For some industries, the disruption wrought by the pandemic has been a springboard to breakout growth. As consumers spent unprecedented time at home in 2020, conducting more and more of their lives online, the fintech sector emerged as a major beneficiary. The integration of financial services with technology is hardly a new trend: to take an obvious example, the shift from brick-and-mortar to online banking was evident long before COVID-19. But since 2020, the scope of fintech has expanded far beyond retail banking.
Growth has been particularly explosive in the crypto segment of fintech. The buzz around bitcoin, ethereum, and the broader blockchain ecosystem has been gaining momentum over the past decade, but before the pandemic the crypto community was still pretty niche. That has started to change in the past year, with consumer awareness reaching new heights.
Now that the aggregate value of cryptocurrencies exceeds $2 trillion, regulatory agencies like the SEC are increasingly focused on the sector. For companies involved in crypto, regulatory attention has been a mixed blessing. There is widespread agreement on the need for more comprehensive regulatory guidance. Most companies active in the crypto ecosystem are eager to understand their obligations and build a stable compliance infrastructure. But so far, the agencies have seemed more interested in staking out their turf and preserving flexibility to regulate than in laying down black and white rules.
This puts crypto companies in a difficult spot. Feeling the scrutiny, but struggling to know how to comply, companies are rushing to build out their legal and compliance functions. And with all the main players seeking to expand simultaneously, recruiting is proving to be a major challenge.
Some of the dynamics mirror in-house recruiting in other sectors. The ideal candidate has sterling educational credentials, Biglaw training, and prior in-house experience in a high-growth company. Equity is a substantial component of the compensation package, and base salary is relatively modest, meaning the variance of compensation outcomes is much greater than in a Biglaw role. Finding candidates who check all the boxes in terms of credentials and experience and who also have the risk appetite for an equity-heavy compensation package can be difficult.
Although those challenges are not unique to crypto, they are exacerbated in the crypto context. Candidates must have a particularly high risk tolerance to enter a sector that still has an uncertain status. If all goes well, employees will reap impressive gains, but there is still some risk of a damaging regulatory crackdown, on top of the usual business risks inherent in less established industries. The supply of candidates with relevant substantive experience is limited, and there is intense competition for that small pool. Although the industry has existed for a decade, few players in the early years were focused on compliance and actively engaging regulators. To the extent they sought legal advice, they were generally not paying Biglaw rates. That meant few Biglaw attorneys gained experience in the sector.
In short, the imbalance between supply and demand means that companies seeking to hire top candidates must out-compete other suitors. How can they do that? A strong business model is obviously important. But the companies that outperform in recruiting are those that express a clear vision. They crisply communicate their strategy, and they inspire candidates with a compelling mission that aligns with the candidates’ values. Shrewdly packaging the opportunity and communicating a consistent message throughout the recruiting process will help a crypto company stand out from the crowd as it seeks to attract legal and compliance talent.
Cadence Counsel has extensive experience partnering with fintech and crypto clients to identify and recruit highly qualified in-house lawyers. If you are interested in taking your in-house recruiting strategy to the next level, we welcome you to contact us to discuss your needs.