Tagomi pioneered best-execution in crypto. Now it's setting its sights on Big Tech

When Marc Bhargava was building out Tagomi in 2018, he was thrilled by the level of interest coming from the Wall Street crowd. 

Indeed, the firm counted Peter Thiel's Founder's Fund as one of its main backers when it emerged from stealth mode. And at the time, the New York-based company had a number of large family offices and asset managers interested in using its platform. Through a sleek interface, Tagomi enables traders to tap into several different pools of liquidity, including market-making firms like Jane Street, and crypto-native exchanges. 

Similarly to broker-dealers in traditional markets, Tagomi leverages smart-order routing technology to execute a trade at the best possible price, known as best-execution or best-ex.

Best execution in crypto

Tagomi was among the first movers in setting the foundation for crypto best-ex.

Tagomi's efforts are taking place within a wider context in the industry. On Thursday, Chicago-based crypto exchange ErisX announced that it would link up to Etale, an institutional trading platform that offers best execution via "machine-learning-based quantitative models." Elsewhere, cryptocurrency exchange Kraken recently acquired Australia-based Bit Trade, which claims to offer "best prices" to its clients, as per its website.

Another early entrant includes CoinRoutes. Bitcoin Suisse leverages the firm's technology to offer trading across Coinbase, Kraken, Bitstamp, and a number of other venues. 

Indeed, CMT Digital head Colleen Sullivan told this reporter in 2018 that the lack of a crypto prime broker and prime services were holding back institutional capital from entering the market.

"Without a prime broker, trading firms are directly subject to events that an exchange may suffer like hacks, regulatory issues, operational issues, technology issues (and many more) — all of which may lead to loss of the trading firm's cash and coin," Sullivan noted. 

Institutions remain on the sidelines

Still, as Bhargava noted in a recent episode of The Scoop, large investors have mostly remained on the sidelines. 

"And I think a lot of them were in it for the hype, but also, to be fair to them, a lot of them are looking for real use cases and are not finding all that many," Bhargava said. "The groups that have become more active are more the crypto funds, which is where the family offices tend to invest."

Yet the firm said that it's been able to continue to grow its user base, onboarding large crypto native institutions.

"They look to us as a way to give them that institutional trading system that can let them focus on whatever their core business is," COO Kevin Johnson noted. "So we're basically all about taking this group of technology that we've built for execution, for settlement, for financing and finding different use cases for different types of institutional clients, whether it's a trading firm, or quant fund, or an index fund."

With a staff of 22 and having raised more than $28 million, Tagomi is pushing forward despite the lack of big investors in the market, expanding its product offering and new opportunities. 

In 2020, it plans to expand into derivatives trading, for instance. 

Big Tech opportunities 

Despite a lack of interest from large investors, Tagomi sees a new opportunity in Silicon Valley firms wading into the crypto world.

On the one hand you have the Facebooks of the world developing their own digital assets. Bhargava told The Block that Tagomi could leverage its existing technology to offer treasury services to large technology companies with a token. On the other hand, financial technology companies from Square to Robinhood have launched crypto offerings, for which Tagomi could provide its liquidity services.

"And, you know, you see a lot of tech companies starting to talk about that and making steps, or anyone who wants to have their own independent token, they can use us for Treasury management as well," Bhargava said. "So, you know, in 2020, definitely kind of this institutional class of tech is one we're keeping our eyes on."