Institutional Marketing In DeFi: How To Get On The Radar of Regulated Heavyweights With Deep Pockets?
Learned from hands-on experience in attracting institutional clients to crypto exchanges
Many DeFi projects want to go institutional one day.
Because institutional clients mean more money and less headache than it is with retails.
However, the challenge lies in figuring out how exactly to attract these institutions.
Obviously, good old memes and airdrops aren’t going to cut it.
In my conversations with DeFi projects, the most common question I hear is,
“What is the right marketing strategy to attract institutional inbound leads?”
Do you also see “inbound” here???
Short answer: it’s not about marketing.
However, you can add marketing to enhance your “go-to-institution” strategy and increase your chances of winning their trust.
Below is how.
But before we start, a brief note on how I gained my knowledge of institutional clients
And why sometimes DeFi bros seek my advice on marketing to them.
In a nutshell:
For almost a decade, I worked in legal consulting on M&A deals, banking, and IPOs.
Over these years, I’ve had my fair share of communications and meetings with VCs, family offices, banks, hedge funds, asset managers, and other regulated guys with big money.
Unfortunately, their money had never flowed to me.
However, I managed to know them closer and build solid relationships with many of them.
One day I decided to quit my legal job and embark, almost butt-naked, on an amazing crypto journey.
Quite soon, I ended up in crypto exchanges. First as a business developer and later as a marketer.
It has been over six years since then.
This “about me” rant does not say I have all the answers about institutions. It just gives me a slight permission to share some insights and experiences that may help those new to working with this audience.
Let’s define institutional clients in DeFi and distinguish them from retail clients
In simple words, they represent anything from banks, hedge funds, family offices, asset managers, pension funds, and endowments to insurance companies and foundations.
Compared to retail clients, institutions typically
- manage larger capital (including third-party funds)
- operate under strict regulation and reporting requirements
- follow strict compliance with their licenses
- have a lengthy decision-making process, and
- are cautious, skeptical, and conservative.
They also have more complex needs and demand specialized services and customized solutions, which can be quite challenging for DeFi projects to provide.
You might have heard of the term “Institutional DeFi” — here’s what it means
“Institutional DeFi” and “institutional clients in DeFi” are not synonymous.
While both terms refer to the same category of the DeFi market participants — regulated guys with big money — they have different meanings.
“Institutional clients in DeFi” are entities that become clients or investors in DeFi solutions, like those providing liquidity to DeFi protocols or using yield farming strategies.
On the other hand, “institutional DeFi” occurs when, let’s say, traditional banks or investment apps integrate DeFi technologies to enhance their offerings to clients. In this case, institutions invest in creating their own DeFi protocols and investment products to attract new types of clients.
Here are some examples of Institutional DeFi:
- JPMorgan has recently integrated its Onyx blockchain platform with ConsenSys Quorum, a popular Ethereum-based blockchain platform, to create a secure, scalable, and auditable way to execute financial transactions.
- AllianceBernstein, a leading asset management firm, has announced its plans to offer cryptocurrency investment products to its institutional clients.
- CME Group, the world’s largest derivatives marketplace, has introduced Bitcoin futures contracts to its institutional clients, providing them with an opportunity to invest in Bitcoin in a regulated and secure environment.
- State Street, a leading provider of financial services to institutional investors, has partnered with Pure Digital to create a new digital currency trading platform for its institutional clients.
- Standard Chartered has recently launched Zodia Custody, a new cryptocurrency custodian service that will provide secure storage and management of digital assets to institutional investors.
Since we have established definitions, let me share my key insights from years of pitching to institutional prospects in the crypto space
Whether you agree with them or decide they are all just my hallucinations, feel free to share your thoughts in the comments.
Here they are:
1) Institutional prospects will simply ignore your marketing stuff
Usually, institutions are quick to dismiss anything coming from unknown sources.
Especially from those with “Web3”, “DeFi”, or “crypto” in their names.
Since institutions handle large sums of money and face strict regulations, they can’t afford to be sold on random marketing materials. No matter how well-crafted they may be.
Instead, they prefer to rely on referrals from trusted sources (a partner, consultant, service provider, etc.), warm introductions, and thorough research before meeting in person.
This is important to understand.
And this is why the question about having institutions as INBOUND leads is naive and incorrect at its core.
For clarity, an inbound lead implies that someone scrolls through your content gets convinced at some point, and decides they want to reach out to you.
Now, let’s try to imagine this with a multi-million dollar hedge fund. Its manager binge-reads your fantastic articles, gets inspired on the 5th one or so, and suddenly decides:
MAAAN! I’m impressed! I have to work with these Web3 guys at all costs. Can’t wait to jump on a call with them!
Unfortunately, the institutional world doesn’t work like this.
It’s always on you to find approaches to them and prove that you are trustworthy.
Just forget about your inbound dream. And actually about the magic power of marketing here.
Instead, try to do this.
👇👇👇
2) Instead of relying on marketing, sweat for business development and cultivating relationships
In the institutional world, building personal relationships is crucial. Institutions want to work with people they personally know, trust, and have a good rapport with.
As you might have guessed, both trust and rapport take time to develop. You must be patient.
So where do you start?
In the beginning, I’d recommend the following simple steps:
- Compile a list of target companies you want to pitch to (let’s call them your ICAs).
- Define your ICA’s network. Find out whom they work or partner with — legal, financial consultants, advisers, ambassadors, custodians, etc. In today’s overly-transparent world, it’s just impossible not to find this information.
- Reach out to these partners. Send them direct messages to start a conversation. Keep it professional and concise.
Later, you could ask them for a warm introduction to your dream institutional client.
So how exactly do you reach out?
4. Use LinkedIn.
As simple as it sounds.
It works better than any hyped conference promising you tons of leads and deals signed right on it.
But what kind of message should you send to get a guaranteed response?
Lemme show you a good and bad example, so you understand better.
Bad example
(Wordy, vague, require me to invest time in reading their pitch deck and figuring out what exactly they want from me)
Good example (could be better, but did well for me)
(Short; addresses the objections right off the bat — yes, we’re compliant, partner with a regulated custodian; shows relevance — I need you as a market maker or as an arbitrageur. No pitch decks or heavy features descriptions)
What’s next?
- An intro call to see if we vibe. If we do, then goes a group chat creation.
- A few more calls with product and tech teams.
- Regular convos on how things are going/sharing updates.
- Let’s catch up and have a drink? 🍹🍹🍹
A honeymoon phase of getting to know each other and establishing relationships.
After that, you can ask for a warm introduction to your target.
Sounds sneaky?
Welcome to the world of business development! 🎉🎉🎉 (Kidding! 😂)
However, it’s not as weird as it sounds.
In fact, all the participants are interested in having personal time- and battle-tested connections.
Ok, now let’s review the essential rules for successful first-touch conversations.
Unfortunately, while these rules may appear to be obvious, many sales and business development professionals struggle to implement them correctly, resulting in disappointing outcomes.
So here they are:
- Show respect for their time (coz time is the most expensive currency today. They don’t have to pay it to you)
- Show relevance right off the bat: I reach out because you do this, and I do this. This is where we align.
- Predict objections: I guess your main concerns are XYZ. Here is how we address them.
- Show that you’re flexible: we are happy to give you a-la-carte terms that work best for you.
- Show that you know people from their circle: By the way, I know Joe Doe and John Smith from your circle and already partner with a partner of your partner.
For God’s sake, AVOID:
- drying their brain with sales pitch decks, tech details, and anything they don’t ask about
- salesperson tone
- nebulous crypto rants about disruption and saving the world from the darkness.
This was how I got 80% of my institutional funnel.
No fancy networking events were needed.
In fact, these free and simple actions brought me 10X results compared to any other tactics I applied.
Hyped crypto conferences make no sense
Usually, institutions’ representatives only pretend that they go to crypto conferences to network with crypto projects.
In fact, they give no crap.
With numerous parties and side events on the agenda and all expenses covered by their companies, most representatives are there to enjoy themselves rather than find new collaborations.
How about your fantastic DeFi startup?
Oh, next time, for sure!
They’d take your business card and then forget about you the next day.
The exception here: online casino conferences — this is where the magic happens.
But this is the subject of another blog post.
Lemme know in the comments if you want to get some insights on this topic 🤔.
Your institutional prospects may have representatives in your local crypto community
Even if you’re like me, living in Bali, where the cultural norm is to “go with the flow and explore your Higher Self,” you can still find people who can connect you to your desired audience.
For example, in Bali, we have several vibrant communities; within them, you can find people from giant companies like Coinbase, Tokocrypto, 1inch, etc.
So keep your eyes wide open.
But before taking any business development move, make sure you are clear on where the minds of your institutional clients are
In other words, you must KNOW THEIR MAJOR NEEDS, concerns, and what they care about.
Since every institution is distinct, it’s crucial to understand each one individually.
“Small crypto funds that prefer active yield farming across the long-tail of DeFi tokens, are very different from multi-billion dollar hedge funds that prefer and need to work with qualified custodians. Larger organizations often need different technology stacks for different funds, different parts of the same book, or different geographies.
It is important to recognize that access to different types of assets, and different requirements for risk management, operational infrastructure, and processes all drive different needs for different players across organizations.”, says Metamask’s Report “DeFi and Web3 for Organizations”.
However, there is one key concern that unites them all. It’s RISK MANAGEMENT.
Within DeFi, risk management takes on several dimensions.
Metamask’s pyramid of institutional needs below provides an excellent illustration of these dimensions.
Let’s break this down.
- Security
The most common question I used to hear from institutions:
How do we know that you guys don’t steal our or our client’s money or that your platform will not be hacked? Do you have a licensed custodian as a partner?
Their main concerns in this security context involve ensuring the safe storage of private keys, either through custody technologies like MPC or qualified custodians, as well as insurance against loss of access or theft.
Additionally, institutions may want to know how you would cover their losses if something goes wrong.
Just be prepared for these questions.
- Compliance
Institutions are subject to significant regulatory oversight and must follow AML, KYC, and reporting obligations to avoid fines, penalties, and even the loss of their licenses.
According to Metamask, within Europe, Asia, and the US, institutions have to comply with Anti-Money Laundering (AML) regulations that often carry with them the threat of fines, fund closures, and incarceration when trading with nefarious counterparties.
So when selecting a counterparty in the DeFi market, institutions must be sure that dealing with you will not only provide value but also allow them to stay compliant and won’t impose any legal challenges on them in the future.
- Execution and liquidity
Among other institutional needs in DeFi, are efficient trade execution and deep asset liquidity.
This means ensuring that assets can be acquired and disposed of with ample liquidity and that margins, spreads, and slippage remain tight and low.
- Monitoring and reporting
Institutions require the capability to monitor and manage their assets, yields, Annual Percentage Yields (APY), and risk management around their positions, which is crucial for their investment strategies. DeFi projects aiming to work with this audience must provide relevant tools for that.
How does your DeFi project enable monitoring and reporting for institutional clients?
To avoid making this article overly lengthy, I’ve divided it into two parts.
In Part 2, I’ll discuss how you can incorporate marketing into your “go-to-institution” strategy to improve your chances of winning institutional clients’ trust.
Don’t forget to sign up so you don’t miss it!
In the meantime, feel free to contact me on LinkedIn to discuss the latest developments in the crypto industry.
I’m always happy to chat.
Cheers!
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