserve asset What would the real failure rates be? Maybe a lot less. Maybe they would actually have a chance because now, instead of just kind of having, you know, maybe after like one bad year you're wrecked, now if you've got like a Bitcoin reserve that you've been stacking and saving for some time, now if you have a bad year or a bad quarter or whatever, you can sort of take stock and be like, okay, look, well, actually, unfortunately, we might have to actually sell some of our Bitcoin to, you know, to make it through, or maybe they borrow against some of

It gives them a cha- it gives you a fighting chance, right? Like that you could actually take a few hits and have a fighting chance to actually survive that instead of like, "Oh, I've taken a few hits, had a bad quarter, had a bad year, now I'm out of the game." Absolutely,

yeah. It, it's, it's in our view the best monetary technology to, to run a business on. And, and of course, you know, being cognizant of where we are in the adoption cycle, so we are a-as believers in Bitcoin as we are, You know, we, at, at Castle, we do put a hundred percent of our revenues into Bitcoin, and we just raised a million dollar pre-seed that we announced yesterday from partners we're really excited to, to have believing in this mission. we're putting a significant chunk of that into Bitcoin. so, you know, skin in the game, we absolutely want to practice what we preach. But at the same time, you know, when we talk to businesses that are brand new to this, making sure that, that we are being responsible stewards Of Bitcoin and, and not going to get them into any position that is risky for their business. So advocating for starting small, even one percent, get them familiar with it, experience some number go up, learn a little bit more about the why, and then it's much easier to go from one percent to ten percent or higher once you're ready and once you're comfortable than it is to kind of get off zero and go from that zero to one. So, so we're, you know, we're not wanting any businesses to get Overlevered to do anything that would, you know, be detrimental to their business. We want this to be something that can fuel their growth and their expansion. And what, what drives us is, you know, hearing, "Wow, like we were able to consider opening another location sooner because we've started allocating to Bitcoin in a meaningful way." we were able to, you know, to just do more, sleep more easily at night because we feel Diversified, and we feel like we are part of this, this modern future of money, and we're not missing out. That is the kind of stuff that's important to us, and kind of our north star.

Yeah, interesting. And so, I mean, I, I'm with you in that sense that, you know, there's one aspect of, let's say, ideology, right? Many of us came to this as libertarians, maybe some, bit-- some or many Bitcoiners are cypherpunks, so they-- we have, many of us come from that ideological perspective, but even if you set that aside, just looking at it neutrally as a technology, just sort of objectively over the, you know, last whatever five, ten years, like if you just-- if you've been You just sort of objectively saw, hey, this is just a better technology, I'm just gonna use the better tool for the job.

Absolutely. you know, there's, a slide in the talk that I do at Bitcoin meetups sometimes, and it's a little bit tongue in cheek, but, but it's like, what do these three things have in common? leaving your garage door open overnight? installing, you know, run-running an old computer, like Windows PC with no antivirus or, you know, holding fiat and holding bonds. And in all three of those cases, you are making it easy for your stuff to be taken from you because you're just not using the best form of technology to protect yourself. And, and that's really just how we view this. We see it as an upgrade. It finally is a way that you can get Supply side assurances on the asset that you hold that are absolutely unprecedented. It has never before been possible to acquire something and to know with perfect certainty that you have at least a percentage of that asset Globally forever, for the next thousand years, you know, even assets like gold and silver that have historically been hedges against inflation, yes, it's much harder to dig those out of the ground, the government can't simply print them out of thin air like they can with fiat currency, but even those assets like precious metals don't offer the same predictability around supply. We never know when we're going to trip over a new trillion dollar deposit of gold in the Earth's crust. We certainly don't know how much Elon is gonna find when he gets better at all the asteroid stuff, and, and how much is in the solar system. And, and there's even a funny framework there where you could think about holding precious metals as almost a bet against technological innovation in some ways, because it's almost betting that we aren't going to get good enough with tech to go up and get more supply of, of these metals and of these assets. And if we do do that And it's a threat to, to the people who hold it and who store their wealth in it. you know, much like maybe the, the holders of seashells were, were betting against circumnavigation and sailing to get good enough for superior forms of money to kind of invade their economy like silver coins, hundreds of years ago. And, and so there's some interesting parallels there, I think, to, to consider. But, yeah, Bitcoin just, you know, the supply can- Never be more than twenty one million. In practice, maybe it's more like eighteen million if a few million coins are already permanently lost. And we've never, as a species, experienced anything like that before, and I don't think it's at all priced in or

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To coinkite dot com, use code levera to get ten percent off on your cold card or other devices and level up your self custody today. This episode is brought to you by Galloy, builders of banking software for the Bitcoin age. After years of risk and uncertainty, Bitcoin and banking are colliding. The regulatory environment is rapidly shifting in favor of Bitcoin and digital assets. Fintechs and crypto-native companies can become chartered banks, and traditional banks and credit unions will launch Bitcoin products. But the legacy core banking software that many financial institutions Institutions run on wasn't built for Bitcoin. The Galloy banking infrastructure stack delivers all the key elements of a modern core banking platform with cloud native infrastructure, event based architecture, and robust APIs coming together to meet the security, scalability, and reliability needs of banks of the future. Whether you are launching a modern financial institution from the ground up or you are adding Bitcoin backed lending or payments to your product offering, talk to the team at Galloy. Visit galloy dot io or reach out to the team at b i z at g a l o Why dot io. Now, on the investing side of things, the common-- and, you know, what I find interesting now, and maybe this is changing now in the kind of the treasury company, especially the leveraged treasury company paradigm, but, I'm sure you thought about this even in your, let's say, angel investing days, right? In this kind of VC and angel investing, the common question would just be, "Well, if you're a Bitcoiner..." You are kind of, are you betting on this company outpacing Bitcoin? And that's like an extremely hard thing to do, isn't it, right? That many of these companies may have well done in fiat terms, but not- Returned in Bitcoin terms, how are you thinking about that nowadays? Oh man,

yeah, that, that is true big time, and, I definitely have supporting data personally for, for how difficult it is for startups to outperform Bitcoin. You know, of the eighty or so angel investments that I've done, not many have out-- there's like probably maybe ten that have outperformed Bitcoin ever, and the- You know, there's of course a lot of qualitative benefits to doing that type of investing. You get to understand new industries, you get to form relationships with founders, and, and so there's a lot that's hard to put a price tag on in that that has been, you know, extremely valuable. So, even if in raw financial terms holding Bitcoin would have been better, you know, personally zero regrets on any- thing, but, but it does illustrate the, you know, that Bitcoin is this powerful new hurdle rate, and, and so the opportunity cost is so much higher. And if you, if you get an angel check as a startup from an investor who understands Bitcoin, I think that actually, you know, should maybe hit harder in a way because it's like they're, they know what they're giving up. Exactly. They know what they're giving up. Yeah. and, and I think it'll be an interesting five or so years in venture capital and startup investing, and maybe even private equity. I haven't thought as much about like how Bitcoin penetrates that world, but, I can see a future where not only will Bitcoin be the rails that investors will use to like transfer funds to do an investment, but actually having contracts denominated in Bitcoin. Maybe you have these, like safe- Documents or equity rounds and some of the investment money is actually papered as Bitcoin and some of, you know, what, what you are, entitled to legally could be denominated in Bitcoin. And that could provide this interesting incentive for the startups to hold at least the funds that you are giving them as a bitcoiner in Bitcoin terms, so that they can, they can kind of, you know, match that What would be almost like a liability on their balance sheet. so, you know, I, I can see that becoming a lot more common and it's, you know, there, there are definitely firms like, like ten thirty one, I believe, has been doing a lot to kind of move the needle forward on thinking about SaaS flow and Bitcoin-denominated returns and just what a, a, a future of venture capital is that is, that is based in Bitcoin. and so that's, it's exciting to think about you know, just how Bitcoin's gonna become the, the standard for all that, even in VC.

Yeah, it's, it's fascinating to think about because as you said, ten thirty one is doing some of this stuff. I know the early riders guys and kind of connected with Onramp, I know they're into this as well, so they've got like a Bitcoin denomination aspect of it. we see this even in the life insurance, right? So there's Meanwhile, I've done some interviews with them, they're doing Bitcoin life insurance where it's literally, you Pay outs, the life insurance is in Bitcoin. there's Alt PG, so the Blockchain Group, they're doing, one of the treasury companies, they're doing like Bitcoin-denominated bonds, and so they're like raising capital in Bitcoin, now I think that has like an equity conversion aspect of it, so it's, it's not a hundred percent, but it is kind of Bitcoin-denominated, even, I believe, Blockstream Mining Note, right? So we've seen a few of these things, but I think it's, it's-- Think about this. I would say there's been a shift in thinking on this, like, of course, like the people who were like super hardcore Bitcoin only from the early days, they kind of got this early on, but I would say even in Bitcoin VC world, it probably wasn't as commonly understood as it is now because at that time, maybe years ago, and I'm sure you can speak to this right from like VC and angel world, it might have been seen like Oh, your company, they just raised, they just did a big raise, and even if they were a Bitcoin wallet or a Bitcoin company or something like that, it might have been seen as, quote unquote, irresponsible to go all in Bitcoin with that treasury money because, you know, Bitcoin was more volatile in earlier years, and so it might have been seen like You know, maybe you should put some of it into Bitcoin, but not all of it, 'cause that's irresponsible. Whereas nowadays, it's almost seen like, you know, the Michael Saylor kind of thing, only keep the money in fiat that you're willing to lose kind of thing, because, you know, anything that's not in Bitcoin, you might lose that. How are you seeing that now as an angel and kind of, you know, in this kind of VC and angel world?

It's absolutely trending in that direction. Bitcoin is becoming much more acceptable as a balance sheet asset. Startups are really interesting for that because unlike cash-flowing SMBs where you have some profits and you've got some perhaps historical revenues if you've been established a while to kind of look at as you think about allocations, you know, especially in the earliest stages like pre-seed and seed technology companies, maybe revenues aren't in the picture yet, and so the only money that you have is the money that your investors have given you or, you know, Maybe your, your revenues are a drop in the bucket compared to the rest of your balance sheet. And so the sensitivity to runway is much higher in startups. And so I think that is why there is an extra degree of kind of risk that's inherent and thoughtfulness that needs to be given to Bitcoin's volatility in the short term. but, but yes, even in the pre-seed, seed, series A stage stage, we're seeing a lot more acceptance around some percentage of that, even if it's like five percent being put into Bitcoin. I've, I, I think founders especially are more comfortable with this, and now what's really going to be a big theme of the next twenty-four months are, you know, boards and VCs and like Silicon Valley VCs that have control over boards and, and major decisions, even if they don't have, perhaps a A, a veto right formally, you know, it's, it's often just, a personal relationship that you want to keep in very good shape as the founder with the board member. And so if they are against an allocation of Bitcoin, the founder will be much less likely to, to act on that. And so I think that the needle will very likely move more in the Bitcoin direction in the next few years on it, but that's what I see as increasingly the point of friction in the conversation. It's now like the founder is pretty willing, but oh, you know, we've-- maybe it's Series A, maybe you've got a board member, maybe that board member's not as comfortable, and so just getting consensus around the asset is, is a little more challenging at that stage.

Yeah, I, I think it's fair to say that, and also the other motivating factor that I would have heard when I speak to, let's say, VCs, and they might have been like, "A general partner," but when I would talk to them, they might be like, "Well, I might be into it, but let's say my LPs, they might look at me and be like, 'Well, if I'm just gonna put money into you, and you're just gonna buy Bitcoin, or the founders that you put the money to,

you, you, you, they The conversation as well, because then the either the LP, the limited partner, or the, let's say the angel investing into that company is sort of like, "Well, hang on, if you're just gonna buy Bitcoin with it, I could have just bought Bitcoin myself. Why would I?" You know, so then maybe there's like a conversation of they felt like they had to justify You know, this idea that, well, we're gonna need that money for the business, and that's the way we're gonna outperform, and other, other-- you know, 'cause otherwise, yeah, what? But, but it's kind of interesting to see that shift in thinking over time, isn't

it? It really is, and it really brings to the surface all of these relationships in the, you know, across investors, like you touched on, where there's like, it's like the founder, and then maybe a general partner from a VC firm is on the board Maybe the LPs that, that that general partner has relationships with, because the LPs are ultimately the ones giving them the money, there's this like daisy chain of, of kind of comfort that is required, at least to do very significant allocations of, of Bitcoin. and so it's more heads that have to nod, i-in order to, to move on it sometimes. but, you know, five years ago, you would just get laughed out of the room. It was like crazy talk. And now it's sort of like, okay, it's, you know, it's a conversation. There are, the ETFs exist, there's institutional validation, micro strategies like outperformed Nvidia or at least close on certain timeframes, you know, close to the best performing stock on the planet. And so I think there is this awakening and increasing acceptance of it where you don't get to just dismiss it and scoff at it, you at least have to give it an evaluation, and that is progress.

Yeah. Interesting. Okay, and so, I know you're also into this whole topic of hard, quote unquote, hard tech. So tell us, give us the, give us the lowdown on that. What is hard tech? Yeah, man.

so over the last few years, I've become really just obsessed, interested, believing in the importance of hard tech. And it's been really amazing to see a renaissance of appreciation around that, where you have, you know, VCs like Founders Fund, A16Z has their American Dynamism Fund, and in the new administration here in the US, there's, there's this emphasis on revitalizing America's manufacturing base and our industrial base. And, for a while, that trend of globalization, where you just sort of outsource everything, and the US was the land of like- Like financial innovation on Wall Street and software innovation in Silicon Valley, but all of the world of atoms we didn't really have an appetite to touch. And I think what we've realized is that that has made us vulnerable in some ways, and we've forgotten how to do some important things, and, and, and some of those areas of our economy have atrophied. And so it's been really encouraging to see over the last couple years such a- A renewed interest around it, and, and I think those terms like hard tech and deep tech, are what's usually associated with these movements, where it might be like nuclear energy, robotics, manufacturing, even like weather modification, things like that. And, and something that I think isn't often thought about, especially by founders who are deep in that hard tech movement or investors Who are deep in that hard tech movement, is I think there's actually an important tie-in to Bitcoin with those. Bitcoin sort of gets put in the bucket by a lot of people of just software stuff or maybe crypto stuff, where they have it lumped in alongside all the other cryptocurrencies and sort of this degenerate gambling, you know, aspect to it. But I think really there is this, there is this importance where you could almost say that the hardest tech deserve This is the hardest money. And if you are going to be building these, you know, important areas out, doing that in a society that has sound money as its foundation, and that sound money, you know, could be Bitcoin, that is such an accelerant that I think is just often overlooked. And when builders and companies like SpaceX and Tesla and Elon, you know, you could, you could think about it as they Maybe move us a thousand steps forward with the things that they build, but then in some ways, central banking and the, the monetary system quietly undoes some of that progress. So maybe Elon takes us a thousand steps forward and hard tech builders take us a thousand steps forward, but central bankers take us five hundred steps backwards. And, and so I see Bitcoin as this sort of overlooked important piece of that puzzle, where it allows us to lock in some of that progress for society. When you, when you build this fantastic tech and you are growing, allocating to Bitcoin on your balance sheet is a way to just make sure that you are moving society forward maximally, in all of the, the ways that you can And, and in, you know, the, the ways that you deserve to be with the innovation that you're unlocking. And so I think there's a very, you know, that connection of like hard tech and then hard money as the Bitcoin piece, there is this marriage there that is just so often overlooked and underappreciated.

Yeah, I think you're right there, and it seems to me that, well, it looks to me like a lot of tech people in the US now are pro Bitcoin, right? Like, they, they, you know, they kind of are into it, even if it's not their main thing. They sort of, they might hold a little bit or they might, you know, loosely be in favor of it, so it is interesting to see. And as you said, keeping the gains of this, these big productivity enhancements, whether that's, you know, Starlink and being Robo taxi stuff and think about people being able to be productive while they're commuting, instead of having to, you know, sit there driving, I, yeah, there's just so many of these examples that Innovators and technologists and people just come out with ways, you know, with, just like with the internet, and then all those gains get eaten up by government and government bureaucracy and just kind of money printing and, the obviously the money printer, those who are closest or nearest to the money printer, they get the benefit. And so really the only way to, you know, historically the only way to play it was to be in fiat debt, but sort of skillfully doing it, because obviously if you do it badly, you get wrecked, but if you were kind of-- Using fiat debt and fiat leverage, you won, you won the game in the last few decades, and I guess there's, there's a kind of injustice of that, because, you know, on one side it's the people who, who tried, who tried fiat debt and got wrecked, and then the other people who were just sort of out of the abundance of caution, they never went into that, and then as a result, they were either inflated away either their savings or their salary.

Yep, I agree a hundred percent. And so, you know, I, if any listeners, I know the audience is largely Bitcoiners, but, you know, if this message reaches any hard tech founders and entrepreneurs, I think, you know, just consider that Bitcoin stands apart from all these other cryptocurrencies, and it is hard money, and it is foundational for civilization. And, and so, you know, how your business and what you're doing can make use of it, whether it's taking payments in it or especially putting it on the balance sheet to, to make sure that the, the progress that you make for society can't be undone by wealth redistribution and, you know, folks who don't have any skin in the game and maybe not the right incentives, is, is, I think, very

important. Excellent. Alright, well, I think that's probably, all the key questions I had for you. Any last closing thoughts? And where can people find you online? Yeah, thanks

for having

me.

so I'm, I'm on Twitter, my DMs are open, s then c, s t h e n c is my personal Twitter, and, you can find us at Castle, so we are savewithcastle dot com and on X and, and other socials. particularly if there are any- SMBs in the US who are interested in making their Bitcoin treasury strategy automated, we would love to talk to you and, and see if we're, we're a good fit for your business. and it's, it's great to connect again. Man, I was scrolling through pictures on my cell phone and I, I saw a pic of us from Baltic Honey Badger in Latvia 2019, the other day. I remember that. Thought, oh man, yeah, it's, it's been

great. We went like out the

front and we So, fantastic to, to get the opportunity to come on again and appreciate you having me.

Excellent. Well, yeah, I like I've said, I want, obviously, I'm a maxi, I want as many people to use Bitcoin as possible. So listeners, think about if you know somebody who has a small business or if you are somebody with a small business and you could benefit, make sure you tell them about, say with Castle, we want as many people using Bitcoin, saving with Bitcoin, you know, earning, spending Bitcoin as much as possible. So, joining me. Thanks, Stefan. See ya.