Interoperability Rails Are Here
Founder Spotlight - Philipp Zentner Originally published on my newsletter June 14 2023
I recently interviewed another visionary Web3 founder, Philipp Zentner of LI.FI.
We discussed his origin story, the tech they’re building, and how he went about solving the pervasive compliance, talent, and go-to market challenges facing every Web3 founder.
It was an engaging conversation, peppered with insights from a seasoned veteran - I'm sure that other founders will find this helpful as they blaze their own trail in the "Wild West" of Web3.
Origin Story:
To understand LI.FI, it is helpful to look at Philipp’s background and prior experiences.
Philipp spent the past 10 years building B2B SaaS companies. Back then, the (pre-Stripe) Web2 payment landscape was fragmented and cluttered. This was even before PayPal offered service to SaaS providers. The abundance of APIs offered marginal utility in such a disjointed payment systems landscape.
When he entered the crypto space and analyzed blockchain throughput rates, he realized that the future had to be multichain.
Looking at market dynamics, he saw an influx of money poured into different chains, distributed ledger technologies, cryptography, etc. He realized that this research and development would be productized at some point and saw massive economic incentive to get ahead of this trend.
Knowing how fragmented the Web2 payment space was, he posited that in order for Web3 payment systems to find mass adoption, blockchains would have to deal with the "fragmentation problem", both for infrastructure and liquidity.
In order for this space to grow and mature, he realized that someone would have to aggregate and abstract away the fragmentation. In so doing, they would strip away complexity and interlink the most important DeFi infrastructure for both builders and users.
He realized that his core offering was “linked finance”; the idea for LI.FI was born.
What Is LI.FI:
LI.FI is an aggregator of aggregators. To Philipp, that means offering on-chain swaps, cross-chain swaps and a combination of both. They've aggregated bridges, DEXs, and DEX aggregators.
By aggregation, he means taking the most important underlying services (data services, oracles, cross chain bridges and interoperability solutions to move assets from one chain to the other, decentralized exchanges, and even other aggregators like DEX aggregators) and aggregating their APIs so they can provide one API that gives access to all of the afore-mentioned services, utilizing a smart order routing algorithm.
LI.FI is aggregating core financial infrastructure, so that both DeFi projects and traditional finance businesses have a simple multi-chain transaction rail to build on.
How to Solve Existential Challenges Within Web3:
GTM Strategy
LI.FI’s go-to market strategy hinges on solving the big problems that major financial institutions face moving large sums of money in Web3.
Philipp elaborated that LI.FI is focused on aggregating core financial infrastructure to make blockchain tech more accessible to traditional finance and banking institutions such as Robin Hood, Revolut, JP Morgan, etc. Large institutions face significant risk relying on blockchain tech due to potential sunk costs and the pace of infrastructure change.
LI.FI provides a stable platform that these institutions can rely on, enabling them to take advantage of DeFi opportunities while limiting infrastructure risks and counterparty concentration.
When asked about his interactions with large financial institutions, Philipp states that the JP Morgans and Goldman Sachs’ of the world struggle to identify which blockchain services to offer and which use cases to apply them to.
To that end, the broader GTM strategy revolves around being known as the fastest, safest, and most cost effective option. They are able to achieve this by aggregating the dozens of APIs and scores of bridging providers between chains. Their customers realize it's much smarter to rely on LI.FI for the best and latest bridging and swapping options versus developing and executing their own routes. LI.FI’s team of 40 people have developed the best tech to navigate the complex and ever-changing blockchain landscape.
There are a number of directions LI.FI could go, but the plan is to spend the next two years staying true to their message, refining product-market fit, and adding features that help institutions move larger sums of money in a seamless and risk mitigated way.
Talent
As a fully remote company, with >40 employees distributed across 14 countries, LI.FI has fought hard to find the right resources with the right competencies and mindset. With that in mind, LI.FI optimized for two concerns: finding world-class talent, and creating processes that allow them to work well together.
Having spent ten years building remote companies, he knew that the key to building a high-functioning remote team is to optimize internal processes and knowledge sharing.
The second challenge is familiar to anyone in tech; a constricted labor pool. Philipp shares the story of the massive demand for talent, specifically smart contract developers. Over time, he realized that many developers were taking advantage of the high demand for their skills and were working multiple jobs - simultaneously. Philipp challenged the team to be wholly focused on their mission.
He searches for people who are inquisitive and ask questions without fear of being viewed as "the idiot in the room".
In terms of finding and screening candidates, he shared, "We hire no one without a full test week during the screening process. It doesn't matter if you're applying as a team assistant, if you're applying in marketing, if you're applying to be a developer, we give you a test. We have a test week, and we give you a task and just by looking at how you solve it, not only tells us how does your brain work, but also the details and work ethics and how much they want the job." A person expresses themself through their work, and attention to detail is a reflection of their standards for themselves.
LI.FI navigated growing to a team of >40 people in 18 months without losing focus on the mission at hand. In the process, he learned to hire very aggressively and take fast, decisive action if a hire is not a fit.
Compliance
I asked him about compliance, specifically the laws he needed to comply with and how they stayed within the parameters of the law across the multiple jurisdictions that they straddle.
The first and most important element of compliance for LI.FI is staying secure and protecting funds. In the past 9 months, LI.FI has been audited by three independent firms, including a continuous auditing contract with an auditing firm. The security that comes from these audits subsidizes the overhead costs that they incur because it makes clients feel safe to move massive amounts of money.
In terms of technical compliance, they are prepared to acquire necessary certifications (ISO 27000, etc) as soon as an enterprise client demands it. But as a founder, he can’t allow the unbridled pursuit of compliance to divert attention from the core product.
He sees a difference between being compliant and enabling compliance.
To give an example, LI.FI could easily make sure that their products are OFAC compliant by paying for and plugging in Chainalysis or Elliptic. But they could also easily integrate their API and allow their customers to pass the API key. In this way, Li.FI enables “compliance on demand” for customers when they need it.
Closing Thoughts:
Being the connector between the growing web3 user base and the increasingly complex web3 infrastructure positions LI.FI as a category defining company. They are positioned for growth benefiting from expanding use cases and the increasing technical sophistication of infrastructure.
LI.FI empowers developers to build applications that serve a customer irrespective of the asset or chain that it's built on. Dapps that leverage LI.FI are more user friendly because users can come to a Dapp regardless of the asset they have. Developers also have more choice, as they can use LI.FI to build on the chain most suited to the technical needs of their applications without having to "follow the crowd" to a specific chain or chain ecosystem like Ethereum or Cosmos.
LI.FI makes it easier for builders and users to succeed in Web3. This helps the ecosystem grow and also allows all of us to realize the value of the many diverse chains that are changing the future of the internet.