From Niche to Necessity: Tax & Accounting for Web3 and Digital Assets

Taylor Zork, CPA [00:00:09]:

Hello and welcome to the Niche to Necessity podcast. My name is Taylor Zork and today we have a very special guest, William Grant. He is the Director of Partnerships and Growth, the Head of Growth and Partnerships at Integral. And Integral is empowering Web Three organizations in crypto, accounting through revenue recognition, NFT collection management, capital gain loss calculations, audit, compliance reports, and more. So hi Liam, welcome to the podcast.

William Grant [00:00:40]:

Hey, Taylor, thanks so much for having me. I'm really excited about today.

Taylor Zork, CPA [00:00:43]:

Yeah, thanks for joining us. So I'd like to start off by just asking you a bit about your background and how you became involved in the Web Three space.

William Grant [00:00:52]:

Yeah, I think it really started with kind of my engineering background. Did mechanical engineering in school, was always that kid who was taking everything apart from TVs to motorcycles and trying to understand the technology behind it. I think that's really what interested me about crypto is it just seemed like a community of folks that were really trying to think about financial infrastructure differently. Worked for VMware with a number of financial institutions and I think pretty much everyone in the tech side of financial institutions was frustrated and felt limited by the rails and the infrastructure that existed in those contexts. And many of them were 20, 30, 40 years old. So that was a real blocker for innovation in that space. And though there was a lot of really smart people trying to innovate, they were kind of just held back by the infrastructure of the day. And so this new approach really interested me and that's really kind of when I met Guy, our founder, we had been kind of running in the same social circles and we were chatting about what we saw as the kind of the largest problems. And Gee's background was the electric capital entrepreneur in residence. And so I think he spent about a year just asking their entire portfolio of over 100 companies. Hey, what are some really difficult challenges that you see operating a crypto company? And by and large, what came back was, hey, I think accounting and the entire basically CFO back office is just really difficult to navigate. And that's really why we wanted to build Integrals. If we can be the kind of unblocker or enabler for companies to have really solid financial back offices and reporting, I think that will be a big enabler of the space as a whole, which is ultimately our mission as a company.

Taylor Zork, CPA [00:02:44]:

Very cool. Yeah, I mean, I have a similar kind of entry origin story into the Web Three space. I was in niche accounting industries with cannabis, and then I had heard about Bitcoin in 2013, but it really clicked with me when I heard more about smart contracts and ETH and all these things that kind of felt to me like it made sense and it made that kind of light bulb go off. So very cool. You guys saw issues and a structure that you guys wanted to help overcome. So you kind of answered it already, but I kind of wanted to follow up a little bit on that. So what specifically led you and your team to design and build a tool for crypto, tax and accounting? Because there are other sub ledgers out there. What was that led you guys down this road?

William Grant [00:03:34]:

Yeah, I think the first thing that really struck me about all the conversations we had in the early days was just how fundamental some of the challenges were. You would go and talk to a CFO running a relatively large crypto company and they would say things like, hey, I spend 80% of my time just trying to track my transactions or just trying to understand my balances. Like really fundamental workflows. And it was interesting because the market complexity of crypto and the financial complexity was it seemed to be much higher at a very early stage. Right. If you think about the number of companies that have 100,000 transactions a month in traditional finance, pretty much all of those companies are going to be pretty big businesses, big teams, a ton of support working the top four accountants and et cetera that could be like a seed stage company with six or seven people in crypto. And so that was like one thing that struck me initially is just how fundamental the problems were and how much bigger the problems were earlier on in these companies journey. When I think about maybe some of the solutions that are out there right now, the kind of common challenges we heard were one just the user interface wasn't easy enough to use. If you were a founder who were at the seed stage or even if you were a CFO at a really large company, the user interface, no one had really reached the quality of the best financial products out there. The stripes of the world. And so we thought there was an opportunity there to just build a user experience that was a lot more powerful. And I think the second thing that we heard was just that there was so many different tools being used by these CFOs, and there was an entire patchwork of infrastructure that they had to build, almost like a mosaic. Model, essentially, of the back office where they were going to one tool to aggregate some of their data and then another tool for payroll and another tool for tax. And that all had to flow into their traditional finance ERP, and they got into what I call basically the spreadsheet Olympics, where they were trying to take all these different data sources, putting together these insane spreadsheets, and they couldn't really realize the benefits that any one platform had to offer because they didn't really have a single source of truth for their company. And so that's really what we aim to build here at Integral. And I think we've done a decent job so far, which is just being the single source of truth that financial operators can rely on that spans all of their different accounts, whether that's their custodians, their exchanges, their payroll platforms, their traditional finance ERPs, and everything else. If we can consolidate, that all, I think we can really realize the benefits of automation, but also just of visibility. That's where it starts.

Taylor Zork, CPA [00:06:29]:

Yeah, it's funny you mentioned all those things because I resonate so hard with all those things. I was CFO of trustwap in the kind of summer of DeFi when we launched, and it was a nightmare. I mean, at the time, I didn't really have or it was either I didn't know of or didn't have exposure to really nice, clean financial stack like you're mentioning. And I ended up being the spreadsheet workhorse and managing a company that I ended up being at one point, there was like a half a billion dollar, fully diluted market cap. It's like, insane to think that it was a one man team behind that. And it just got to a point where it was out of my range. And that's a big reason why I created crypto CFOs, is to help level up accounting and tax help in the industry, because I just simply couldn't find anyone to help me with the work. And I'm managing this multi jurisdictional beast in Excel. And I'm glad that there are tools like yours out there that exist to make our lives as accountants easier. And when you mention UI experience, I have noticed that with other subledgers where it feels like it's geared at the bookkeeper and not necessarily at the finance team. And so it's nice to hear that you guys put a tremendous focus on the user experience and the user interface in developing your product. So, again, you already kind of answered this question, but in a quick paragraph or sentence, what would you say your overall special sauce at Integral is for your tool?

William Grant [00:08:20]:

Yeah, I think we did an exercise recently where we canvassed all the users that had switched off other platforms, and I think there was basically three common narratives that emerged. So the first one is data and accuracy. Right. There are markets where it's okay to have 80 or 90% of the data and make decisions. Accounting is just not one of them. Right. 100% completeness matters. And so with Integral, we thought a lot about what is the gold standard of reconciliation. Essentially, in the industry and in traditional finance, it's relatively obvious. Right? It's bank reconciliation. You have a starting balance and ending balance. The transactions tell the story of what happened in between, and then you compare it to what your bank statement says. And so we thought about, okay, what is that gold standard? And I think that a lot of subledgers rely on maybe one data source to do that. Whereas at Integral, we take three different data sources. We do that API integration into your account. We're also aggregating raw blockchain data and we're also using third party data providers. And we compare them all. And if there are disagreements, we surface them to the client with a recommendation about how to proceed. And what we think is the most accurate and how that tactically breaks down when users switch is that they see a couple of things. One is their number of transactions increase. That's, simply put, there's transactions that were missed that are now complete and integral. And the second is things like capital gain and loss numbers change. And we built integral. We kind of say internally, like, we're just in the business of showing you the math, right? We want every transaction, every report, every balance sheet, line item to be auditable and to really break down to our users exactly how we arrived at that calculation so that they can really trust the system. So that's really the first narrative that we heard. Data accuracy, auditability, trust. That's the key. The second narrative that emerged is really the user experience, right? And so you mentioned and kind of alluded to this, but at Integral, we wanted to build a platform that the bookkeepers really loved and felt that it made them more powerful and got them out of maybe the minutiae of tasks and into things that were a little bit more strategic or judgment based. But it was really important for us that we created a platform that not only the bookkeepers and accountants, but also the controllers, the founders, the CFOs can all collaborate on. I mean, I'm sure you've experienced this firsthand, Taylor, but the number of email chains where it's like 200 emails long, of what was this transaction and what was that for? How do I value this asset? Are really slowing teams down. So that was kind of the second thing, is build a user experience that caters to all the folks in the finance team and the external bookkeepers, make it easy to collaborate on that interface and really basically create some efficiency in the communication associated with that. I think the last narrative is really more about what we operate as a business. Building a SaaS company is pretty tricky, right? There's a lot of folks that approach it in a way of how do we optimize our margins and revenue and pricing model and those sorts of things. I think what we did at Integral pretty early on was just decide that our model would be very easy to understand and that we would basically treat our customers the way that we would hope to be treated for any software that we consume. So there's a lot of just really simple things we do super fast response times. If there's an issue, we really sprint to fix it. We collaborate heavily with our users. What I say always is just we take our users best idea, steal them and then build them which they're totally happy with. And so I think a lot of it is just really how do you act with integrity as a company and one, not bite off more than you can chew, but continue to just engage with your users? That's really what we hope to do with the Crypto CFO community is if we can harness some of the superstars that we have using integral to create education and the courses and all the other things that we're going to be doing to empower the overall community, I think that becomes just a really powerful source of us all working together. That's really what it's about.

Taylor Zork, CPA [00:12:49]:

Yeah, I love that. I mean, too many businesses are short term focused and if you're patient, it pays off in the long run.

William Grant [00:12:58]:

Right.

Taylor Zork, CPA [00:12:58]:

Because you're building a sustainable business model that is supported by its user base. It's supported by the industry itself too. If you build up the industry, there's a bigger pie for everyone to consume. And I think that's really important. What would you say is sorry. I guess the world of digital assets and crypto assets is evolving always. It's crazy that the pace that we're at sometimes new projects and tokens are constantly emerging. So you alluded to this a little bit already, but how would you say that Integral? You talked about data integrity and data completeness. How does Integral stay on top of all these advancements, ensuring that your clients have accurate and reliable data?

William Grant [00:13:52]:

Yeah, I think it's definitely one of the core challenges in this space. And so I think the way that we think about it is in our position, it's very tempting to go and build every integration or chain integration under the sun because theoretically that increases the size of the market and maybe ultimately revenue or something else. But the approach that we have is to do things correctly and accurately the first time. And so that is a mix of relying on multiple data sources. So we're thrilled and blessed to have some awesome partners on the API side that really specialize in certain ecosystems or certain activities. They're definitely part of the picture. I don't think there's any providers that have Integral with everything across the sun just for the reasons that I just mentioned. So it's really about picking the right ones for the right ecosystems and the right activity. There are also ecosystems that simply don't have an API provider that is accurate enough for accounting purposes. And so in that point, we have to go and build it ourselves. But the way we approach it is we have deep relationships with the A providers that we have. I think that they really appreciate the way that Integral does business and so they're willing to continue to expand and help us in various market, whether it's NFT or DeFi or anything else. But I think the second one is really just more of a commitment to just not shipping things that are half baked and only really doing it when we know it's going to be accurate. And every integration that we build here at Integral goes through, we like to say we kind of test it to within an inch of its life to make sure that it is accurate. And we do it with a significant amount of data because we don't want to ever be in a position where we're not providing the right data for our clients. We take that extremely seriously.

Taylor Zork, CPA [00:15:55]:

Very cool. What would you say the most challenging aspect of accounting for crypto assets is as a subledger?

William Grant [00:16:01]:

Yeah, I mean there's no shortage of challenges. I think maybe one of the ones, and this is kind of, maybe something that we've kind of touched on is just that there's so much innovation happening in crypto all the time that that's constantly creating essentially new data sources, new types of activities. And so aggregating data is, I think one of the most difficult things is how do I get all of my financial activity, all the transactions, all the assets in one place for all the vast activities that we do right? And so you'll have companies that know they have primary and secondary revenues on NFT collections, but they're also staking their treasury using DeFi instruments and then they have a hundred different wallets and four exchange accounts and three custodians. And so the power of a solution like Integral I think is the ability to really aggregate all the data from all the different data sources. But that's also the core challenge. And so we do a lot of work to basically figure out where we can add the most value in which markets and then we really build towards that and focus on it. And so right now I would say that's really NFT collections, gaming companies, marketplaces and exchanges is where we see a lot of the value. There's lots of other companies we work with as well, but it's a little bit about just not biting off more than you can chew at the time and then really focusing to actually solve the challenges, like I said, to the 100% level, not the 80%.

Taylor Zork, CPA [00:17:43]:

Yeah, I love that. I mean, ultimately there's going to be niche sub ledgers for the emerging blockchains and things like that, but you guys want to make sure that everything you put out is quality. That's awesome. So looking ahead, where do you see the future of crypto accounting and the broader digital asset industry heading? Are there any emerging trends or technology that you're particularly excited about and believe will have a significant impact on the way businesses manage their crypto assets?

William Grant [00:18:14]:

Yeah, I think one of the ways that this challenge has been framed and basically for the growth of the entire industry is how do you onboard the next 100 million or billion, even crypto users? And I think it'll be a little bit about making crypto a lot more accessible for people in specific use cases. And so at Integral we're thinking, okay, really, how do we support that? We've seen a ton of large Fortune 1000 type brands enter the space with a lot of different use cases. You have PayPal releasing stablecoin, you have lots of remittance and basically forex type use cases that are very interesting. You have the tokenization of real world assets. You have luxury brands experimenting with NFTs in order to drive user engagement, understand their communities better, market to them better, create exclusivity, lots of really interesting things happening. And so I guess what I see as the kind of future of how that relates to crypto accounting is one just being able to support the use cases that are likely to be the most successful and the most wide reaching in terms of onboarding all of those users. But I think the second is that it's likely, in our opinion at least, that all of the kind of financial tools and the CFO stack, so to speak, start to become unified. And it may be the case that there is a platform that unifies many different aspects beyond accounting. Also treasury management and payroll and money movement and lots of other things. And I think those solutions become more and more powerful. The kind of wider the reach is, and this goes back to the core concept around, can you actually get all the data in the same place and create that single source of truth? That's what I'm really excited about. And I think there'll be really broad implications for managing a crypto business once those platforms like Integral are a little bit more mature. Because the reality is that right now, this is quite an immature market, right? It's not like there's companies like Intuit and Zero and NetSuite that have been around for 30 years building every tax report known to man and integrating with 500 banks. No one's really at that level yet. That's a very exciting place to be, and I think that there's a lot of value that we can create there.

Taylor Zork, CPA [00:20:49]:

Yeah, that's awesome. I think that part of you alluded to a lot of things that are going to increase adoption. I think that part of it's going to be people not even realize they're interacting with crypto assets, whether it's through Starbucks's NFT based rewards platform or I came across another product recently called coast where they do like a dead man switch for Beneficiaries. If you die, you can pass along your crypto via this smart contract where if you haven't interacted with it in a certain amount of time, it gets automatically distributed to whoever you've designated it to. And the people who are receiving it, they don't need to have a crypto wallet already, they just need to use their email or whatever. So ways that you can integrate crypto assets without people even realizing or without removing that barrier, that is, whether it's a noncustodial wallet or all these terms that people get kind of bogged down with when we kind of break down those barriers, that's when we can onboard the next billion users, I think. Cool.

William Grant [00:21:58]:

Yeah, I think I heard someone say it's like when your grandma is using crypto, we've won don't even know that they are using crypto. I think, yeah, if there's a challenge with the kind of onboarding the next 100 million or billion users, it's probably a front end and interface problem and maybe not as much of a back end problem, but we'll see.

Taylor Zork, CPA [00:22:22]:

Yeah, I mean, always a good top indicator too, is when your family, who your grandmother is asking you about how she can buy ETH or Bitcoin or whatever. That's definitely a top indicator. That happened to me September or October of 2021. I had family members who had never talked to me about crypto at all asking me how they can buy on coinbase. And that should have set off some alarm bells for me, but yeah. Okay, final question for you. If you could wave a wand and change any aspect of the industry, what would you change?

William Grant [00:22:57]:

Yeah, that's a great question. I think maybe crypto culture in some sense, I think this is kind of true of any emerging technology where it always starts with some level of not exactly a counterculture, but a subculture or a relatively small group of people who believe in the technology early. And honestly, they're ultimately the ones that advocated for crypto and made it into what it is today. So I'm nothing but grateful. If we do want to onboard the next billion users, I think we need to establish a culture that is maybe a little bit more about how do you actually educate people instead of creating more of an exclusive environment. And I think by and large, everyone or the vast majority of people in crypto agree with that sentiment. But I think that's really why communities like crypto CFOs are really important. It's really all about sharing information. And that's one of the huge challenges with finance in general, is that and we hear this all the time in certain jurisdictions, there isn't really any published standards or at least clear standards for how people should operate. You just have a lot of folks with some level of guesswork or basically informed hypotheses of how to do things correctly and a lot of really like tribal knowledge. Right? And I think that tribal knowledge is build strong and tight knit communities, but they're small kind of by definition. And so our ability to kind of take all of that tribal knowledge that was hard won by people who are really innovative and who are willing to kind of charge into an unknown space and then being able to translate that into a broader kind of consumable package of information is what is one of the really important parts of how we're going to scale to that billion users. And the way that I think it plays out in our industry. And I know you know this, Taylor, because otherwise you wouldn't know. Building this community, right, is you got to get the word out there. You have to have the courses and the education and people that you can rely on and talk to. And how do we make it so that folks who are interested in crypto, who are CPAs are able to actually onboard into the space in a matter of months and not have to figure everything out themselves over a two year period? There's lots of awesome resources that exist in the traditional finance space and lots of different certifications you can get. And I don't know that there really is that many in crypto. There's a lot of people who are trying to add value there, but it's certainly not as mature. And so, yeah, that's why I think crypto CFO is important. I think that's really why Integral wanted to partner. We're definitely aligned on that mission.

Taylor Zork, CPA [00:25:58]:

Yeah, I think that if I had a nickel for every CPE course that I've taken in crypto, that was essentially just blockchain one and 101, it's like I've taken that same CPE course by a different name probably ten or 15 times. And so, yeah, that's kind of the goal here is to go an inch wide and a mile deep on all these things. And we're excited to partner with you guys on some CPE courses coming up. So, yeah, I think that all that stuff is great. And one thing I do want to note is I think that at least from a networking side, definitely there is like the tribal aspect of the crypto industry. But just coming from cannabis first, cannabis is so tribal, and I think that people were afraid of networking within that community partially because of the stigma of the suits coming in or whatever. But I have noticed that just networking as a whole in crypto feels so much more open and it is a nice industry to enter from that space where it's not like, oh, how long have you been here for? People aren't as concerned about that. And that is one nice thing that it is. Open doors for people if they want it is intimidating because there's a lot to learn and sometimes, like you allude to the culture, there is sometimes a little bit intimidating. But I do also want to highlight that if you try to network in the crypto space, the vast majority of people want to connect and the vast majority of people want adoption, so they want to bring more people in. And I think that that's a distinct difference between the cannabis industry and the crypto industry is that the doors are open if you want to come in, so come find us.

William Grant [00:27:34]:

Yeah, I think that's totally true. And I mean, even just speaking with so many different growth and relationship kind of based folks in the space, the openness and just the friendships that I've been able to create just working for a couple of years are really interesting. Everyone kind of approaches it with the openness, and I think the next step is, how do we get that information out there so that more and more people want to come and innovate in this space? Because me coming from more like big tech or banking environments, I think there's a lot that they could learn from the way that people approach culture in crypto as well.

Taylor Zork, CPA [00:28:15]:

Absolutely. Very cool. Well, thank you so much, Liam, for joining us today. We're excited to be partnered to you guys and excited to keep churning out new content with you guys. So thanks again, and we'll talk soon.

William Grant [00:28:26]:

Thanks so much. Taylor.