The biggest startup exit by an Egyptian — ever?

Hany Rashwan didn’t set out to build a a global crypto powerhouse — he just wanted to make his mom’s life a little bit easier. Along the way, he pulled off what we think is the largest exit by an Egyptian startup founder — ever — selling his crypto startup 21Shares, the first and largest crypto ETF issuer in the world, to FalconX, the leading prime brokerage for digital asset in a transaction made public late last month.

Hany won’t say how much the transaction was worth, but a source with first-hand knowledge tells us it’s a bit north of USD 1.2 bn.

From an idea designed to make life easier for two moms (Hany’s and his co-founder’s), 21Shares today has c. USD 12 bn in assets under management across more than 50 exchange-traded products and funds listed on stock markets in the United States, UK, Switzerland, Australia, Austria, Brazil, France, Germany, Sweden, and the UAE, among others.

We caught up with Hany between flights to unpack how he built the business, why it was the right time to exit, what’s next, and how being an Egyptian was one of the superpowers that let him build what he did. Edited excerpts from our conversation:

ENTERPRISE: What is 21Shares? What does it do?

HANY RASHWAN: 21Shares makes it easy to invest in crypto — without having to deal with or touch crypto. Normally, if you want to buy BTC or ETH, you’d need to open a crypto wallet, manage private keys, or use crypto exchanges. Instead, 21Shares packages each crypto asset into a traditional financial product — think of it like a stock or an exchange-traded fund — that anyone can buy using their regular bank or brokerage account the same way they would if they were buying Apple or Nvidia shares.

E: Let’s go back to the beginning. Why crypto in the first place? Take us back to that moment.

HR: I moved to San Francisco to do my first startup when I was 20 years old. It was a payments company, so I found myself in the middle of fintech in Silicon Valley. That’s why and when I first heard about BTC, sometime around 2011. I remember getting c. USD 50 of BTC from someone I knew, not knowing what to do with them, seeing the USD 50 become USD 15, and subsequently losing the whole flashdrive. It just really wasn’t that important back then.

E: That’s real money in today’s terms…

HR: The USD 50 was 3 BTC, which were then priced at around USD 15 each, but today would be valued at USD 110k — meaning my flippant attitude back then prevented me from seeing USD 50 go up 23,000x to more than USD 350k within 15 years…

None of this is unique. Everyone has dismissed crypto or BTC at some point. Some still today.

I sold my startup, Payout, in 2016 and started thinking about what to do next. I wanted to stay in fintech and was exploring a few ideas in that domain, but crypto’s promise was unlike anything else. Though nascent at the time, it promised something that none of the other fintech ideas did: an instantaneously global offering. Fintech is so regulated and complex that you often as a startup become siloed to one country or one region. Crypto, on the other hand, was always-on and global from day one.

I believed in that bullish crypto vision and still do today, though it’s much more refined today. Ironically, though, I never intended to build a company in this space at all. That part happened almost by accident.

E: What was the original thesis for 21Shares, or Amun as it was known when you started. What was white space in the crypto market you were trying to fill? What made you say, “Yeah, a crypto asset management business — that’s the ticket.”

HR: Oh, the thesis back then was so simple: We weren’t even trying to build 21Shares at the beginning. A good friend of mine and I had the same problem. Various members of our families, including our mothers, had by 2017 heard about and were interested in investing in BTC and ETH, but they couldn’t find simple products they understood and they were deeply uncomfortable with crypto exchanges or handling their own keys and custody. All we were looking for at the beginning was a product for them to use.

We ran into some really terrible products that, unfortunately, a lot of people were forced to use, and we then asked ourselves, ‘How hard could this possibly be to build?’ Turns out it was pretty damn difficult. That good friend of mine was Ophelia [Snyder], who became my co-founder and built 21Shares with me from scratch.

It took us about a year and a half to find a jurisdiction that wanted us and that made sense. We eventually found our perfect home in Switzerland and launched the world’s first physically-backed crypto exchange-traded product in November 2018. My Egyptian mother and Ophelia’s Italian mother were very happy.

But even back then, we didn’t really comprehend how big the opportunity would turn out to be. The first product we built was a basket composed of the top five crypto assets. Our customers then asked for a single-asset ETF, like a BTC ETF or an ETH ETF. So those were our next five products and we grew quite slowly, slowly for a couple of years before then riding the crypto wave up to bns of USD in AUM from dozens of products across dozens of geographies serving mns of customers.

In retrospect, 21Shares was much harder than we thought, took much longer than we wanted, and turned out to be much larger than we imagined.

E: You mentioned to me that the company was founder-majority controlled and profitable for seven of its eight years. How did you pull that off in a frothy climate?

HR: We pulled that off because of the climate, not in spite of it.

Our company and our products were written off by most experts, both crypto bulls and crypto bears. While the company’s products may seem obvious today with how popular BTC (and other crypto) ETFs are today, the entire crypto asset class was dismissed by most back when we started. To make matters worse, native crypto users thought back then that ETFs were completely counter to the decentralized philosophy, not appreciating the central role ETFs would take in bringing institutional and retail money into the space.

So when we launched, we were a little ahead of our time and the company at the beginning was a little of a slow burn. Switzerland has a more nascent tech startup scene and American Silicon Valley VCs aren’t really known for investing much outside of the Valley — let alone America.

As a result of all of that, very few investors were willing to give us money at the beginning, which is the stage where most of the dilution and board seats happen. By the time they caught up to the fact that this would be a great investment, the company was already doing nine-figures in revenues, worth too much, and was too large for most of these seed investors to invest in.

That’s how we managed to maintain control for so long. We were forced to be profitable to survive. But because we were profitable, we as a company thrived with vision as founders firmly in control of the company’s direction.

E: Did you learn anything from your previous businesses that was key to your success building 21Shares?

HR: I learned something from each product company I built and I have built three such companies so far.

With my first company, I learned the importance of the co-founding partner you have. It’s not enough to be excellent at what you each do. Given that even semi-successful startups take close to 10 years to get to that stage, who you do it with is of paramount importance. You and your co-founders must work well together and that often means things like shared values and frameworks. My 21Shares co-founder and I couldn’t be more different as people, but when it comes to values and the important stuff, I can’t remember us ever having a disagreement. That support and lack of infighting allowed us to build a crypto giant without the internal distractions a lot of startups sometimes have.

With my second company, I learned the importance of markets. Not even a great founder could succeed if the market is bad. A terrible founder can get lucky sometimes if the market is massive or euphoric or very fast growing, and we’ve seen some examples of this in every bubble from AI to crypto. The most powerful position is to grab a lot of market share in a market that’s overlooked because it’s so small but has rapidly compounding growth. That leads to the kind of success 21Shares had, starting contrarian enough that no one notices but then seeing both the products and market size exponentially improve.

With 21Shares, I saw first hand the magic of owning good distribution. Once we had a good product and great distribution, we were able to grow at a rate neither old or new competitors could catch-up with and it’s part of what led to such a great outcome in the end. There’s an adage that first-time founders fixate on product and second-time founders fixate on distribution. I’ve personally found that to be quite true.

E: Why Switzerland?

We did our homework. When we were looking to build a BTC ETF in 2017, we investigated or spoke with 27 different jurisdictions around the world. Switzerland was by far our number one choice and in the end one of the very few countries that would allow us to list such a product in 2017.

Our thesis was simple. The massive markets like the UK or the USA would take ages and a lot of pressure before allowing in crypto products. By the time the world’s largest markets like America open, we will have existed for years and accumulated bns of USD in AUM. Since most tech startups are in places like America or London and those founders tend to focus on their home jurisdictions, it would also mean that we would have a lot less competition since no one would be willing to do what we did in moving to Switzerland, learning German, and a new system just to create this product. (Ironically, after just two years after our launch, the first of many competitors who previously scoffed at our strategic choices then followed us directly to Switzerland, uncreatively copying our product.)

That’s a big part of why we consistently beat both new competition as well as entrenched traditional and established players. Switzerland was key to all of that and the welcome I received from that country is something I’ll never forget. It was a perfect place that gave us support and credibility and allowed our seed of an idea both protection and ground to grow. It was a very unique matchup, as Switzerland was working to be “Crypto Nation” and we were looking for a very highly-regarded host.

E: When did you know, “We’ve arrived” or “We’ve made it”?

HR: Oh, I hate that. Made it? Made what? That kind of mentality is around when people start losing and is often the start of a downhill trajectory. We haven’t made it at all and can be defeated very quickly if we become comfortable or complacent.

There’s a deeper point here. I spent the last 15 years of my life doing tech startups and this is one of the most powerful lenses I’ve viewed the world with. Startups are tough emotional and physical rollercoasters. The way I have survived and thrived is by learning to fall in love with the journey, not the destination. That has made me very process-driven instead of outcome-driven.

Building a company is a little like asking someone to go on a walking journey of 1k km. Thinking about the goal is going to be too distracting — and unhelpful. 1k kilometers aren’t walked by thinking about the distance — only by taking each day’s steps, getting 15-40 km in, resting, and beginning again. Tenacity is the key to startup success and rollercoaster management is an incredibly important prevention of burnout.

Falling in love with the process solved all that for me. I’ve worked on 21Shares for about 3k days of my life. The worst of those days was just one day. The best of those days was just one day. And the day we sold was just one day in eight years. Most of the 3k days were journeying. Learn to love that. It’s always day one.

E: Was there a point at which you knew the business had traction?

HR: I warmly remember the reaction to the word “21Shares” in conversations or sales pitches going from “What?” to “I’ve heard of it,” or my favorite “Oh, I bought your products.” That happened slowly, slowly — then all at once in Europe especially, as well as the USA.

E: The question of when and how to exit is often driven by investors, not founders. But you control and were the majority shareholders, so you led the decision, right? Why exit and why now?

HR: It was a complex decision. We grew the company from zero to USD 10 bn in AUM. That’s extraordinary, but clearly the mission isn’t to stop at USD 10 bn. We believe in crypto’s future and our own company’s capabilities, so what’s USD 50 bn or USD 100 bn in AUM? While certainly possible (arguably even probable), it is a different game from when we were at USD 1 or USD 5 bn.

I wasn’t really dying to be an asset manager courting institutional clients all day — and even today remain much more excited about tech than finance. So that was the first big decision, trying to replace my co-founder and I with a competent leadership suite that could take the company to the next level.

Once we stepped back from our daily operational roles and the company started institutionalizing, we then started to think about whether our large ownership stakes in the company were a hindrance and if there was an alternative cap table that could take the company and run with it better at this stage. A situation where the joining of two firms could lead to an outcome where 1+1 equals more than 2.

E: What were the main negotiation levers from your side (majority-shareholder leverage, profitable track record, product pipeline) and from FalconX’s side (access to institutional infrastructure, distribution, etc.)?

HR: The main negotiation lever from our side was that we didn’t need to sell. As a profitable company, our runway was forever and there wasn’t pressure to pursue an acquisition. This allowed us ample time to assess all the interested parties and figure out who would make not just the right acquirer, but the right steward for the company we built.

FalconX has a much much larger institutional footprint than we do and that’s clearly where 21Shares and the wider crypto market is headed next. So the combination of our product building capabilities and their capital markets leadership will lead to a much stronger combined entity.

E: Can you give me colour on a “turning point” moment in talks? When and how did you know the transaction was going to happen?

HR: This will sound strange, but it was around the more difficult or argumentative moments in the process. Sales processes always have a variety of moments, positive and negative. And it was when we were working through disagreements together that I really could see us working together for a long time.

In how they were thinking about company building and values, they reminded me a lot of us and that made it much easier to pick them as the right steward for our company in the end.

E: What’s the combined business about? What does that look like in practice? You bring the asset management and retail side and product expertise; they bring the trading infrastructure. How is the combined business positioned?

HR: That’s it. We now have a true one-stop shop for crypto access. 21Shares brings exceptional product capabilities and retail distribution. FalconX is one of the leaders in crypto on the trading infrastructure side as well as on institutional distribution.

So we will continue offering breadth and depth, combining FalconX’s deep liquidity with our product platform. The two firms coming together will result in building better, faster, and cheaper products for our mns of customers.

E: Why was this the right transaction? Why was FalconX the right buyer for the 21Shares business?

HR: This was the right deal to me primarily because of two things. First, the shared values and similar cultures that the companies had would make working and growing together far easier. Second, that working together — given the very different things each firm brings to the table at scale — is going to hopefully lead to an outcome where 1+1 = 5.

E: What does the transaction say about the maturity of the crypto industry?

HR: It says a lot. Crypto is too big to ignore and isn’t going away. The fact that companies like ours can grow revenues in such a way is testament to how large crypto, our underlying market, has gotten. This transaction also shows the trend of institutionalization in crypto, as regulatory clarity comes in and products like ours offer investors various access points to crypto.

Similar to any other new and disruptive technology, like the Internet or phone lines, crypto will be ubiquitous in time. It hasn’t even achieved 10% of what it could. So what we are going to witness over the next 10 or 20 years is crypto touching more parts of the ecosystem and you can expect FalconX and 21Shares to shape the next chapter of this crypto innovation.

E: You’re now the third-largest shareholder of FalconX. What is your new day-to-day role in terms of time / involvement? Will you serve on the board?

HR: I am not planning on being involved on a day-to-day basis at FalconX, similar to how I was not involved in the day-to-day at 21Shares since the start of this year. The combined business is of huge importance to me and I will continue to be a resource for the leadership whenever they need me. We don’t plan to be highly active shareholders, nor is that our style.

E: You were born in Egypt, built your first tech ventures in the US, and then built a crypto giant in Switzerland. How did that “inarguably Egyptian” but “expat” background influence how you went about building a global, regulated financial company?

HR: It’s funny. The one inarguable truth that anyone who meets me gets is that I’m Egyptian and a very proud and patriotic one at that. I am often made fun of for inserting Egypt into every conversation I can.

It dawned on me a few years ago that I thought differently about company strategy than many of my peer competitors. While my approach has positive and negative attributes, I believe now that my upbringing and Egyptianess is precisely why I think in the unique (and strange) way that I do and end up building the kinds of companies I am interested in.

Let me explain. I’ve always felt like an outsider looking in — Egyptian in the West, Arab in America, “American” in Switzerland, or a techie smack dab in the middle of very traditional finance. I see and understand and naturally build systems and interconnections. I have a very ‘big picture’ orientation. And I think that comes in large part from my expat upbringing, pressuring me to spend extra time observing and thinking about my constantly changing new environments. That’s part of why we could see crypto through a regulatory lens early and effectively build bridges to connect between worlds when no one else saw how building a crypto ETF in Switzerland would lead to the US and Australia and so on.

My Egyptianness comes out in very interesting and obvious ways to anyone paying attention, two of which are especially notable. One of my unique inclinations is around long-term thinking, which I find a lot easier than the short-term. That’s Egypt. Growing up, I always had a different sense of time than those I was surrounded by in the West. Egypt gives you a certain sense of endurance — of wanting to build something that lasts beyond yourself. We grow up in Egypt surrounded by the works of thousands of people who did just that throughout our long and glorious history. Egypt forces you to think in centuries and millennia, not quarters, and I’ve often wondered if that’s where I got my obsession with long-term thinking.

The other quality I have that I think must trace back to Egypt is a general sense and comfort with creativity and improvisation. We even have an Egyptian Arabic word for it: fahlawa. That street-smart improvisation of finding clever, often playful ways to get things done (with charm and a smile) when the system doesn’t work as it should. We consistently spend our time turning obstacles into puzzles — and then solving them. Egyptian fahlawa, directed at startups, I think is one of the most potent advantageous and highly unique skills for entrepreneurship, an area I feel we are naturally born to be successful in and something more of us should end up doing.

In America, everything is possible, no one is crazy, and you are able to manifest some outrageous things into existence. That’s where I got my ambition. In Switzerland, I understood the importance of credibility, precision, and trust. The US and Switzerland are global leaders at those specific traits and I have been lucky to learn and experience that thinking directly from them.

So I think both I and my companies so far have been a mixture of Egyptian ingenuity, American ambition, and Swiss discipline.

E: What’s next for you?

HR: First, a nap. I’ve been doing nothing but startups for 15 years and need to catch up on a lot of things, including sleep.

I am fascinated by AI, crypto, and energy — and the intersections they will have moving forward, so this is a huge area of interest for me.

Now that I’m done with the company, I also plan on spending a lot more time in Egypt and I look forward to exploring what I can do here, both commercially and charitably. Egypt is the only place in the world I truly feel at home in, so I can’t wait to have ample time to explore the country and her industries further in ways I haven’t been able to before.