What We Discuss With Tal Zackon
The theme of this episode is tracking DeFi transactions, and providing the CFO managing their crypto treasury with how to generate a historical report of their DeFi positions, with their realized & unrealized gains/losses, interest income & losses & rewards earned.
If you’re not using a dedicated crypto tool, and having to manually retrieve the data from inspection tools, like block explorers, the monthly/annual reporting and cash flow forecasting can be very time-consuming.
On episode 50, I spoke with Tal Zackon, the Co-Founder & CEO of Tres Finance.
Tres Finance is more than a crypto sub-ledger. Their unique financial data lake architecture expands beyond crypto for TradFi as well.
In short, Tres Finance provides you with a one-source truth to track and consolidate your DeFi and TradFi transactions simultaneously, and stay compliant for your accounting and audit.
- Episode intro (00:40)
- Story of Tal co-founding Tres (2:20)
- Challenges tracking on-chain transactions (8:27)
- What is Tres Finance (10:59)
- What is a financial data lake (15:02)
- Sub ledgers v/s financial data lake (18:16)
- Onboarding with Tres (19:13)
- Thank you to our sponsor Convoy Finance (20:54)
- Capturing onchain & offchain transactions with Tres Link (22:30)
- Use cases of clients using Tres (23:30)
- Automation practices & labeling (27:38)
- Integration with Xero, Quickbooks, Oracle Netsuite (29:27)
- Reconciliation with ERP integration (32:06)
- How Tres compares to its competitors – Bitwave, Cryptio, Cryptoworth (33:05)
- Banking integrations – Plaid (36:54)
- Thank you to our sponsor Web3CFO Club (37:53)
- Pricing with Tres (39:36)
- Certification program for accounting & audit firms (44:11)
- Roadmap and upcoming milestones (46:28)
- Challenges for adoption (48:57)
- Closing thoughts (50:15)
- How to reach out to Tal (51:43)
[00:00:00] Umar: Welcome to the Accountant Quits, brought to you by the Web3CFO Club, a community of web3 CFOs, sharing best practices on web3 operations and Convoy Financial, a crypto accounting firm specializing to provide digital assets bookkeeping, and tax support.
[00:00:17] Umar: On this podcast, we discuss how blockchain will impact the accounting profession and how accountants should prepare themselves for the future of work.
[00:00:26] Umar: My name is Umar, your host, and even if some might refer to me as the accountant gone rogue, my job is to provide you with blockchain knowledge you need that will be relevant for the accounting industry as a whole.
[00:00:39] Umar: Welcome to Episode 50. The theme of this episode today is tracking DeFi transactions, and I’d like to provide the CFO managing their crypto treasury with how to generate a historical report of their DeFi positions with their realized and unrealized gains and losses, interest income, and losses and rewards earned.
[00:00:58] Umar: If you’re not using a dedicated crypto tool and having to manually retrieve the data from inspection tools like block explorers, the monthly and annual reporting and cashflow forecasting can be very time consuming.
[00:01:11] Umar: Today I have the pleasure to be speaking with Tal Zackon, the Co-founder and CEO of Tres finance.
[00:01:18] Umar: Tres Finance is more than a crypto sub-ledger. Their unique financial data lake architecture expands beyond crypto for TradFi as well. In short, Tres Finance provides you with the one source truth to track and consolidate your DeFi and TradFi transactions simultaneously and stay compliant for your accounting and audit.
[00:01:38] Umar: In this episode today, you will learn what are the challenges tracking DeFi transactions, how Tres Finance’s financial data lake facilitates DeFi accounting and reporting, automation practices for recurring DeFi transactions, examples of project using Tres Finance, how Tres is upskilling accountants with a certification program and much more.
[00:02:01] Umar: Tal, welcome and thanks for making time to be here. It’s good to see you after ETHcc in Paris.
[00:02:08] Tal: Yes, great to be here. Thank you.
[00:02:10] Umar: To start, can you share a bit about your background, how you first became interested with blockchain and the story that led you to co-founding Tres Finance?
[00:02:20] Tal: Yeah, for sure. So the story of Tres Finance is, is actually really interesting.
[00:02:25] Tal: I was a VC before starting Tres, venture capitalist, investing in early stage companies, mainly seed stage. And we’ve been investing as generalists, so like cybersecurity, FinTech, InsureTech, DevOps, you name it.
[00:02:44] Tal: And then in 2018, a friend of mine who I regard as like one of the smartest people I know. I was tracking what he was up to and I said that if this guy ever leaves, I think he was working at Facebook. Something like that. No, it was a hackathon. Anyway he was one of the smartest engineers I knew. And I said, if this guy leaves this company and opens a startup, I’ll be the first one to knock on on his door and offer him a capital investing.
[00:03:09] Tal: And eventually, that happened in 2018 and they co-founded for this partner company called Porters was, which was supposed to be like the Metamask slayer as it was the Founder at the time. And I kind of fell in love with the whole concept of digital assets. Move on the blockchain, decentralized. And I started digging into that and that was like our first investment at the fund in the blockchain ecosystem.
[00:03:37] Tal: And then from there we had the winter and I kind of took my step off the gas, and then with the whole rebranding to web3 and NFTs kicking in, caught my interest again and we started investing more and more in the space. At the time, I started to see what kind of challenges, Founders, kind of, , interact with when they need to go through accounting and audit and even reporting to us as their investors.
[00:04:01] Tal: At the same time, my Co-founder, Eilon, we know each other from the Army. He was a CTO and Co-founder of a Cybersecurity company, and on his spare time, he was participating in, IDO, crypto projects as a hobby I would say.
[00:04:19] Tal: And then, there was like this peak around end of 21 when we kind of, discussed working together and we started talking about what are the pains in the web3 digital asset crypto space. And we said, okay, we are really good at data. We are really good at infrastructure, enterprise grade products.
[00:04:39] Tal: What is out there that we can actually kind of start working on. And everyone was like, you should talk to the CFO, the Finance, the OPS teams. They’re going through hell, it’s like spreadsheets and all over the place, and these are, you have more chains and NFTs and DeFi, and it became a huge pain for them internally. We started looking into that and as we started looking into that domain, we said, okay, at the end of the day, what is an accountant?
[00:05:09] Tal: Okay. An accountant is actually a data scientist, if you think about it. They’re the first data scientists in the world are accountants. They just, they get the glory of having the title data scientist. They’re data scientists and they need to crunch the data and they need to get the bottom line conclusions for different use cases, right?
[00:05:25] Tal: So at the end of the day, accounting is a combination of, science, right. Data science but it also has an aspect of art. Of like how you wanna manipulate the data to kind of make sense or kind of shift it towards what you want it to be at the end of the day. And talking to more accountants and to more finance teams and ops teams when, so this is a really interesting problem that we are in terms of as VC, I can say founder market fit was great.
[00:05:52] Tal: Okay. We thought that we are the right people to go and solve that problem. Unlike, like sometimes you say an accountant should solve problems for other accounting teams or finance person, I’m like, no, actually bring someone that’s outside of the space. And it’s like more of data products, startups oriented.
[00:06:08] Tal: Send them to kind of discover and think out of the box in terms of how you wanna solve the problem is a better idea.
[00:06:19] Tal: Looking at other teams and at other products in the space, and we saw they’re very accounting oriented, very application oriented. And end of the day, the problem we’re trying to solve is not an application problem.
[00:06:29] Tal: It’s a data problem, it’s an infrastructure problem. The application will only come afterwards, okay. So that until this date, that is the way we run the company. That is one of our core values and that is our main competitive advantage. And I’m gonna talk about the product in a second. And what we actually are, because we discuss subledger, accounting platform, what are we, what is Tres Finance? So we can go into that in a second, but that’s kind of the story of how we came to build Tres.
[00:06:55] Umar: Yeah. So before we dive into Tres Finance, I want to speak a bit about the challenges tracking DeFi transactions. So that’s the theme of the episode today, and I want to give perhaps the new web3 CFO an idea of the challenges, how to reconcile the DeFi positions, their realized and unrealized gains and losses, interest income and losses on different chains basically.
[00:07:20] Umar: Let’s take an example where the CFO would allocate their treasury to different liquidity pools and use the LP token received for yield farming to generate additional returns. Now, I have an example laid out in front of me where I’d have to farm the CRV token on the Curve protocol using DAI. Let’s say I’d have to, I’d first start with depositing DAI to the Curve’s liquidity pool.
[00:07:44] Umar: I’d received the LP tokens in return. Which would be cDAI, then I would take the LP tokens received and deposit that in the Curve staking pool, and in return receive the CRV token. There’s a lot going on here. So in this scenario, yeah, the DAI would earn interest and fees in Curve’s liquidity pool, and at the same time, the LP token from the liquidity pool earns CRV tokens as reward.
[00:08:07] Umar: So the CFO, he basically has to be able to track all the interest expense, and interest income from all these different positions. And that’s just one DeFi protocol, right? My question is, what’s the challenge in tracking all these transactions in order to book these entries for their financials at the end of the day?
[00:08:26] Tal: So I’m gonna try and answer this in a simple way, ’cause you can go like really deep in the technicalities, but if anyone is listening to this podcast and has that problem, feel free to reach out and I’ll show you how we can solve this. First look, look at this, like the, the macro. Okay. As a CFO or Head of Finance in a company that’s engaged with DeFi, you’ll have several financial endpoints that will create a financial parameter..
[00:08:54] Tal: One of those endpoints will be a DeFi position, as you just described. Okay. That defi position or that endpoint was created by a series of transactions. Okay. So the first step is thinking about it from the high level. Okay. What is the hierarchy? What is the timeline of how this position was created?
[00:09:13] Tal: Where did the assets start? How did they move between different endpoints and where did they finish?
[00:09:23] Tal: And now that the position is not dynamic anymore, it’s passive right, it’s standing.There are still actions happening, right? It’s generating rewards. It’s generating yield, and that you can now claim or it’s being pushed directly into your wallet. Okay, so let’s map out, let’s put out the tree and understand what is, how do we create the position. Now the position is stable. What are the other transactions that are happening and this sort of comfort, okay?
[00:09:44] Tal: So what we do at Tres is inside the platform, we’ll already show you that hierarchy and we’ll show you what are the claimable that are being generated the whole time. And every given moment, you’ll be able to see the value.
[00:09:55] Tal: Also of those rewards of the yield at every time that you need to go and claim them and also of the core position..
[00:10:02] Tal: And then you can start unfolding backwards, only when you need to dissolve the position itself, right? Because you pushing assets into a certain position, it’s now sitting at a certain endpoint. Let’s look at now these transactions that are flowing into your wallet accounting for them one by one. Okay? So the rewards, I mean, we can look at a different ways.
[00:10:20] Tal: The last IRS ruling was that you have to account for it as yield, as income. And you need to care take of those, and only after you’ve decided to kind of dissolve the transaction,
[00:10:33] Tal: I would say liquidate the position. Go back to the underlying assets and claim them back. Then the whole part of the impermanent loss kicks in. And how do you actually account for the core part of the position and the rest of it. So to summarize, understand the flow to the position, the stable position what’s generating, once you decide to dissolve the position, how you fold it back to the underlying assets.
[00:10:59] Umar: So we’ve discussed about these complexities of aggregating on chain data from different block explorers. Can you tell us how Tres Finance today is facilitating converting those DeFi transactions into an accounting grade data that can be reported then into the financials?
[00:11:15] Tal: For sure. So every transaction that happens on chain, off chain also, right?
[00:11:20] Tal: If you are saving through different CeFi platforms or other accounts, we’ll also see that. But essentially we’ll be able to track your position because everything will be registered on the blockchain. Okay? So we, once you create a transaction and let’s say you deposit into liquidity pool, our algorithm knows how to cluster and give context to the transaction.
[00:11:38] Tal: So automatically, we will label those transactions as deposit into a liquidity pool, and we will show that the assets that you receive back, okay, that LP token you receive back has the same value of assets you pushed in. It means you’re reconciled 1 to 1, it’s done automatically. Okay. Then the LP token is sitting inside your wallet. It belongs to you. Now you wanna start moving it. Okay, so now you’re gonna stake it, you will see deposit into staking, which will also be automatically picked by Tres, another line
[00:12:08] Tal: Okay, that movement. Or be an outflow that that we’ll see. Okay. But in order to make sure that you aren’t kind of creating a loss on that transaction, we’ll automatically create a virtual transaction back to your wallet, kind of a internal transfer so it doesn’t mess up your tax slots. And the way you run your inventory, if you running FIFO or if you’re running the LIFO, HIFO, weighted average, whatever.
[00:12:33] Tal: Then you’ll start claiming rewards. Okay? Those rewards will be tracked again into your wallet. We’ll be able to see every time you claim a transaction. Now, also here, it’s a bit tricky, right? Because sometimes, and I’m not talking about the position I just described. Let’s say you’re involved in native staking and you have this kind of streaming of rewards into your wallet.
[00:12:50] Tal: Right now, these micro transactions kicking in, you might have hundreds of those a day. Okay. That will kind of create a lot of noise in your ledger, and if you are pushing that data into some kind of ERP system, it’ll clog the whole integration. Okay. What we do in Tres is we recognize when there is a same transaction happen hundreds of times a day, or thousands of times a week or a month, we’ll be able to create a rollout.
[00:13:13] Tal: Okay? So we’ll aggregate all those transactions into one transaction, aggregate the sum of fair value, and push that as one line into the ERP, and also appear as one line under Tres. Okay, so besides recognizing the transactions automatically and giving it that context. Because we have that data, we’ll also be able to give it the financial context, and understand when we should
[00:13:35] Tal: attribute a gain or loss a transaction or when we should kind of manipulate the blockchain and the Tres account to consider as an internal transfer so it’ll maintain its place in the inventory, and if it’s a different position that creates many transactions on a daily or monthly basis, we’ll be able to roll those up and make things much easier for you.
[00:13:54] Tal: Today we have very interesting customers working on our platform and the amount of DeFi data is streaming through our product is pretty amazing. Our financial data lake knows how to catch any protocol on any chain, okay? We have the most robust coverage today when it comes to DeFi and check and understand what’s happening in each and every transaction.
[00:14:14] Tal: So I can assure you that I’ll just give example. We have a fund that we’ve been working with. We’ve been able to help them reconcile an account for all their DeFi data from 2020. Okay. Because we know how to recognize the transactions so well and give them the context and give them the fiat value that is needed and know how to manipulate the transactions to make sure the cost basis is correct.
[00:14:38] Tal: And today they, they’re able, I think now as we speak, we just closed one more report for them, and they were able to close 2020 data given that it was a long time ago.
[00:14:48] Umar: I see Tres Finance using this term quite often, a financial data lake. For the non-technical CFOs out there, could you explain what a financial data lake means in the context of tracking DeFi and CeFi transactions?
[00:15:02] Tal: Yes, for sure. With pleasure. So if you think about the stack of an organization that is interacting with digital assets, okay, it could be a crypto native company or it could be a company like PayPal, right? That just announced that they have their own stablecoin that is also interacting with digital assets.
[00:15:19] Tal: The core of the stack. Okay. The bottom piece of the pyramid, for example, is the wallet. Okay? It could be a self custody or you can use a custodian or an exchange, or I would say any endpoint that you use to store value.
[00:15:33] Tal: That’s what we call financial endpoint. All those financial endpoints, create a financial parameter. Okay, so as a CFO, I know what my financial parameter looks like. I have bank accounts, I have wallet, I have exchanges, and I have a bunch of endpoints and they interact within the financial parameter. And those are regarded as internal transfers.
[00:15:52] Tal: Anytime they interact outside of the financial parameter, which is with third parties, okay, I’m sending money to a team member or to a vendor, or I’m moving assets into a smart contract DeFi, for example. All those will be also caught by Tres, okay? So all the internal transfers and all the external transfers, third parties will be captured by Tres.
[00:16:11] Tal: So we talked about the financial parameter, and then at the end of the pyramid any organization has to be compliant, right? They have to account for the transactions. They have to hand in reports. They have to make sure they are audited. They have to maintain a healthy state of business. To mitigate the gap between the, the tip of the pyramid and the financial parameter. You need a product that’s called FDL, okay a financial data lake.
[00:16:37] Tal: The financial data lake essentially, as I said earlier, will sit kind of like in cybersecurity, like a firewall around your financial parameter, and every transaction inside and outside will be captured. Okay. When it means it’ll be captured, it means that it’ll be tracked. It’ll be analyzed. Okay? You’ll be able to see the metadata and the financial data will bring in all the data. Okay? That’s data in coming from all the wallets and all the exchanges and the bank accounts also.
[00:17:05] Tal: Inside the financial data lake, and I’m saying financial, because you need to index the data. You need to format it and you need to start the financial enrichment.
[00:17:13] Tal: The fiat value, the cost basis, the realize and realized gains. Okay. Sometimes we also add I’ll say security and risk enrichment. Okay. Labeling transactions as spam tokens or scams. Right. That’s something that today we do at Tres as part of the financial data lake using machine learning models. Once we have the organization’s financial data lake ready, now we can streamline the data out to the Tres product, okay the application itself.
[00:17:38] Tal: To an ERP through the application. I mean, NetSuite, QuickBooks there, whatever you use to using the API to whatever kind of database the customer wants and what they wanna do with it, or to predefined databases like Snowflake, Tableau, whatever they wanna use in order to visualize that.
[00:17:55] Tal: So essentially, when a CFO team and financing and ops team thinks about operational risk, financial risk, how to mitigate all that data coming in from all these sources. It is a must have to work with an FDL with the financial data lake. Okay? If you don’t have a data lake, it’ll be very difficult to financial data. Now you talk about subledgers, right?
[00:18:19] Tal: Subledgers are a very specific part of the data lake. Okay? It’ll show you all kinds of transactions, but as a finance person, I want to have the flexibility to manage much more than that. I need a bunch of different tools. I need to answer a bunch of different questions except for accounting, right? And to report to the board.
[00:18:39] Tal: I need to report to LPs sometimes. I need to build internal reports for analysis. I need to go through audit.
[00:18:45] Tal: I need to have all that data ready for any kind of use case that might come. A sub-ledger cannot answer that. An FDL is built exactly for that.
[00:18:55] Umar: I wanna go through onboarding a new client. Could you provide us with a walkthrough of how you onboard a client with Tres, and whether each project has to be onboarded on a case by case basis and the kind of time it requires for them to have all their transactions on the Tres Finance platform.
[00:19:13] Tal: Sure. So the onboarding to Tres is super easy, right? First of all, if you’re working on chain, we’ll need the wallet addresses no matter what network you are working on. Layer1, Layer2s, whatever you need, send it to us, we’ll be able to ingest the data into the data lake. Number two is we’ll need the API read only to any off-chain account.
[00:19:30] Tal: Could be a custodian, it could be an exchange, it could be an OTC, it could be any of those, okay.
[00:19:38] Tal: And if you want to integrate TradFi data, which is brand new. Okay? Tres link, you’ll be able to integrate your bank account data with balances and transactions. Why is that so interesting is because part of the, the financial data lake, you’ll be able to see your dollar to dollar conversion. That means money coming into your bank account from an investor, from revenue, from an LP, whatever.
[00:19:59] Tal: Then the on ramping, the whole movement inside the blockchain, whatever kind of operations or transactions you want to create and work on.
[00:20:10] Tal: And then going back off ramping into your bank account. So when we are able to show you the dollar to dollar cycle inside the financial data today, okay. And then into the application. So essentially we need that data from the customer. Then we go and ingest the data, you get the login and you can start working on the platform.
[00:20:25] Tal: And you also get API keys. You can pull the data wherever you want. So this also really depends on the size of the wallets, right? So if you send us 100 wallets, that’s great. Okay. We’ll be able to ingest all the data simultaneously. If there’s one wallet that’s like 5, 10 million transactions to date. Then everything will be loaded, and that one will take a bit more time.
[00:20:44] Tal: Okay. But essentially we can get a customer from the moment he starts working with us till the moment he gets value. Okay, time to value, as they say, less than 24 hours.
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[00:22:23] Umar: You mentioned Tres Link, so this is a new feature of Tres finance. What is it exactly and when are you going live with it?
[00:22:30] Tal: We released Tres Link two weeks ago, and the idea is to enable our customers to see a hybrid view of all their assets and all their transactions,
[00:22:41] Tal: If it’s digital asset transactions or if it’s fiat transactions. So not only streaming data from the on chain wallets and from the off-chain accounts, but also from TradFi financial endpoints like bank accounts. We do that integration to Plaid, okay. So our customers will be able to integrate also their bank account, and you’ll see a hybrid view of all your transactions and see a hundred percent dollar to dollar cycle.
[00:23:06] Tal: Okay, so from the bank account, or let’s say LPs or revenue or other investors sending money into your bank account, movement on chain, on ramping, creating transactions, working inside the digital assets sphere, off ramping, and then back to the bank account. And then from there, distribution or whatever you want, you’ll be able to see the whole cycle from dollar to dollar.
[00:23:28] Umar: Perfect. I wanna speak about some of the use cases with your clients. So your clients vary in their use cases. You work with Skale, a layer-2 scaling solution, Halborn, a security audit firm, P2P one of the industry leaders in non-custodial staking for enterprises. I wanna ask you perhaps if you could take an example of one of those and not necessarily mentioning any names, how did their financial stack, or how were they managing like all these DeFi transactions and not only Defi transactions before and how Tres finance made their lives easier now.
[00:24:06] Tal: Sure. So maybe, I mean, there are two examples I’d like to use. The first one is meeting a customer or potential lead that is working on spreadsheets. Okay. You might have a third party accounting service, and it was great until the point that he reached out and now the number of wallets scale, the number of transactions scaled and working manually and interacting with his accountant is just too much work.
[00:24:34] Tal: He’s investing too, too much resources if it’s time, if it’s downloading reports, if it’s more manpower and he needs to automate everything and also make sure that when time comes and he’ll need to account or audit past data, he’ll have the possibility to do so. Okay. That means he got to the point where he needs an FDL, financial data lake. That’s the simple example.
[00:24:57] Tal: Another example is customer using some kind of subledger. They are starting to see themselves creating more and more manual uploads . Okay, because the coverage just isn’t good enough, okay? Like they are being able to manage 50, 60, 70% of their assets on transactions on that other platform, but there’s another gap in the data.
[00:25:20] Tal: They think you keep uploading manually. And then you kind of miss the point, right? Because you wanna automate everything. You wanna make sure everything is tracked, because if not, you just go back to where you were at the beginning. Human error, more manual work, not optimizing your time.
[00:25:34] Tal: We offer a very aggressive SLA of a hundred percent coverage of all your assets no matter what you’re using. Okay? So if a customer comes to us, we’ll make sure he never works manually again.
[00:25:45] Tal: The third part okay is companies that are heavy into DeFi. Let’s take companies that are doing like staking as a service and I’m sure you know some of the names. We’re working with our top industry leaders today.
[00:25:56] Tal: All of them are working with the Tres financial data lake. The reason is we’re able to track also the validators and also the internal wallets and see the entire financial parameter of rewards coming in from these validators, and we help them also calculate their attribution . And how they will be distributing the rewards among their customers in terms of percentage and margins.
[00:26:19] Tal: It’s an amazing use case, by the way, and you know, that’s what I said earlier. We’re talking about the financial data lake and difference from that to a sub ledger.
[00:26:26] Tal: The fact you can do DeFi revenue analysis using the FDL is something you can’t do with any other tool. And that’s why all the market leaders or all the top companies in the space are working with us because we’re able to give them the flexibility to work on the data very easily instead of starting to cultivate that manually.
[00:26:43] Tal: And believe me, I’ve seen, I’ll tell you something. Our first design partner when we started was Celsius. Okay. It was amazing to see how things are, are being operated there. The amount of DeFi was mind blowing, the amount of money that was that was running there, the amount of assets and part of it wasn’t managed through an FDL.
[00:27:03] Tal: It was managed in some kind of spreadsheet and other tools. Okay. I think today it’s obvious. Okay. That part of your stack has to include a financial data lake, a centralized one source of truth, all your financial data, digital assets, and bank accounts and TradFi and any kind of end points we store value..
[00:27:24] Umar: Now when it comes to auto labeling and automation practices for the CFOs looking to automate the accounting of those recurring DeFi transactions, what are some of the automation practices that they can use inside of Tres?
[00:27:38] Tal: For sure. So we have two types of automations. The first automation is something, or it’s an automation that our customers can fit manually. Okay. So they go into the Tres product. And then there’s an automations tab. Then they’ll be able to create rules, okay? So they can say if this transaction moves to that wallet, or that function, or that kind of asset in this amount, whatever kind of features they want.
[00:28:00] Tal: Okay, they can choose the triggers and then they can choose the outcome. Which would be implemented if this occurs. Okay, that’s the first part. Okay.
[00:28:11] Tal: The second part is automated labels that we bring into the product automatically because we’ve seen so much data. We’ve built a machine learning learning model, and I have to say the whole open AI API has been really helpful for us because we aren’t using it from like super sophisticated transactions, but there are some transactions that we do understand that are recurring and pretty much look the same, and we’re using different models to autolabel those transactions.
[00:28:36] Tal: Like we had a customer the other day that we onboarded and we were like, okay, let’s have an onboarding session. Let’s go through your account. And we showed him that 80% of his transactions were labeled without him doing anything. Okay. It’s kind of mind blowing to be honest. Like think about it like once you had to like go one by one and like, oh, what happened here?
[00:28:55] Tal: Now you have the context, you have the fiat value, you have the realized gain and loss. You know what your is going to, you know, the label. So everything is already ready for you. Okay. It’s like, it’s amazing for finance and ops team to just like see every, all the data streamed into the financial data lake being processed and, and also enriched, and then from there you build your own rules and streamlines into reports or into your ERP system or other databases, whatever you need. So those are the two types of automations for labeling that we have inside the system.
[00:29:27] Umar: Moving on to the accounting integration. So today, Tres Finance integrates with the traditional accounting softwares like QuickBooks, Xero, Oracle NetSuite.
[00:29:37] Umar: Could you share how the integration works in terms of having to import the chart of accounts from these softwares like onto Tres?
[00:29:45] Tal: Yeah, I mean, it’s super easy, right? Inside the system. You click integrate, you, log in with your username and password, and we automatically pull in all the chart of accounts.
[00:29:54] Tal: Then you can build your default rules if you would like, you can build custom rules to the granularity of like four sections, right? So you can say if the transaction was labeled as salary, and the asset was USDC and the chain was Ethereum, and these wallets named Ben, Chris, Tom, who are the receivers, and then you’ll see the chart of accounts default expenses, salary or wages. Okay.
[00:30:20] Tal: And you can build whatever rule you want without granularity. The one cool thing that we’ve built that I haven’t seen anywhere else is the flexibility in changing or editing the transaction post the sync. Okay, so what is the, what is one of the biggest pains we’ve seen? A customer will go and he’ll sync his data into NetSuite, for example.
[00:30:40] Tal: Okay. Then he’ll go to to a transaction. He’ll be like, Hmm, you know what? I think this is the wrong chart of accounts. Then what does he need to do? He needs to go back into NetSuite, look for the transaction, edit it and remember to go back to Tres and edit it again.
[00:30:56] Tal: Okay. And sometimes like you have a bunch of users who’s editing what, how’s it moving? Can create chaos and then that creates a problem for the P&L, the reconciliation. I think you know how it continues from there, huge pain.
[00:31:08] Tal: What we’ve done in inside the platform is the ability to edit the transaction post-sync. Okay. Automatically the ERP icon will turn orange and then you’ll need to re-syncs the transaction.
[00:31:23] Tal: And when you do that, we on the backend will void the transaction, delete it from Netsuite and re-sync the transaction into the new edited chart of accounts so you don’t have to worry about jumping back and forth. You can only work on Tres.
[00:31:37] Umar: Wow. Super helpful.
[00:31:39] Tal: You know, it’s actually a wild moment. Sometimes I in the demo like, oh, this is actually great. It’s like, you know, sometimes have those small things they like. This is a game changer for me a bunch of times.
[00:31:49] Umar: A hundred percent because I mean, I’ve been doing accounting for like a number of years, so if you can take that manual work away cause you do have to reverse the transactions and usually like create another journal entry to like reverse it. So you’re taking that pain point away. Yeah. And basically saving time.
[00:32:05] Tal: I just wanna add one more thing about the NetSuite or the ERP integration. Another pain point that see is how do you know for sure that all the transactions from Tres was synced into the ERP. How can you trust that, that there was no bug, that like some transaction wasn’t able to sync? So we monitor that very carefully. So there’s always a dashboard that shows you synced, issue with the syncing, failed sync, whatever. But what is even more interesting is that inside our reporting system, you can create a pre-sync journal report and a post sync journal report.
[00:32:40] Tal: At any given moment, you can reconcile the transactions from Tres and with the ERP and understand if they match one to one. Okay, so it’s like another layer of confidence and enable our customers to kind of help themselves to, in order of, in order to gain confidence and make sure that transactions before the sync are labeled correctly and are going to the right chart of accounts.
[00:33:02] Tal: And after the sync, all transactions were pushed and the numbers are the same.
[00:33:05] Umar: Now there are many emerging crypto accounting solution providers and it’s already a very competitive market. How does Tres Finance differentiate from its competitors? The likes of Cryptio, Bitwave, Cryptoworth, Integral, and many more coming up now.
[00:33:22] Tal: For sure. Great question. I think that all the companies you mentioned are great companies doing a really good work in helping to bridge the gap of the accounting for companies in the crypto space. Okay. Which is a huge problem. And I’m happy that we’re able, like as a CFO or an accountant has the ability today to check a few products and understand which one makes the most sense for them.
[00:33:48] Tal: I don’t see Tres as part of that pack. Okay. And I think we discussed this a bit earlier, but the fact is that we’ve seen that the ecosystem is maturing and it’s growing from not like from only the accounting use case to many more use cases. Okay. And I think the next case that we are seeing more and more is audit., Okay. But now we’re starting to see transparency when it comes to reporting also for internally and also for the investors.
[00:34:21] Tal: Then we’re starting to see all kinds of more complex organizations in terms of the revenue model when it comes to DeFi. Then we’re starting to see, and I mean we know this already, but any company in the digital asset space is a hybrid company. They have to have a, a bank account, almost always. So they’re starting to kind of, the appetite is growing.
[00:34:42] Tal: Like, wait, why should I have a subledger only for crypto? Why not manage? I mean, the UI is great. The usability is amazing, much better than anything I’ve seen. Why can I manage all my fiat transac here also? So I see ourselves, as I said earlier, as a financial data lake on the backend. We are a data company, and as a data company, we wanna make sure that our customers have all their financial data in one database.
[00:35:10] Tal: Now, in order for them to enjoy the data, we also have to build an amazing product to serve their current needs and their future needs. The current needs are definitely the accounting sphere. Okay. But because we have all the data waiting for them, a hundred percent coverage, the accounting becomes much easier.
[00:35:32] Tal: Okay. Cause we’re thinking on the infrastructure and then we build the application. So that is the accounting. But if you think about it, the infrastructure is the FDL and one application on top of it is accounting. But then, the next application we built is audit, and I can also do audit. And the next application that we built is DeFi revenue analysis, and the next application is internal reporting and dashboarding and financial analysis.
[00:35:54] Tal: And the next ones we are building are in the risk and security space. So eventually what you’ll have is the company’s financial data lake and the whole CFO stack built in applications on top of that database. Okay. That is not something that, at least I can’t see our competitors going that route because they’re very accounting oriented and I think that’s great and it’s serving the needs today.
[00:36:17] Tal: We’re thinking of like what is the big vision for Tres Finance? And when I think about the big vision, I say any company will need financial endpoints to store the value, which means bank accounts, custodians, wallets, exchanges. So the next thing that we’ll need on top of it, the next layer is a financial data lake.
[00:36:37] Tal: And Tres´ will be the market leader and it’ll be the standard for any company engaging with those kind of assets and also TradFi assets to engage with a hybrid financial data lake. And that’s a totally different product and a different market that we are going through.
[00:36:53] Umar: I think you’re nailing your vision. I forgot to ask you a question about Tres Link before. So, will those work irrespective of where that banking jurisdiction is, like CFO in the US his bank is Mercury, one in Switzerland is working with Sygnum, the other in Singapore with Aspire Bank, is it gonna be, you’re gonna have global coverage or has it gonna work?
[00:37:15] Tal: You know, as a startup we always start with like the POC. We see our data streams, we see the feedback from our customers, and then we expand. So today we’re a Plaid oriented with our integration that means, the whole US and parts of Europe, and we’re seeing amazing response from our customers. So we are now looking at more and more integrators to go into Asia and to other parts in the world.
[00:37:36] Tal: Essentially to be a financial data lake, it’s an integration game. Right. It’s like how many networks can you onboard, how many bank accounts or banks you can onboard, how many CeFi exchanges you can onboard? How can you build the largest integration database up? And that’s what we’re aiming to do.
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[00:39:35] Umar: Now moving on to the hot topic of pricing. So from speaking with different folks in the industry, it is a heated topic for crypto accounting solution. So for web3 projects I’d say, the minimum tech stack for their accounting would involve having a custody provider with a multi-sig wallet, an invoicing solution for their AR and AP and a product like Tres Finance to facilitate their financial reporting and audit.
[00:40:03] Umar: I think it’s unfair to compare like traditional accounting softwares pricing like Xero, QuickBooks, Oracle with emerging products like Tres, right? Because those ones have like hundreds of thousands of users. How does pricing work with Tres finance, and I wanna ask, do you have different packages for maybe crypto accounting firms who maybe have multiple license for their different clients?
[00:40:26] Tal: Yeah. I mean, we can get into the pricing topic. I know it’s like a heated topic, but I wanna take a step back and talk about pricing in general. Okay. As a startup, and we’re working with startups, and I know that like startups are probably also founders are listening to this pod, and mostly CFOs. At the end of the day, you have to build a sustainable business model.
[00:40:47] Tal: Okay. At some point in time you’ll have to show good enough metrics that will make sure that you are break-even and even profitable as a company. If you wanna build a big company, a healthy company, if you are aiming for an IPO one day, that is the way you need to go. Okay. Selling a product that no matter what, okay.
[00:41:06] Tal: In my, like in our ecosystem, let’s take like a sub-ledger that sold a year ago and it’s only supporting Ethereum, only EVM chain. Selling their product for $50 a month is not sustainable. They will not survive. Okay. So I’m seeing all kinds of, like, I’m talking to all kinds of companies. And part of us maturing as a business is also saying to customers, Hey, listen, you know what?
[00:41:29] Tal: Your needs are not that crazy at the moment. You have a pretty simple financial parameter. You can keep working on spreadsheets, you can work on another platform. It’s okay. There’s no need to go full-on on Tres, that’s okay. We are more of an enterprise-grade solution. We are working with large companies with crazy financial parameters. Of course, we’re also working with smaller companies, but those smaller companies also have a complex financial parameter in the way that they are working on different networkschain in DeFi that isn’t common.
[00:42:05] Tal: So no one else can support them except for us and because of the robustness of our financial data. So that’s just like something about pricing general. Today, the pricing addresses, we make it out of the number of transactions that we’ll need to monitor, the number of endpoints, we’ll need to monitor, the number of users and entities, and all kinds of premium features.
[00:42:23] Tal: It’s really built, customized to the needs of what our customer is looking for. We do work with different distribution channels, mainly accounting firms, consulting firms out there. And the way we work with them is we have like a partner pricing package. Okay? So you have to go into the website, there’s a become a partner button.
[00:42:43] Tal: You click there, you have to fill out the questionnaire, and if you qualify, we may have you, go through a certification program with the team. And once we have that done, then you get the special pricing where you can offer your customers reduced pricing offer. And that makes sense also for us, because then they are serving as a distribution channel.
[00:43:02] Tal: So cost of sales is lower and we can offer a lower price point. But again, it goes back to the business and how you wanna manage company and how to build a sustainable business. There aren’t, like sometimes when you see products that are selling for, I don’t know, pretty cheap and you see them investing a lot of time and like onboarding you and working with you.
[00:43:20] Tal: Take into account that every hour that they spend with you, if it’s a dev and like one of the leadership team is a lot of money, there are probably like bleeding money of any hour that they’re working with you. And you should ask yourself, will this company be around the next year or two? By the way, I’m getting that question more and more.
[00:43:37] Tal: I don’t know if you guys are getting it at Request, I’m getting questions like, hey what’s your runway, how much, how many people are. What’s your burn. You guys are gonna be customers. You’re not a VC. Like, no, it’s important for us to know that if we’re onboarding with you, you have a sustainable business plan to stay alive for the next couple of years. You don’t wanna invest time on our side to onboarding with you.
[00:43:56] Tal: And in six months you guys will go bust. I can assure you that like we have enough capital in the bank and years of runway. And we run a very lean and mean, business. Yeah, I went a bit over with pricing question, but hopefully it was interesting.
[00:44:11] Umar: Yeah. You mentioned the partner program and the certification course, so it’s a good segue onto my next question, which is, what types of companies benefit from the partner program are these accounting firms, audit firms?
[00:44:25] Tal: Today we work with accounting firms, audit firms, and consulting firms, all three. It’s really straightforward. There’s a questionnaire they need to for now, then we qualify them. We have a whole team of like sales engineers and CPAs that will help them or take them through a certification program. It’s about 90 minutes where we open a sandbox account and we open a demo ERP account and we show the integrations, another data streams, it’s a hands-on.
[00:44:51] Tal: So like we all share screen, they all share screen and we onboard the customer together. So you really get the touch and feel of the product during the certification and we feel comfortable of like letting them take the charge of their account moving forward. Of course, like there are more advanced features that then have another session for like an hour.
[00:45:11] Tal: Let’s about two, three months after the first session. You get like a nice certification. You can post it on LinkedIn, you go add it on LinkedIn. Like it’s pretty cool.
[00:45:23] Tal: We also publish those firms on our website. Like next week alone, we have like five certification programs. Okay? So we are also building a nice bank of certified partners, and these are partners that we work with and we can also recommend them to our customers because many times we meet customers that they say like, you know what? My accountant like says he knows crypto, but like, to be honest, he has no idea what he’s doing.
[00:45:40] Tal: And we feel comfortable to say, oh, depending on the size of the company, we’re working with this certified partner or that certified partner, so we also able to stream business to our partner, which has been amazing. I know for sure there is a pretty well known accounting firm out there that we’ve introduced a bunch of customers of ours.
[00:45:57] Tal: I think we’ve helped them generate hundreds of thousands of dollars in the, in services and revenue. And we’ve got a really good partnership around that. So, and that’s something that we’ll keep maintaining and it’s very important to be part of the ecosystem and show that we want to contribute from our knowledge and from our technical skills in solving some of the most complicated problems in the ecosystem, in the space.
[00:46:20] Tal: Regular transfers. Okay. We talked about some DeFi earlier that is part of our expertise data and the most complex chains out there.
[00:46:28] Umar: Tres Finance is, I would say like on a weekly basis, announcing new integrations, whether these are new protocols, exchanges, new chains. You’ve also announced an integration with Request Finance a few weeks ago, the crypto invoicing, payroll and expenses solution.
[00:46:45] Umar: Could you share maybe what’s upcoming with the roadmap, some of the other upcoming features and milestones for Tres.
[00:46:56] Tal: We have three parts of the product. We have data in, data out, in the middle we have the Financial Data Lake itself and the enrichment of the data. On the data out part, we’ve decided that we want to rebuild our reporting system. So there’s a whole new module that we are planning at the moment, which is gonna look absolutely amazing.
[00:47:15] Tal: You have predefined formats that will include anything you can even imagine. Audit, P&L, balance sheet, all kind of the, because you already have the data inside the financial data, it’s just about streaming the data to write columns and making the calculations. You’re also enabling a something that’s called the flexible report.
[00:47:32] Tal: That means you can choose the columns and the calculations and you can create your own report. Because sometimes we have customers say, hey, you know what? I’m not using any kind of known ERP, I’m using a local ERP in Germany. By the way, it’s very common. How can I create a report that I can download and just drag and drop into my ERP?
[00:47:50] Tal: So that is exactly what you’ll be able to do through that reporting module. You’ll be able to kind of give the columns different names and choose how you wanna stream the data. Another thing we are doing is we’re implementing more and more Open AI, Chat GPT in the system, but it won’t be on the front end.
[00:48:07] Tal: It’ll be more on the API side. So essentially what you’re able to do is you’ll be able to ask your financial data, like any question through the GraphQL API, so it’ll be an interface. You’ll ask a question. The question will be translated into a GraphQL query, then that will go to database and pull out the answer.
[00:48:24] Tal: So think about this as an accountant or as a financial operation person, you’re able to say, hey, for 2023, between March and May, what was my realized gain & loss on all my swaps involving 1inch, and then it will just spit out the answer, pretty cool, so that’s something we’re working on.
[00:48:46] Tal: On then on the enrichment level, we are working on a few things that, no, I’m gonna keep that a bit to myself because it’s like some really cool stuff. So stay tuned.
[00:48:56] Umar: Tal. One of the recurring questions on this podcast that I’d like to ask is about some of the challenges for adoption. In your opinion, what are some of the biggest challenges that Tres Finance faces today in terms of adoption?
[00:49:08] Umar: Maybe like education, like people still using spreadsheets as well.
[00:49:12] Tal: You talking about like for the finance teams that are engaging with digital assets,
[00:49:16] Umar: Challenges for Tres Finance to gain more adoption.
[00:49:20] Tal: Yeah, I think that, I mean, I can talk about internally what’s happening inside the company and how we are growing, but I think that the main part today is that the market is still evolving.
[00:49:31] Tal: We’re gonna see more and more companies touching a digital assets, and of course we are always fighting for getting a larger piece of the cake. But I think the biggest challenge for us at the moment is seeing the cake itself grow. Right. So that’s what we were waiting for. We were waiting to see how stable coins, tokenization of real world assets takes off.
[00:49:52] Tal: I think there’s a DeFi summit coming. So that’s what I’m looking forward to and we’ll be there to kind of hammer that down and make sure that we gain as much market share as possible.
[00:50:02] Umar: Perfect. Tal we’re soon to the end of the podcast. As closing thoughts, do you wanna share anything else with the listeners? Has there been anything we’ve missed or maybe a message you’d like to reiterate to the listeners?
[00:50:15] Tal: Yeah, I think that we are, for the past year and a half we’ve been building and kind of under the radar, posting a LinkedIn post here and there, gaining market share, proving ourselves as a worthy team with a worthy product. And I think that we’ve got to the point where, as a company, we understand that we need to redefine the market.
[00:50:37] Tal: And the market is a financial data lake market, and the product is gonna move towards that area. It’s always been there, but now we know exactly what our North Star is and what kind of products we wanna build, and the team is growing also on the dev side, but then also on the business side. And we’re gonna be having more and more marketing announcements, product announcement, and you’re gonna be hearing more and more about Tres Finance, and I’m super excited about the rest of 23 and what’s gonna happen in 24.
[00:51:06] Tal: So I’ll just say to listeners, keep your eyes open. Follow us on the LinkedIn page, on Twitter page. Reach out if you wanna be part of the newsletter. Some really cool things that are happening. And if you don’t have an FDL, it’s time to get one.
[00:51:19] Umar: The last question of my podcast is, do you have a quote or a maxim that you live by?
[00:51:25] Tal: Well, I actually don’t. It’s like, I’ll say, go with the flow. Enjoy life, work hard, play hard. All the cliches I don’t know.
[00:51:35] Tal: [00:51:35] Tal: Yeah, for sure. You can choose.
[00:51:37] Umar: All right, Tal, thanks a lot for coming in today. Thanks for your time.
[00:51:41] Tal: Thank you very much. It was pleasure.
[00:51:43] Umar: If people want to reach out to you after this episode, where should they go?
[00:51:46] Umar: And of course, if they want to learn more about Tres Finance, where should they go?
[00:51:51] Tal: Sure. Our website is Tres.Finance, but also on LinkedIn. You can DM me on. I’m like always commenting on the company’s posts. You can also look for my name on LinkedIn and then if someone wants to reach out on Telegram, you can do it through the website.
[00:52:05] Tal: Other than that, yeah, I mean I’m available. I answer everyone. If you have a question, if you wanna consult, if you wanna see the product, anything you need, feel free to reach out.
[00:52:16] Umar: Awesome. Thanks a lot Tal. We’ll speak soon.
[00:52:19] Tal: Cool. Cheers. Cheers. Have a good one.
[00:52:21] Umar: I would like to thank everyone for listening to this episode.
[00:52:24] Umar: You’ll find all the links of the episode show notes and transcript on the website of The Accountant Quits at theaccountantquits.com. Please note that this content is for general information purposes only and is not a substitute for consultation with professional advisors. If you do know anyone who could benefit from the episode and you care about them, please do share the episode with them.
[00:52:48] Umar: All the episodes are available on Spotify, Apple Podcasts and Google Podcasts, and by leaving us a review and rating, you will support the channel and all your fellow accountants in order to be notified each time we release a new episode, do follow us on Instagram and LinkedIn.
[00:53:05] Umar: We hope to have you with us next time. Bye for now.