Crypto leadership & talent: Dawn Capital’s Dan Chaplin offers an investor’s perspective on the recent challenges facing the digital assets industry

In this episode of our series, “Crypto leadership & talent: Evolution of control functions,” part of The Heidrick & Struggles Leadership Podcast, Heidrick & Struggles’ Guy Shaul and Aliceson Robinson speak to Dan Chaplin, a partner and leader of digital assets at technology investment firm Dawn Capital. Chaplin’s investment portfolio stretches across B2B fintech and includes businesses such as Tink, Billie, Access FinTech and OpenGamma, but he has specific investments in digital assets that include Copper and Elwood technology. Chaplin shares where he thinks certain parts of the industry have gone wrong, how he thinks some of the executives, management teams, and boards need to evolve, and his perspective on the common criticism that there's a lack of governance controls and oversight in the digital assets industry. He also discusses how the recent collapse of Signature Bank and SVB will impact the ecosystem, how engagement from regulators is changing, and what leadership capabilities and qualities he thinks are important for organizations to be bringing on board as they chart the next chapter for digital assets.

Below is a full transcript of the episode, which has been edited for clarity.

Welcome to The Heidrick & Struggles Leadership Podcast. Heidrick is the premier global provider of senior-level executive search and leadership consulting services. Diversity and inclusion, leading through tumultuous times, and building thriving teams and organizations are among the core issues we talk with leaders about every day, including in our podcasts. Thank you for joining the conversation.

Guy Shaul: Hi, I'm Guy Shaul, a partner in Heidrick & Struggles’ London office and the leader of our Web3 and Digital Assets Practice in Europe, the Middle East, and Africa. I'm joined in today's podcast by my colleague Alison Robinson, who's also a partner in Heidrick & Struggles’ London office and spends her time focused on media entertainment and consumer growth tech. In today's podcast, we are really excited to speak to Dan Chaplin, a partner at the technology investor Dawn Capital. 

Dan's investment portfolio stretches across B2B fintech and includes businesses like Tink, Billie, Access fintech and OpenGamma, but he has specific investments in digital assets that include Copper and Elwood Technology. Notably, he also leads Dawn’s initiatives in the digital asset space. Prior to Dawn, Dan was with JP Morgan in London, where he found his passion for fintech investing, advising Europe's leading financial institutions on M&A and corporate finance. Dan, welcome, and thank you very much for taking the time to speak with us today. 

Dan Chaplin: No problem. Thank you very much for having me, pleasure to be here. 

Guy Shaul: Awesome. Just to get this kicked off, walk us through your journey into digital assets and give us a sense of what drew you into the space in the first place. 

Dan Chaplin: So, I've come at this really from the investment side and with a background in financial markets. That's really the perspective I've taken on the space. My career has been in financial services: I was initially advising banks, asset managers, and market infrastructure businesses. And then at Dawn, I've been investing largely in B2B fintech companies, specifically looking at infrastructure propositions. 

That's something that Dawn's always had a longstanding interest in. We're looking for the kind of technologies and technology businesses that are providing efficient foundations for other companies to go and build business applications, consumer propositions, whatever the case may be. And, in the fintech space, we've done a bunch of those kinds of businesses: companies like Tink in the open banking space, which was helping people to facilitate much more efficient and cheap payments and transfer of data between banks; access fintech as well, effectively a data management proposition for buy-side and sell-side firms to collaborate on trade information in the cloud. These are really interesting financial markets infrastructure: companies that are helping to create more efficient financial processes and the foundations for those companies to operate on. So, that's the way that we've come at this digital assets space. 

The crypto market’s been going for quite some time now. It was initially very consumer-focused. I think in the last five years we've started to see a much more deep engagement from the largest banks, the largest asset managers, who are looking at the space and thinking well how can we use this technology to support our businesses. We feel that the technology itself has some really inherently interesting dynamics that can power really interesting financial markets use cases. 

There's been a ton that's written about this, but I'd frame it in the following way: traditional financial markets effectively compose a bunch of very fragmented regional systems. They're highly intermediary-operated. They work very well, by and large, and they've been built up over decades and decades, and there are big patchworks of these systems and counterparty relationships. But I think that that patchwork is so complex and the data between the parties in that patchwork is so fragmented that the financial processes themselves often break down and struggle to interoperate with one another. 

Whereas digital assets, by comparison, are basically global, they're programmable, they're composable, they're transparent, they're available anywhere that an internet connection exists. They also fundamentally create a single source of truth for data for financial participants to collaborate on and to build workflows around. That means that there are use cases for them to do things like reducing settlement times—I think that's one that's been written about and it's pretty well understood—that can create a huge amount more liquidity in the market and make markets much more capital-efficient. 

I think there's fantastic use cases potentially around cross-border payment (which is hugely hamstrung at the moment by correspondent banking networks). And then, , over time—I guess it's a panacea—but I think we can create much more transparent and actually resilient financial markets, which is not necessarily something you would associate with crypto, but I think that the technology over time has the capacity to create that. 

So, we're a venture investor; we're taking long-term bets on where markets will go. We've looked for enabling infrastructure propositions that support this digital assets ecosystem. We've done two investments so far in the space: we've done Copper, which is a custody platform, effectively working with large banks, crypto funds, asset managers, and helping them to safely store these assets, but also operate and interact with financial markets in an efficient way. And then we've done Elwood, which is a trading and portfolio management system. 

Guy Shaul: Super interesting. Obviously, your investments until this point have (to your point) been at the financial markets end of infrastructure for digital assets. Is that a niche that you're always going to focus on at Dawn, or is there an appetite to think about broader infrastructure within digital assets, maybe not so closely related to financial markets? 

Dan Chaplin: I think it's step by step. I think the financial markets use cases for crypto are some of the clearest and probably some of the nearest term. So, from our perspective, it's where the bulk of the near-term return on technology infrastructure is likely to be. That's not to say that we wouldn't do other categories; certainly, some of my colleagues are much more focused on things like developer infrastructure tools, how to make developers more efficient and support their processes. There are some really interesting companies that have been built in that space as well, and that's certainly an area that we're diving deeper on. At the end of the day, though, we're a B2B focused firm, so we're not really looking for consumer-facing applications for these businesses right now. 

Alison Robinson: Dan, famously the sector is very fast-moving and you and others have attracted executives with diverse outlooks and philosophical beliefs. Most recently, we've obviously seen a number of setbacks. In your view as an investor, where have certain parts of the industry gone wrong?

Dan Chaplin: Yes, you're right. There's obviously been some setbacks over the last few months. I’d want to distinguish between structural problems with the crypto market, which I don't think has been the cause for them, and potentially bad actors at play. I think that the setbacks have largely been the result of the latter and I think that stems from some questionable risk management and probably due diligence decisions that were taking place in the dizzy heights of 2021. 

But, you know, ironically, I think it's also been the centralised actors that have most obviously been at the heart of some of these setbacks. When the right checks and balances have been in place, you've not seen the same kind of issues. The decentralised players and DeFi itself have proved remarkably resilient through this market. Some of the automated market makers have continued to operate throughout this volatility in exactly the way that you'd expect them to. There are obviously big headlines at times around hacks of protocols, you know, and that does come down to problems in the way that this technology infrastructure is maturing. But, I think that's to be expected in this kind of market. It's very fast-moving. 

At the end of the day, we're trying to build a new asset class, a new infrastructure paradigm. There's always going to be growing pains to get through and you have to be conscious of that. I think looking ahead, you want regulators to be laying out a clear path and structure for the sector to operate. You need the technology to have time to mature, and for the value chain and the service operators and everyone who exists around the ecosystem to mature, and I think we're seeing that happening at pace. 

Guy Shaul: Interesting. With that in mind, you mentioned a large part of the cause of what we've seen in the market being largely down to bad actors, as opposed to structural issues with the markets. Obviously, there's been a common criticism of the industry that there's a lack of governance controls or oversight at some of the larger players. Do you agree with that and how, in your view, do you think some of the executives and the management teams and even their boards need to evolve? 

Dan Chaplin: I think that would probably be a fair representation of certain organisations that have operated in the market, but I don't think it's a systematic problem that's associated with all crypto companies. I think it's any kind of financial—or any kind of company really, whether or not it's financial services related are not—needs to have strong governance foundations, governance processes that are there to avoid conflicts of interests and to allow businesses to actually benefit all stakeholders who are involved, whether that's customers, whether it's management, whether it’s shareholders. 

I think you need to then be mindful that you're backing leaders in those organisations who are generally honest, grounded, and customer-centric. I think customer-centricity comes down to the heart of it, because I think at the end of the day if you can do that, then you're benefiting all stakeholders around the table. 

Alison Robinson: Dan, when we think about the news over the last month and the collapse of Signature Bank and Silicon Valley Bank, what impact do you see that having on the ecosystem? 

Dan Chaplin: Well, I think in the short to medium term, I think we've lost two valuable service providers who were pretty important and well-respected within the crypto ecosystem. I don't think the fallout or the collapse of them was—there were certainly idiosyncrasies to both, and you can't necessarily correlate one story to the other, but I think both were supporters of the ecosystem in different ways. I think it's generally true that the relative youthfulness of this crypto ecosystem and the way that it's being viewed by regulators right now means it remains pretty tricky for crypto businesses to get access to the fiat ecosystem and to banking services. 

And, you know, a lot of these crypto businesses were reliant on these kinds of service providers to help them manage either deposits or payment clearing, and they're having to now find workarounds and alternatives. So short to medium term, there's certainly been an impact, but I think overall I'm pretty optimistic about the long-term impact that this is going to have on the ecosystem. 

I think, again, for any business, it's prudent to have appropriate risk management in place and to have a robust set of fallback infrastructure and service providers. I think all kinds of businesses, whether they're crypto or not, have been reminded in the last few weeks, of just how important that is. 

Longer term, regarding regulators: it's a constant dialogue with the crypto market. I think over time we've always assumed that this market would become more heavily regulated; it would become closest to the traditional financial markets in that respect, and I think that's a good thing for the industry. I think it will become easier over time as well for banks and service providers to operate with these companies when they have greater clarity around regulatory frameworks within which they're operating. 

Guy Shaul: Just on that theme, Dan, how have you seen engagement from regulators change over the past, let’s say, six months, rather than twelve? Because it feels like even the last sort of six weeks has been quite eventful. But, you know, where's the change from your perspective, and how are you seeing their approach to this industry developing? 

Dan Chaplin: Yes, I think that the regulator's view of the crypto market—I mean, there's idiosyncrasies in every single geography, right? But at a very high level, I think (completely fairly) regulators have been focused on protecting retail holders. I think that is absolutely the right thing to do for this market to have strong foundations and to be successful in the long term. 

Having said that, I do think there's more that regulators could probably be doing to provide assurance and clarity for businesses operating in this market. I think putting in place fair and progressive regulatory regimes that actually allow their own countries to capture all the benefits that digital assets as a technology have to offer global capital markets. I think there's more than that can be done, and I think it's an ongoing dialogue. There's obviously many different viewpoints within the regulator's themselves and within political parties that sit above and alongside those regulatory organisations. 

Generally, I think there's a tendency for regulators to huddle together. They're not by nature risk-takers; they want safety, security, they want reassurance that they're in line with one another. There are no real prizes as a regulator for being a first mover, particularly in large jurisdictions. But, I do think we're starting to see, at a political level, pressure for these regulators to engage more closely with the ecosystem, to understand how they're going to derive benefits from things like central bank digital currencies over time. 

And so, I think over the medium term—whether that's driven by client demand or by regulation—we're going to see better alignment of global regulatory frameworks and we're going to see some of the more traditional financial market regulation being put in place in the crypto market. I think that will do things like segregate duties between players. It will reduce conflicts of interest between trading venues, custody settlement providers, between exchanges, clearing houses, whatever the case may be. And I think that alignment will reduce conflicts of interest, protect customers, and give the crypto space much more clarity. I think it will give it strong foundations to realise the benefits of the infrastructure itself. 

Guy Shaul: Yes. The answer to this question will depend a bit in region with the idiosyncrasies you reference, but: at a high level, how do you see some of this intervention, some of those frameworks that you referenced, impacting industry behaviour? 

Dan Chaplin: The different pace at which regulatory regimes around the world move, I think, will certainly impact the development and the pace of development of ecosystems that sit underneath it. You need a relatively progressive regulatory regime in order to allow some of these firms to grow and to flourish. But a lot of them are naturally operating in very grey areas, and so it's only right that they take a conservative view of what the regulators in that market will suggest. So, the quicker they can get clarity and the more closely they can align themselves with the regulators, the more confidence they can have to invest in their own businesses. 

There is some tension: I think you're starting to see regulatory regimes begin to compete with one another. The US, most recently, is taking a much more conservative view. I don't know whether that will continue to be the case in the long term, but certainly I think that's the way the market is going for the short term. Sitting in Europe and in the UK, I think we're starting to see a much more forward-thinking set of views and relationships between regulators and the crypto market generally. 

Alison Robinson: Dan, as you think about the implications of what we've been discussing for the coming years, how's that shaping how you're thinking about investments and the prospects that you're looking at? 

Dan Chaplin: I'm not sure it's changed a great deal, necessarily. I would say we've seen this as a five-, ten-, fifteen-year market development journey. We're seeing digital assets as an infrastructure that can potentially be a foundation for financial markets for the next twenty, thirty, forty years. And we know that change doesn't happen overnight; as I said before, there's obviously growing pains to get through. What we're looking for is to take early bets on really strong technology and really strong teams who can speak both the language of crypto native players, where a lot of the activity in the market is today, and traditional financial services firms, where I think much of the volume and much of the financial payoff will be over the longer term. 

That's the approach that we've always taken to the space. Thinking about Copper and Elward, we have companies that are doing exactly that. Dmitry Tokarev, the CEO at Copper, spent most of his career in the traditional financial asset management space. They are a company that's been hiring senior executives from places like MasterCard, Citi, and I think they are putting the company on a footing where we can have very, very strong relationships with the largest financial institutions in the space, people like State Street. 

Elwood, similarly, is a company that has the credibility of a strong relationship with Alan Howard of Brevan Howard, one of the largest global hedge funds. Alan Howard is an extremely forward-thinking investor in the digital assets market. We have in there partners and co-investors with Goldman Sachs, with Barclays. These are the kinds of companies that we're looking to back: people who can create strong relationships in that crypto native space, who are fast-moving, agile, who understand use cases today, but also who are having likeminded and harmonious conversation with the biggest financial institutions in the market. 

Guy Shaul: And on that point, Dan, you referenced some of the types of profiles that Copper have been hiring, some of the industry associations that Elwood has there. What are the leadership capabilities and qualities that you think are important for organisations in this space to be bringing onboard as they chart the next chapter for the digital assets? 

Dan Chaplin: It's a maturing market, right? So, you have to be willing to operate in often what are shades of grey. You need to be very flexible individual; you also need to be very agile and be able to operate your organisation in an agile way as that market moves around you. I think that means you also have to be very open, very honest, and a really strong communicator, so you can advocate for the market itself with all the various outside forces that impact this ecosystem. You also need to serve as a spokesperson for your company itself and for the team that you're trying to bring along with you on the mission. 

I think that means you also need a leader who can create the right culture in the organisation—people who value the importance of risk management, who value the importance of compliance, who are highly institution-friendly but are, at the same time,  flexible and fast-moving. I think that's what you see: the companies that are really interesting in this market are the ones that are building deep, resilient technology, but who also have an ambition to provide foundations for the global financial markets in years to come. I think Citi last week produced a report saying they think roughly eight trillion dollars of traditional assets are going to be moved onto tokenized rails by 2030. That's the kind of volumes that you're going to have to be dealing with, and you need leaders and businesses that can support that level of what is ultimately going to become a globally, systemically important infrastructure for financial markets. 

Guy Shaul: Yes, there certainly is a very large prize here. 

Dan Chaplin: Absolutely, absolutely. I mean, it's totally green field, which is exactly what we as venture investors like: well-defined, well-understood categories, which frankly need strong infrastructure and different infrastructure to what already exists. That’s a massive opportunity. 

Guy Shaul: Dan, thank you so much for taking the time to speak with us today. That was super, super interesting; we appreciate you sharing your perspective so candidly. 

Dan Chaplin: No worries. Thank you very much for having me.

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About the interviewer

Guy Shaul (gshaul@heidrick.com) is a partner in Heidrick & Struggles’ London office and a member of the global Technology & Services Practice. He leads the Crypto & Digital Assets and Cybersecurity sectors in Europe and Africa.