How Arjun Sethi runs Kraken for crypto ‘hypergrowth’

Andrew Edgecliffe-Johnson: We’re speaking at a moment of great expectation around the crypto industry because of the change of administration in the US. What do you think the most consequential changes for Kraken have been so far, or will be, under President Trump?

Arjun Sethi: [Other countries’] regulatory regimes were taking a much more explicit perspective to work with the companies that were secure and also regulated. And I think it was the first time in history, from a technology perspective, where the US was trying to figure out how to catch up. So in the run up to the elections, there were a lot of conversations on both sides [about] how do we figure out how to make sure that we stay number one and innovative?

The momentum has moved at a much faster pace than we would have even anticipated. I think you’ve seen a monumental shift [and] I think we’re probably already now the leading country in thinking about what matters for crypto moving forward. The engagement we see from everyone, on both sides of the aisle, executive, even judicial, is an order of magnitude different from what it had been for my whole career.

What regulation do you want that would strike a balance between access to capital and preventing bad actors?

If you go down into the details around the types of things that happen in crypto, they’re transparent. So when something happens, you can fix it as soon as possible. In the last two years, who did you see fail at a higher rate? We saw our banks here in the United States fail. You saw [Silicon Valley Bank], you saw [First Republic Bank]. I’d say we created our own self inflicted wounds [in] crypto during that time but we came back faster.

I’m not saying that there shouldn’t be any regulations, just a healthy dynamic around ‘OK, well, you have this very powerful ecosystem that’s very transparent, that fixes itself very quickly in front of you.’

What did you think when Elliot Management said that Trump’s support and this acceleration you’ve talked about post-inauguration may be creating a crypto bubble that’s due for an inevitable collapse?

I don’t disagree that different inflection points in the markets that are coming from government, coming from stimulus, might create bubbles. You have micro bubbles, you have macro bubbles all the time. I won’t project on what’s happening in this ecosystem. Is it creating a bubble or not? Are there more speculators? Yes. Is there more stable coin usage? Yes. Is the price of Bitcoin going up? Yes. Is it going up because there’s speculation? Maybe, maybe not, probably not.

There’s a huge amount of demand coming into the ecosystem, because institutional [money] is coming in as well. So I would say that’s just simple economics. I just think you’re going to see a compounded growth rate. We will see drops just like any other market. But that’s just typical market technicality.

Kraken just announced financials for the first time. Why did you decide to do that? You’re a private company so you don’t have to.

It’s the culture and ethos of how I’ve run a lot of my organizations, especially when I came into venture. When you talk to any investor, they say ‘our industry is art, so you’ve just got to trust me.’ When you come from an operating background, you’re used to operating metrics and KPIs. That’s the only thing you think about, which is, what are your customers doing? How can you improve the product?

One of the ways in which we’ve built out Tribe Capital was [to ask] how do we lay out North Star metrics for each business to help people understand what they need to do to drive it forward. Whenever I’ve gone to any private company, I worked with them — and especially when I decided to join Kraken, especially in crypto — [to ask] how do you become more transparent? How do you build more trustworthiness?

Why did you decide to come into Kraken in an executive role? You’ve been on the board since 2021.

I had built long-standing relationships with Jesse [Powell] and Thanh [Luu], the co-founders. When you are in the trenches with folks during the high highs and the low lows — and I say really low lows [because that’s] what you’ve seen in the industry — you tend to build trust.

I had built previous companies and scaled them at pretty high velocity. And I think they looked at that and said, ‘Can you help us think through what we’re doing at Kraken beyond being just an exchange’. [Jesse said] ‘What we want to be able to do is double down and focus in the quantitative way that you’ve always run your organizations, the very transparent way in which you run your organizations, but also the very micromanaged way of running your organizations.’

Had you ever taken on a role like this before?

I had been acquired into [Lolapps, a social gaming company] around 2009. I was getting ready to leave, and then the CEO said, ‘can you take my role and I’ll take your role?’ It was a turnaround company, and I didn’t know what the word turnaround meant, so I read Lou Gerstner’s book about the turnaround for IBM. [Who Says Elephants Can’t Dance?]

What did you take from it?

I actually have index cards [with] lines that I took out of it. There was this line that he used that there’s a McKinsey way of understanding the business from bottom up and top down. And the people that you want to talk to are at the front line. I took that to the extreme. I basically went right from Ground Zero to understand what do our data analytics look like, what do we need to improve so we can just understand what our customers are doing, and then what products do we want to build on top of that?

Did you go through a similar exercise when you walked into Kraken?

I’m still doing it. I don’t think there’s a day where there isn’t something new that you’re going to be able to learn.

What is the particular management challenge for you here?

Whenever you come to an organization, you might have had your own style, and you need to figure out how to augment the style of what works at Kraken really well. A lot of people [say] you need to do a cultural shift, you need to do some sort of shock and awe. I don’t think that actually works very well, because you are throwing away the most innate talent at the company without understanding where they could be force multiplied.

I take that out and say, ‘What are the things that Kraken did really well? How do you make sure we can focus and double down on that, and cut everything else out that’s not additive to it?’

How do I go to every team and enrich them with the KPIs and operating metrics that matter for their business, and let them come up with their own interpretations of what they should be doing?

You’re not just talking to the executives. I think today I’ve got maybe 50-70 reports, and my assumption is by the end of the year, we’ll be like 100.

How does that not overwhelm you?

The traditional business books give you all of these artifacts around how to run an organization, from post-WWII all the way to the 1990s. [But since then] you’ve got this new generational shift of workflow, with different tools. We’re talking about agentic AI workflows. Well, I have six or seven bots that I’ve trained myself through all these systems to see what’s going on, and how I can communicate with people at a higher speed. If I’m able to digest raw information from my teams as quickly as possible, then we should be able to make decisions all the way down at the fastest speed possible too.

What information are you getting from what these bots are crunching?

I need to know as much primary information as possible, so I have a bunch of these nodes just continuing to research stuff. It could be GitHub transactions. It could be, in the crypto space, what are all the open source projects that are starting to pop up? Then [the bots are] pulling that in, together with my email workflow and all my Slack workflow for every organization. There’s no way I can read 6,000 messages per day, but I can get a recap as quickly as possible on the things that I care about, to make sure I have an understanding, and then go directly to the team to say, ‘Okay, let’s talk [about] this’.

Co-CEO arrangements don’t always end well. How have you and Dave Ripley organized things to anticipate potential pitfalls and avoid them?

Dave and I both came up with the concept, which is, ‘Here’s a set of things that I know how to do really well. Here’s a set that you know how to do really well. Here’s where we’re both weak. Let’s figure those pieces out, and let’s make sure we can have those conversations around what the division of labor may or may not look like.’

We’re both in the loop on all comms between all of the 50 to 70 reports that we have. They all report to both of us, and then between us, whoever jumps in, not the fastest, but the one who has the most context will. Then we’re both communicating on a daily basis to say, ‘these are the things that I made a decision on.’ We’ve moved at an increasingly high speed because we’re doing it that way.

How do you build a platform like Kraken to be ready for the pace of growth you’re anticipating?

You’re never going to be ready for hypergrowth. That’s the whole definition of it. I think what you always want to be ready for, and what you’re always continuing to build for, is compounding growth rates. It might sound the same, but if you’re trying to grow 3% week over week, you’re growing 5x at the end of the year.

So there’s a number that might sound small on a week to week basis, but it’s huge at the end of the year. That’s how we think about each metric, from volume to our revenue. Building out your foundation for compounding growth sets you up for high growth whenever it shows up in those markets.