Kevin O'Leary Explains Why Institutional Capital Must Have a Role in Sustainability
In an exclusive interview, the 'Shark Tank' investor lays out reasons for using sustainability as a metric and explains his investment in WonderFi.
Realistically, only a fraction of cryptocurrency today is held by institutional investors. Right now, there is probably close to a trillion dollars worth of buying power that would come into Bitcoin alone — if it could be approved by sustainability committees.
Which brought me to Shark Tank's Kevin O'Leary and his recent investment into WonderFi, which provides novice users with a simple way to buy crypto, earn interest and track performance, while maintaining full control and custody of their assets. I reached out to O'Leary, as my interest in the transition of institutional capital from marketing strategies to sustainability measures has grown deeper.
O'Leary comes on board WonderFi alongside entrepreneur and TikTok star Josh Richards and WonderFi CEO Ben Samaroo. Richards has 40 million followers across his social media platforms, and feels a strong duty to help educate his followers, many of which are Gen-Z, on personal finance and different ways to look at their money.
In my conversation with O'Leary, we discussed his passion for sustainability driving the future of Bitcoin and cryptocurrency, beginning with his statements at this year's Bitcoin 2021 Conference in Miami — a conversation O'Leary told me predated the event by at least six months.
"These were conversations I was hearing from institutions when I disclosed I had a 3% weighting in Bitcoin and Ethereum, as well as a few other coins," he explained in our recent Zoom interview.
O'Leary says that he started receiving calls from many of the institutions he serviced, wanting to know where he got his Bitcoin from. "We were having issues with our sustainability committees," says O'Leary. "A couple years ago, Larry Figg put out a letter talking about how institutional capital must have a role now in sustainability, and that caught on."
Throughout the duration of our video conference, O'Leary shared the following four reasons why institutional capital must now have a role in sustainability beyond its moral imperative.
1. Sustainability is no longer a marketing fad; it's consumer-demanded
"Only three years ago, sustainability as a topic in business was considered a marketing strategy," says O'Leary. "In other words, you wanted to be a good corporate citizen, so you had a sustainability mission. But it had nothing to do with revenue; it was just something you thought you should do morally, and I agreed with it then."
O'Leary distinguished that this is not the same conversation today when we are exploring issues such as carbon emissions and ethics mandates. "Now, when you start to look at consumer goods and services post-pandemic, particularly in the last year in the U.S. and globally, you found that consumers have changed their preferences," he continues. "The individual consumer wants to know: What are you doing as a company to help sustainability mandates? What are you doing as a company towards a mission of giving back? What are you doing as a company in terms of how you source your input, goods and costs? Do you care where they come from? All of these factors aren't marketing fads anymore; they are demanded by consumers."
O'Leary adds that the reason institutional investors have started to push back is because of these sustainability mandates and missions: "These companies themselves have figured out that consumers want this, that they're going to make purchasing decisions based on your ability as a company to sustain and help sustainability mandates, and in some cases, ethics mandates as well. This is a brand new game that's going on, and it's what the consumer wants. And the consumer is always right."
2. Get out of the wild west and focus on compliance regulations
In asking O'Leary about why there's been such resistance with many institutional investors, he told me it involves conversations about environmental, social and corporate governance. "Many of them have not yet pulled the trigger to go to even the smallest allocations of 1 or 2 or 3% into Bitcoin, because their sustainability committees want to know with certainty that these coins that they have basically purchased as assets," he explains. "I prefer to think of Bitcoin as a property, no different than any other asset class. Sustainability has found its way into the measure of every single sustainability metric in every asset class. So that's why you're seeing many of these institutional clients pulling out of hydrocarbons, pulling out of coal, all of these things that they have now started to measure towards sustainability. Bitcoin is no different."
O'Leary also reveals that the issue of compliance keeps him up at night. "Given the size of my holdings and all the financial services companies I'm involved with as an investor, I am not interested in being a cowboy or being in the wild west," he offers. "And there's a lot of people who think that way about DeFi. But the point is that this is an institutional product emerging, and I come from that subset."
Ultimately. he expects them to also appreciate compliance. "I have to be compliant, so I tell every one of my CEOs that whatever they are doing," he says. "I want it to be compliant with the regulators. I want to know with certainty that you check the box there. Everything I do with every company I invest in and when I deploy capital into crypto, I want to make sure my own compliance team knows exactly what's going on, and that we're reporting it correctly. That is the area of my greatest concern, because I believe the way we can make cryptocurrency a standard globally is to be compliant, by setting the rules and regulations. I want to be part of that as an investor, but not on a non-compliant basis."
3. Capital is moving to where the puck is going
"You look at what's going on in capital generation, looking at deals that have been publicly announced — all of these private companies in crypto are raising capital in amounts that have never been seen before in terms of the size of private companies," says O'Leary. "These are huge, which shows you where these deal flows are going. "Now, those investors could have invested in money-center banks, but they chose not to. These were institutional clients that said, 'We don't want to be back there; we want to be where the puck is going,' and that's DeFi. That doesn't mean the role of money-center banks is going away, but certainly they have to understand the competitive landscape for financial services is going through a rapid transition. These CEOs probably don't have enough innovation in their behemoth of organizations, as a young entrepreneur does typing out code to solve problems to make DeFi faster and smarter."
4. What millennials and Gen-Z should be doing right now
"I told my son that this was an opportunity to democratize investing, making it less expensive and totally transparent, so that people can use crypto and get interest off their holdings and income," O'Leary shares. "Just get yourself exposed to it; you don't have to go all in, but just educate yourself, because the barrier to entry is very, very low."
Referencing the launch of WonderFi, O'Leary suggested that users just "try it and learn from it, because that's the whole idea. This is a massive educational process that we are going to go through here, where people will realize they can actually use this to have an investment strategy where they can make some income, which is all I wanted in the first place."
As DeFi and the crypto landscape continues to evolve, programming like Shark Tank will also mature and grow. "Shark Tank is actually a snapshot of what America looks like, and is going to look like in two years," O'Leary asserts. "We are in the middle of shooting Season 13 right now, and every deal I'm seeing right now is looking at digital America 2.0. There's all kinds of digital deals this year that you could have never thought of."
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