1 year ago today, we received a call from Aaron Harris and decided to join Y Combinator with a conviction that would help entrepreneurs harness the power of Defi. 1 year later a lot has changed but not our vision…
In the past 20 years the way we work and the way we think about work has changed dramatically. A new generation of entrepreneurs have created companies that are lighter, flatter, and more global in outlook. Greater inclusivity, equity, and transparency are values prized by a rising generation of talent. Enter blockchain, decentralized finance (or DeFi), and crypto: all powerful tools and protocols that embody these ideals and can empower a new generation of small and medium businesses to create value in a changing world. The only problem? Your banker is not interested.
I am exaggerating, but only slightly. Most traditional banks aren’t really embracing the full potential of DeFi. It’s not entirely their fault — their infrastructure that dates from the 1970s and heavy regulation make blockchain innovation technically and legally difficult for these legacy actors. The good news is that at Multis, we believe that DeFi-friendly banking can empower millions of businesses in ways that traditional banks cannot. To understand why we believe that old banking model is broken, let’s take a few steps back.
Traditional Banking, or the Failure of a One-Stop Shop
The traditional banks we patronize today have their origins in 12th century Italian city states. At the time they were created, a rising merchant class needed structures that would insure their investments, secure savings, and facilitate trade. That the words bank and bankruptcy are related is not coincidental — bankruptcy was baked into the model. Today, banks still serve a similar need- they offer financing (credit) and underwriting services (insurance) for businesses, and they remain highly centralized. A typical bank handles access, data, customer facing apps, and transiting services (among many other features) — while this makes them irreplaceable it also means that there is a single point of failure. A case in point is last October, when Bank of America had an outage that left thousands of its clients unable to access their funds.
In addition to the problem of centralization, traditional banks are notoriously exclusive. Major corporations and high net worth individuals have priority access to innovative financial instruments and services. It’s well known that most small businesses are not satisfied with the quality of traditional business banking, citing difficulty in accessing banking solutions. Neobanks — like Revolut or Qonto — have honed in on this neglected segment and offer an improved user experience with less friction. However, underneath that attractive interface is the same structure as a traditional brick-and-mortar business bank. While this is certainly a step in the right direction, this is a bandaid on a broken system.
DeFi: Shifting the Paradigm
Banks built on the blockchain might seem like an offer suited only for Bitcoin enthusiasts, but in reality, these emerging structures can provide a wealth of practical solutions for small businesses. Here are a few reasons.
Always on. These banks are built on blockchains, which by their nature are decentralized. There is no “single point of failure” — meaning there’s greater reliability for access to funds at all times and no need to worry about being at the mercy of an outage. Another important distinction is that these structures do not hold funds so users have total autonomy over their treasury. What these banks provide is simply access to them.
More transparent. DeFi friendly banks are transparent- and it’s not just because there are no hidden fees! Because they’re built on the blockchain, their protocols are open source and can be audited externally by anyone, anywhere. Unlike the subprime mortgage crisis of 2008, where toxic assets were obscured by untraceable third parties and hidden from regulators in pages of legalese, blockchain is structurally transparent. Transactions cannot be canceled, modified, re-routed or altered, making censorship nearly impossible.
Same great services. DeFi is structurally revolutionary but the services are very similar to banks- after all, core business needs haven’t changed radically. Banks that take advantage of DeFi offer services that are similar to traditional banking, but applied to crypto. Services like storing funds, managing outgoing payments, wiring money abroad, and currency exchange (either between different tokens or to traditional currencies) are available but they generate significantly lower costs, are accessible anytime, anywhere, and services are instantaneous.
…actually better services. The traditional banking equivalent of some Defi services would require an asset manager or sophisticated treasury investment tools normally reserved for Fortune 100 companies. In DeFi these services are accessible to anyone, anywhere- look no further than the high-interest bearing accounts that Multis offers. The best part is that these services are wholly unbundled, so entrepreneurs can curate what is most relevant for them.
More inclusive. One term used to describe the blockchain is “permissionless”. Anyone can join — it is wholly public. With DeFi services, this means that anyone can have access to new and innovative products and services. In banking this is revolutionary. Traditionally banks served as gatekeepers and granted access only to those they perceived as fit. That this gatekeeping has historically been heavily biased against minorities and women shows how empowering DeFi can be to the many who are often excluded from financial empowerment.
Multis: Leveraging the power of crypto for entrepreneurs
A new world of possibilities. Multis is the first ever bank account for entrepreneurs who wish to run their business on crypto and traditional currencies. We do this because we believe finance should empower companies to thrive. Our aim is to remove the (often) costly and slow intermediaries of legacy corporate financial services. We allow entrepreneurs to:
- Set up an account for their team, with access controls allowing safe storage of funds
- Earn interest on crypto
- Track and streamline payments
- Exchange crypto, USD and EUR
And because we know that traditional currencies are here to stay- accounts will be fiat-friendly, offering modern payment solutions (cards and wire transfers) allowing companies to do business in US Dollars and Euros. And even if there are no hidden fees in crypto, there are network, or gas fees. Multis covers them.
A beautiful UX. We’ve created a user interface that is as elegant as any neobank and makes running a business in crypto and traditional currencies easy to do even for a non-expert.
This is the future. At Multis, we think of ourselves as crypto-dreamers. This idealism helped propelled us to YC exactly one year ago today, and it’s an intrinsic part of who we are. We know that the possibilities for blockchain, crypto, and DeFi are endless and will create a more equitable financial alternative to what is currently available. Of course, we’re not sure where these possibilities will lead us. Nobody could have predicted that a Visa card would become more convenient than cash, or that these same cards would be made redundant by our smartphones. Nobody could have imagined that a digitalized directory of Harvard students would turn into a social network with 2 billion members who log on multiple times a day. Further who would have imagined that Facebook would launch a cryptocurrency (that you could store in your Multis account)? What we do know is that we will be there for our clients to give them access to these yet-to-be-imagined decentralized financial services. Blockchain and DeFi gives us an opportunity to reimagine not only how we amass and distribute value, but also what we value.
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