Lyn Alden's New Firm Will Buy 'Boring' Businesses — and Bitcoin. Why?

Transcript

We think in our case um because the whole strategy is really about building this diversified set of of uncorrelated AI resistant cash flows and then attaching a Bitcoin treasury to it, accumulating those retained earnings into Bitcoin. We generally think that that that sum of parts analysis makes makes sense. >> Hi everyone, welcome to Unchained, your no hype resource for all things crypto. I'm your host Laura Shin and now we'll take a quick word from the sponsors who make the show possible. This episode is brought to you by Cape, America's privacy first mobile carrier. Same premium service you'd expect from any other carrier, but designed so your number, your location, and your data actually stay yours. Get 33% off 6 months at cape.co/unchained.

Today's guest is Lynn Alden, co-founder of Orange Juice. Welcome, Lynn. >> Happy to be here. Thanks for having me again. You announced last week that you had raised $40 million to launch Orange Juice, a permanent capital holding company that will acquire, improve, and permanently hold cash flowing businesses backed by a Bitcoin treasury. How did you come up with this idea for Orange Juice and what problem were you trying to solve? >> Yeah, good questions. I mean, first of all, I we have a very strong team. It's certainly not just me. Some of the headlines will put my name uh on it, but there's this has been a really big team effort. Uh so it's it's the the partners at Ecodes Capital along with um uh Ruben and Adrian uh from from other you know from other ecosystems. Uh and uh you

know the idea actually goes back to early 2025. We've been working on this for a while. This isn't just something we put together here this year. It we we you know it's been it's been a process to figure out the exact structure uh how to bring it to market and all that. Uh and the main uh kind of focus was that um there are a lot of treasury companies out there, Bitcoin treasury companies. Um you know, one of the biggest criticisms against them is that they don't have cash flows. Um you know, for those seeking kind of pure play levered Bitcoin approaches that that you know, that can be a a plus uh in some context.

For others, it's a minus. It certainly kind of adds volatility to the upside and downside. Uh whereas we viewed that if you have a a a stable cash flows like a operating cash flows um that provides a really good foundation that you can then use to build a bitcoin treasury. Uh if anything I mean ever since I saw kind of the first company come to market and add bitcoin to its balance sheet. Um I've been expecting to see you know a variety of other companies want to add some Bitcoin uh as well. Um but it's that they've actually been quite slow to do that. most of the ones that have done it are are kind of more Bitcoin adjacent type of companies or they're springing up specifically to do the strategy.

Whereas I'd actually love to see just boring companies add Bitcoin to their to their balance sheet. Uh and if anything I think value stocks uh that are kind of underperforming in this kind of winner take all market. Uh they kind of slowly become a smaller part of the economy over time. one of the ways they can protect themselves is by owning a truly scarce asset and instead of you know sending all their cash flows out as dividends or as um you know buying back their own shares and stuff, they could be holding um you know this asset. Um and so kind of after years of waiting to see more companies uh bring this to market uh you know a couple of us a bunch of us decided uh let let's go and make this happen. Uh the other reason is that we you know there is a really big

strong demographic force of uh American business owners uh in general are aging. Um many of them are looking to pass on the wealth that they've built. Uh and you know there's there's a variety of options to them. One of the hardest things you can sell is a business uh because of the size and uniqueness of of each one. Uh and the main uh you know option for companies uh in that kind of small to medium size is private equity. Uh and private equity serves a very important spot in the market. It obviously provides liquidity for these businesses that are otherwise quite illquid. Uh you know it could be very hard to find a strategic buyer. Um uh but uh they you know many would say they have a negative reputation and I think at least some of it's welld deserved

which is um you know PE funds generally have like a 10-year life. uh the typical life cycle what they want to do as a business is go in um and then within like a a three to sevenyear period um they generally want to flip it. So they they lever it up they they cut cost pretty aggressively uh they you know they try to find ways to boost the multiple and then they want to either bring it to IPO or otherwise exit that position uh to kind of optimize for that more shortterm um uh gain uh potentially at the expense of that long-term success of that business. Uh studies show that, you know, companies that emerge from PE have a higher than average bankruptcy or financial distress rate. Uh and it's because they're they're kind of in some

ways hollowed out. They they might otherwise have a good business operation, but they've been hollowed out for that kind of short-term flip. Um whereas there are it's rare, but there are other options, permanent capital vehicles that actually want to own that company uh roughly in the format that it's already in. you know, happy to make modifications and and help them where possible bring additional scale, but otherwise keep intact the legacy that they built and not have that kind of four to sevenyear or three to sevenyear uh mandate to to flip and get out of it, which which is totally changes our incentive structure.

>> So, yeah, I would love to ask you two follow-on questions, but we're going to start with one. Um, so when you were describing the types of companies that you would be looking to buy, you described them as boring. So do you have in mind what types of companies you're looking at? >> Yeah, good question. So uh basically because we a lot of us come from a venture capital background in in the company. So we are uh partners at Egoth Capital. So we for example invest in Bitcoin growth companies uh tech companies, you know, fintech companies. Uh but the types of companies we're looking to buy with orange juice are generally speaking companies that are outside of the space entirely. Uh things that often have a a physical real world presence um you know that are kind of AI

resistant uh you know the kind of the classic PE examples like HVAC businesses for example that's it's almost a meme at this point that you know you leave Wall Street and go and you roll up a bunch of HVAC um but that's not really far off. uh you know at at when we start out we are uh industry agnostic meaning we're not we're not targeting any specific industry uh instead kind of in the early stages we're interested in founders that specifically fall under a certain size category uh and that have an interest in uh preserving the business that they built they optionally can even continue working at it um even as they want some liquidity uh you know maybe they want to keep their employees together they want to keep kind of the soul of the company

alive uh they think it's better in those types of hands. Um, uh, and generally speaking, early founders are probably going to be interested in Bitcoin in some way. So, they're going to be founders that just happen to also be Bitcoiners. Uh, because, you know, uh, early on in the strategy, um, you know, we intend to buy companies with a combination of cash and some equity in our own, uh, entity. Uh, and that, you know, that could be variable to the to the business seller. Um and so generally speaking uh you know there we we're looking for founders that kind of buy into the thesis as we see it which is that cash flows in Bitcoin is a good combination. Uh generally speaking as we get as we you know hopefully make a series of successful acquisitions um we will then have uh you know an industry

set that we can maybe more lean into and find synergies between. Uh and at that point we're you know at that point we're probably less targeting business owners that necessarily care about Bitcoin. uh and you know we're more in that kind of uh traditional PE type of of category um uh because we you know at that point we we will hopefully have a track record of uh successful implementations but early on the profile is generally speaking uh small business owners that that you know have a business that most likely has nothing to do with Bitcoin but on the side they're they're bullish on Bitcoin and they like the asset and they they're looking for liquidity and they're looking to keep their company intact.

And why is it that you've decided to not go with uh VCbacked type startups but instead the more boring ones >> uh specifically for cash flow? So VC backed startups are rarely profitable. Uh you know in some rare circumstances they can be uh but generally speaking they're more growth oriented. Uh you know uh you know many businesses start without venture capital. Uh they generally have you know somewhat of a slower growth profile quicker time to profits. Um but venture capu backed companies are generally really going for something bigger. Uh whereas uh and that's not really something you want to f a Bitcoin treasury kind of um you know uh is a competing force with that. Uh instead we're looking for companies that

uh are generally on this you know they're they're the mature phase of their life cycle. Uh meaning that you know we see them as AI resistant. You know they're not really going anywhere but they're not in some massive growth um area. uh and they can be bought at low multiples meaning that with a fairly small amount of capital you can get a substantial amount of cash flows uh that if if selected well are are very durable and long lasting uh and then that can be a very strong foundation to accumulate Bitcoin because the company's not often the type that benefits from aggressive reinvestment of those cash flows uh in some circumstances it might but in generally speaking these are companies that are already established they're spitting off cash uh and uh you know in a traditional value stock setting uh you

know private company or even you know a publicly traded example which we're not going after initially but it just as a value stock in general there's only a handful of things they can do with that excess capital. They can give it back to the owners either in terms of private distributions or for a public company dividends. They can buy back their own shares if they're public. Um they if their balance sheet has issues they can they can you know put more money toward their balance sheet. If they already have a clean balance sheet that's off the table. So a lot of it is just distributing capital outside of the company. uh and we view that accumulating bitcoin is one of the valuable things that you can do with that. In addition, when you have um solid uh operating cash flows, uh you can put moderate amounts of leverage on

that uh with the interest expense uh that's fully covered by the operational cash flows. For example, you can have interest expense equal to say onethird of operational cash flows. Uh so that you know it would it would take a twothirds fall in operational cash flows to get to a point where you're not really covering interest expense anymore. Um so you can you can conservatively lever these businesses and then unlike a traditional kind of PE exit where these companies are highly leveraged uh these companies would be attached to the parent company that has a lot of bitcoin on the balance sheet. So it would be a company that has more assets than liabilities while at the same time having operational cash flows that uh you know fully fulfill the interest expense multiple times over. Uh and so that's a very different model

than if we were to go out and buy venturebacked companies which which would be very high multiple and generally profit uh you know nonprofitable companies that are just it's a completely different category which by the way we're still focusing on Ego Death Capital. It's just it's just a very differentiated uh type of strategy. >> Super fascinating. All right. So in a moment we're going to talk more about the Bitcoin Treasury, but first we'll take a quick word from the sponsors who make the show possible. If you hold crypto on your phone, your biggest vulnerability isn't your wallet, it's your carrier. AT&T, Verizon, and T-Mobile have been breached again and again, and SIM swaps are still one of the easiest ways for attackers to drain accounts. That's where Cape comes in.

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back to my conversation with Lynn. So, as you already started discussing, there will be this Bitcoin treasury and that is um seemingly in a way like on the surface part of a trend that we've seen this last few years, you know, this uh explosion in digital asset companies. Um but you know, most of them are vehicles specifically to acquire Bitcoin and obviously Orange Juice is taking a different approach. So, explain um you know, how your Bitcoin data will function. you said I guess it stays with the with the parent company but I'd love to hear more of the details about you know how what the relationship is with the portfolio companies.

>> Yeah the main relationship is that you know although all the companies will be subsidiaries of of the parent company the treasury will itself be held at at the parent company level. Uh and what that does is it gives us optionality. So if you have a pure play DAT for example, uh the primary goal every every month or every quarter is is to pretty much only accumulate more of that of that coin per per share. Uh where and that the challenge with that is it can be a quite a pro-yclical approach. Uh you know when when when bitcoins or or other you know for for some of the other types of DAS whenever the coin is really high generally speaking the MNAB is going to be high the market at the end is going to be high. They're selling more shares or otherwise raising capital to buy more

of that coin. And often when there's a bare market, it gets harder uh to buy that. Um whereas when you have uh kind of more than one direction that you can go in, it gives you some counteryclical optionality. Uh and what I mean by that is you know if you have a set of cash flowing businesses uh and you're you know you have you're accumulating that that cash flow you're putting some of it into Bitcoin at any given time you have a handful of options for what you can do if the inbound pipeline of businesses looking to sell uh that meet your target at the multiples you're looking for. If that's a very strong pipeline at the moment you can lean into buying more businesses. Uh especially if Bitcoin for example just went up 10x uh maybe it's it's very enthusiastic at the moment. uh

and you know that that you know that's a very pro-yclo environment. Maybe it's better to lean into those businesses with a strong with a strong inbound pipeline. On the other hand, it could you could you know a year or two later you could find yourself with with Bitcoin in a pretty deep bare market at the bottom according to most valuation metrics or most sentiment metrics that are available. Uh coins that have rotated away from fast money towards strongly held hands. uh and that might be a time where you actually wanted to put more cash flows into accumulating a bitcoin uh in that in that kind of when it's cheap when it's kind of out of favor. Uh and so there's a handful of options. Uh and the companies, you know, as long again as long as the operational cash flows are managed well. Uh it's not

a company that has to perpetually issue new securities. Uh you know, it has the option to raise capital. Uh but the cash flows themselves provide a continuous sort of just a new capital that comes in and can be put toward either new businesses or bitcoin. Um you know leverage can be used judiciously at times. Other times uh deleveraging can can be a tactic that makes sense in certain environments. And so it gives the company just a handful directions that it can go in uh that is is very kind of execution dependent. So the the better that the that the partners and and management is at you know executing properly and doing it in that kind of counteryclical uh cautious way uh it's a it's a differentiated strategy compared to what what else is out there. I you

know I've been on record I've been a you know I've been a strategy shareholder since August 2020 when they started strategy. Um, but I'm on the record that the the long tale of other pure play DATs or or treasury companies. Uh, you know, I think it's a very crowded space. There's only there's only, you know, liquidity begets liquidity. Uh, so I think the large ones have a role to play. Um, and and there are different markets out there. There's Japan, there's Brazil, there's European markets, there's a number of kind of big liquid markets. Uh but if you're not one of the top pure play DATs in those markets, those treasury companies in those markets, um you know, I think the much bigger opportunity is just that other companies, whether it's public traded companies now, uh or or it's our strategy that's you know, uh you know,

accumulating private companies and intends to go public eventually, uh to take these just totally non- Bitcoin businesses that have cash flows and just put it into a Bitcoin treasury as just another thing you can do with your capital besides, uh you know, the other things you can do with retained earnings. And how many companies do you expect that you'll end up with in your portfolio? >> Well, we we intend this to run for years and decades. Uh, you know, this is it's a permanent capital vehicle. Uh, and you know, it's it's it's been compared to say Birkshire Hathaway, which of course is premature because, you know, we're talking about one of the biggest most successful companies in the world. But in terms of just intention and structure, uh, it's a comparable kind of data point. So, it's like saying how many companies will Bergkshire Haway

acquire? Well, I mean they they want to keep acquiring companies indefinitely, right? So, uh especially as we start from this small stage, um we plan on >> with the Yeah. with the 40 million. >> Yeah. So, we we plan on acquiring a few per year. Uh we're looking eventually to raise likely raise additional capital in the future. um the early capitals to kind of prove the model uh to you know kind of to to prove that the pipeline exists to prove that that there there is uh demand from business owners for to sell to this type of entity compared traditional private equity and I will say we've already gotten a ton of inbound ever since the announcement. Uh so that's you know we're kind of at the early stages of proving that demand but we have to actually go out and execute

and and and acquire some of these businesses and kind of find the percentage of whatever that funnel is that meets our criteria and ends up being a good fit. Uh but the initial capital is meant to uh buy a handful of companies, prove the concept so that then we can go out and you know potentially hopefully um continue the process for the longer term. And like I said before, you know, at a certain point, you can get to a phase where um you know, additional capital is optional because the cash flows themselves are additional capital that can come in and eventually require, you know, result in another acquisition um or can result in more Bitcoin stack, which occasionally could be levered to go out and buy a business uh and then pay off the the small amount of leverage you took out to

to acquire it. >> Okay. Yeah. I mean, like it it's funny that you you mentioned strategy because um obviously there's they've been in the news a lot recently. Um but I do feel like there is something about um you know you you want to have sort of like a diversified group. um because there's going to be like a number of different levers and you know when things swing a certain way with Bitcoin or something else like you would want to have something that um you know is yeah maybe not swinging or swings the other way or you know whatever it is. But I was curious um to to just think about uh do you think that the volatility of the

Bitcoin price could ever hurt these companies or in any way like cause some stress? So we intend to structure it so that the answer is no. Um obviously any sort of any sort of strategy has risk associated with it. Um because this is a permanent capital vehicle that intends to buy businesses long-term financial stability is one of the the key metrics that we would try to optimize. Uh so we would keep leverage conservative um you know backed by operational cash flows. Uh if you design it properly so the interest expense is only you know relatively small fraction of operational cash flows. In theory, even if the Bitcoin treasury were to go away, the company itself still functions. It's still solvent. Um it, you know, you at that point, you would have lost your

your buffer. Uh and obviously, it's not something we intend for, you know, for Bitcoin to go away. Uh but the way we intend to do it is that the Bitcoin strategy is only upside uh for the cash flow companies that, you know, if these if these companies were spun out of private equity, often on their own, uh they would be very levered. uh they wouldn't have a bunch of liquid financial assets to to offset that leverage. Um they would have just had pretty big cost reductions. Maybe kind of the the employee morale is often not the highest. Um and and they're kind of set up for a difficult road ahead. Um whereas our companies um you know they they uh at the parent company you know we probably would have depends on market conditions. we would anticipate having

some degree of of um you know leverage uh but as a small percentage of operational cash flows but then importantly the the all those companies are part of a structure that is backed up by a company that has more assets than it has liabilities uh substantially so so that even as that asset pile swings uh sometimes it could be really really over capitalized some you know in a bare market it obviously could be somewhat less uh over capitalized uh but that's all still strictly better than if that company was just on its own with very little financial assets with lever with leverage purely against its operational cash flows backed up by no treasury at all. Um so we we intend to structure it so that it's only upside even though obviously the volatility is still a factor to consider. Um and you

know kind of one of my views uh you know as I continue to be active uh in in this company with my co-founders is I I tend to be very cautious. I'm a cautious investor uh in it. The other aspects that I work on and I I expect to bring it to this company as well. >> Okay. And the way that the companies would benefit from the Bitcoin would be that it could be used as like collateral for loans or like how how does it become monetized? >> Well, primarily it's it's a way to retain value. So, a lot of that is attractive to the investors. Uh it's also attractive to the business owners that sell to us because again if if we buy those businesses partially in cash and partially in equity in orange juice um those business owners have a

long-term um you know incentive for the company to continue growing and if those founders uh those business owners if they are Bitcoiners if they like Bitcoin they expect it to appreciate long term and you know a lot of them you know they might have millions of dollars locked into a business that they've you know to some extent they'd rather have in Bitcoin they think maybe Bitcoin has higher upside than their business. Uh this allows them to unlock some of that liquidity uh and either go out and buy Bitcoin if they want or or you know as they take equity in our company they would have that combination of cash flows and Bitcoin. Uh so you know we think it's an attractive uh proposition for business sellers uh as well as those that want uh to invest in this combined strategy uh because we we generally

think that the sum of the parts is better than the whole when you have Bitcoin when you have uh operational cash flows when you have um operation like uh optionality to take on leverage in conservative ways uh either collateralized by the Bitcoin or you know backed up by the cash flows these different strategies are are available uh you know it kind of gives you just different options through different market conditions. And another kind of aspect that one of the challenging things like if you kind of back up and say why aren't there just more permanent capital vehicles out there? There are a handful, but why aren't there a ton? And the the general answer is because you need some sort of edge. Uh so if you're buying small businesses, small cash flow businesses at low multiples, um you generally need an edge that would push

your returns higher. And for PE, for private equity, their answer is flip it. Their answer is we don't want to hold these longer term. Uh we're not interested in that kind of slow and steady approach. Uh we want to buy a company, gut it, lever it, uh find ways to juice up the multiple and get out. And that if you do that over and over again, that's that's their kind of that's their juice. Uh if you're Birkshire Hathaway that is buying companies and holding them long term, their main juice is that they have the the best source of like leverage in the world, which is their insurance float.

So Berkshire Hathaway is, you know, it's one of the biggest insurance companies in the world. Uh and insurance flow is an incredibly low cost of leverage. Uh it's an incredibly stable source of leverage. Uh and then they also of course have other types of corporate leverage. I mean they you know one of the lowest borrowing rates in the world. Uh so they're able to go out buy these businesses and they're you they're doing it on insurance float and they're doing it on some of the lowest bond yields in the world. Uh and that's their juice. Um uh and for orange juice uh you know name implied uh our general view is that our kind of X factor our juice uh is that we think Bitcoin um is a is kind of a little bit of a rocket fuel to kind of push you over that edge to make that

work really well because you buy a collection of of cash flowing businesses uh and you're able to kind of put that into a Bitcoin treasury and then you're able to have conservative leverage that has no end date to it. So there's there's no like um uh you know if if you look at say a pure treasury company you say well where where's the cash flow going to come to pay off um you know the existing leverage and the answer is that they they expect that the underlying asset is going to keep appreciating and of course you know it's a very cyclical asset. There's times where it goes up, there's times where it goes down.

Whereas in Orange Juice's case, the interest is fully covered uh with operational cash flows. Again, assuming, you know, there's always risk with business, but assuming that they're well selected and well managed, u you have interest fully covered by operational cash flows. And then you have this growing um collection of of of Bitcoin on the side. And that combination is your long Bitcoin, your long u you know, kind of durable AI resistant businesses, and then your short fiat. uh and you're short feat in a way that's not tied just purely to one asset but is tied to a strong foundation as well as um you know a scarce asset that can't be printed.

>> Okay, this is so interesting and it totally makes sense and it also feels like it answers some of the criticisms that we've seen uh with some of the dats. However, I do have a question. Let's say that you have a portfolio company that ends up for whatever reason bleeding money. How do you handle that? And how does that affect the structure? Because like like everything that you said makes a lot of sense to me if everything's working and going up as planned. But if something goes wrong, then how do you handle that? >> Yeah, good question. I mean, so when we um kind of model this out, we have to anticipate that, you know, if you acquire 10 companies, you you some percentage uh the more you acquire, some percentage of them might uh not work out the way expected. You could have some

companies that that exceed expectations and you could have other companies that don't. Um, when companies are spun out of private equity, uh, if they run into frictions, uh, it's pretty much game over because they're levered, they're they're already gutted, they've already done cost cutting, if they still run into frictions, um, that's I mean, that's why they have a higher than average bankruptcy rate or a financial distress rate. Um, whereas in our case, if they're part of a collection of companies, um, uh, you know, you you can have a weak area that is, you know, it could be temporarily weak. maybe they run into a cyclical issue or an operational issue that would otherwise kill like a a levered company on its own. Um it can be temporarily carried by the operational cash flows of the other businesses by the strength of the parent

company. Um uh you know we you know we can bring in resources to help them solve the issue if possible. Um you know I'm very bullish on our um um managing partner uh Ruben. He has a a Navy Seal officer background. Then he went into finance. uh kind of a kind of a interesting combination. Um very kind of focused on execution. Uh we would send resources to try to help that you know those running that business solve the problem. Uh it obviously in very adverse circumstances uh you know there's there could be situations where a business has to be wound down or otherwise um you know uh transition to some other owner.

Uh it's not impossible. We don't we don't rule out the the possibility that some businesses might one day down the line have to be sold or might otherwise just you know the world can change and and those are not functional. And the main difference compared to private equity is that we're not intending to sell. So we're not we don't have this kind of 3 to sevenyear uh you know shorty that we're going to do everything we can to flip a company. Instead when we buy we intend to hold indefinitely. Um but the world does change. It's always possible we'd have to take actions. Uh and you know the the general rule is that you know we're not going to just put unlimited resources into one bleeding company. If there's a if there's a wound sometimes you do have to to to mitigate harm. Uh and the other

side of the token is if we have a business that you know we initially bought thinking it's slow growth and it it's low multiple. Uh but if we find investment opportunities uh we can we can direct more resources to help that company grow faster than it was prior to acquisition. Um uh and so there there's both upside and downside associated with some of the businesses that that we anticipate acquiring. >> Okay. Super interesting. So one other thing that of of course is like yet another piece to this is you're planning to go public and you know obviously there are some similarities that you have to Bitcoin treasury companies. Um even strategy itself also has its own operating business. Obviously, it's a very small part of um the business, but

you know, there is that component. Um but I was curious like should or not should but but like would an investor kind of look at this and be looking more at kind of the you know bitcoin per share metric or the mnav metric that people have been looking at or since this is a different kind of animal like what types of metrics would would people assess the performance by? >> Good question. I mean if if I saw a structure like this on the market even if I wasn't involved at all I I would use a sum of parts analysis uh for it uh which is actually initially how I analyzed Micro Strategy when they just started the strategy because back then the operational company was a bigger percentage you know when they go out and buy their first or second tranch of Bitcoin you had this Bitcoin tranch and

then you had this software company and that was you know that was before they added billions and billions and billions of Bitcoin. So I would say okay well here's what the software company was worth pre- Bitcoin here's how much cash flow they're earning here's what's on their balance sheet you know here's a reasonable like industry multiple that is associated with that business and then here on the side is this Bitcoin and then any leverage that you know that company might have attached to to you know as well uh and you generally do a sum of parts analysis so uh in terms of mNAV or Bitcoin per share uh those are probably not the go-to metrics I would use for a more hybrid company like this I think that they they make sense for a a something that's closer to a pure play treasury company. Um but when you have

this kind of hybrid approach of operational cash flows um uh as well as that Bitcoin treasury u you have to kind of break those up to some extent and do the analysis and then there's a degree that that's where investors might differ. Some uh some might view it as a greater than the sum of its parts because when you have that engine combined together that gives you that countercyclical strategy that I talked about before that you can lean you have a couple different levers that you can lean into. Um you that can compound on each other and just be you know it can be 1 plus one equals three because you you have this kind of synergy there. Uh whereas sometimes conglomerates uh get like a conglomerate discount meaning that you you have a you have a bunch of companies together the market might find

it kind of opaque or challenging. Uh and some some conglomerates find that spitting off certain entities ends up helping their valuation in some way that that those things get valued better separately. Um we think in our case um because the whole strategy is really about building this diversified set of of uncorrelated AI resistant cash flows and then attaching a bitcoin treasury to it accumulating those retained earnings into bitcoin. Um we generally think that that that sum of parts uh analysis makes makes sense. Yeah, there's something about the picture making that reminds me of how um people have long been saying that for instance renewable um energy producers could use Bitcoin mining as a way to um

you know kind of even out their cash flow. So I I do see like there is you know something to the strategy that is very um interesting and appealing. Um, but I do also have to wonder like why it is that you're pursuing a public listing because you know I it maybe it's just a way to raise money but um it also feels like then you know it just gets complicated with having to answer public shareholders and all those kinds of things. So yeah, why why uh a couple reasons? One of the main reasons, like I said, when we look to buy businesses, um you know, we're partially looking to to buy in cash, but we're also interested in in um you know, using the equity of the company to purchase some of those

businesses. Uh some of the owners we expect will will want uh you know, ownership in Orange Juice in a similar way uh that investors have. Uh it actually also in certain circumstances could come with tax deferral advantages uh when you when you you know, you sell a business for for equity rather than for for cash. U so there there are variety of reasons why business owners might want that equity. Uh but that equity is more valuable to them generally speaking if it's a publicly traded company um or or or has a has a vision toward going public in in a you know kind of a reasonable number of years. Uh because often if you're a business seller, one of the key things you're looking for is liquidity. If you have a functioning business, it's very successful, you enjoy what you do, you might even want to continue working

there. Um, but for one one reason or another, uh, whether it's because you're, you know, you're looking to eventually retire, you're looking to pass on what you build, or you just want to diversify, you're generally looking for some form of liquidity. And a publicly, you know, a company with publicly traded shares can offer that a lot better than a private company can. Uh, and and so that that's kind of the key motivation to eventually go uh public. Uh, in addition, u you know, we've already gotten questions. Um, obviously as a private company, you know, when you're raising capital from accredit investors, uh, but of course people reach out and say, you know, I obviously I can't invest that, but you know, I'd like to invest a smaller amount. And, you know, having a public listing lets investors of a variety of sizes participate. Um, and and because,

you know, this is a Bitcoin company, obviously, Bitcoin has a lot of enthusiasts. Um, you know, we think that that having a a retail stock, um, uh, you know, can be interesting to a lot of people. Um so we we think that there are additional kind of capital market access uh opportunities if you get large enough for for the obviously there's an additional cost of being public like you said you have to answer to public shareholders um there's a lot more auditing burden there there's obviously a lot more frictions and expenses but if you reach a scale where that makes sense it does unlock additional opportunities and but I would say the main thing is we want to make sure that we have uh you know kind of uh liquid uh offerings for uh business sellers that that might not want the entire value of their business

in cash and might actually want to continue to participate in that side of both their businesses and other businesses um in the orange juice umbrella. >> And this might be early, but do you have any thoughts on how you'll go public? >> Uh that's still um early at this point. Um you know, we we we intend in in a number of years to go public. Obviously, these are it's very market condition dependent. Um you know, that the lawyers obviously want us to be very cautious with how we phrase things as well. um you know we want to make sure that we're doing things um properly and conservatively. But uh when it comes time if the business makes sense to be public um you know we we'll explore a variety of things to to kind of make sure that that's done in a optimal way.

>> Okay. So now let's talk about the AI portion. One part of your press release um you know mentioned that you will be quote assembling an in-house operating team to support companies with operational improvements and successfully navigate the AI transition. So how do you see orange juice helping your portfolio companies with AI? >> Yes. So a lot of business owners uh especially ones that are looking to sell are um you know older in years. um they they might not you know they have a lot they're handsful running a business um you know they they might have just been overwhelmed figure how you know how can I get AI to make my business a little bit more efficient um uh and if you have a team that is prepared to go in there

and help them with that very question uh you know it's a way to kind of ease them of that burden um you know it's not one of those like hack and slash type of AI approaches uh we just say hey humans are irrelevant we can do everything with AI we can degrade customer experience to, you know, save, you know, a couple pennies here and there. Uh, instead is basically saying, okay, are there redundant back-end tasks that can be, you know, just way smoother with AI. Um, uh, you know, can we use AI? And just, you know, obviously the various kind of pattern recognition, optimization to figure out where where revenue growth might be able to come from, you know, can we can we do revenue optimization with with AI with with that analysis? Um a and you know even even just like value stocks in general like um you know I pay

attention a lot to the banking space which is something obviously it's a separate conversation than orange juice but when you look at like community bank CEOs or very small regional bank CEOs um they're it's often just not the most techforward group out there uh you know the the average CEO in that category is like 60 years old um uh and you know they're experts in finance and banking and and all this they're not necessarily tech experts uh and so when They look around, they're saying, "How can we keep up with the really big banks that can go hire all these, you know, AI experts and tech experts and all that and the digitizer platforms? How can we how can we keep up with that?" And I would I I think that basically the same type of questions being asked by a ton of small business small and medium business

owners around the country and around the world which is you know the owners the owners you know you know like up in years may may even if they are techsavvy they might just have their hands full right they're just they're running a business um they're not you know they're not they don't want to reinvent the wheel this whole thing and just kind of custom apply it. they could bring in consultants, which is hard if you're at that smaller scale. Uh, and so we think that having a small but but very kind of um, you know, kind of updated uh, in-house team to go in and just work with that owner and say we want we want to preserve the business that you built.

We want to we don't want to interfere with customer relationships and and just disrupt your team, but we do want to find ways that, you know, to stay competitive in this modern world. How can we how can we streamline your back end? How can we make it so that maybe you don't have to hire, you know, maybe you're not letting people go, but you're not hiring as much because you're doing more with the employees you have because you can empower those employees to to do more with AI. Um, you know, how can you find how can you use AI to seek out new revenue opportunities that, yeah, that might have been invisible to you before. So, we generally think that there's an arbitrage there of of these kind of just smaller, you know, cash flowing businesses that just just probably aren't the earliest AI adopters and that

can be accelerated in a in a responsible way. >> Yeah. I mean, even if I think about my company, just in the last few months, so many of these backend um operations have been completely transformed. So, I agree that um that could probably happen at pretty much every single company on the planet. >> Yeah. Um, all right, let's talk about strategy. Now, you know, we alluded to this earlier. They've definitely come under fire recently for complicating their capital structure. Uh, you know, there are some people who are saying that what they've done is created a structure where any move they make will hurt at least one part of the capital structure. And obviously, we've seen that they're selling Bitcoin after

Michael Sailor famously said, you should sell a kidney before you sell Bitcoin. So, what do you say? um you know to those critics like do you agree with them? Do you disagree? What's your take on what's been happening with strategy recently? >> So I think there's some valid criticism. I think my my my view kind of it shifted over time based on when you asked me this question. Uh because you know I've been a I've been a a you know analyst and and shareholder of Micro Strategy. So I I I you know analyze them. Um when I when I went on their February earnings call um uh so I've been on two of their earnings call as an analyst. Uh one of the things I focused on the two main questions I asked were um you know are they going to maintain that existing USD

reserve policy so that two to threeyear uh uh of worth of of preferred dividends are they going to maintain that policy and two we had seen actually at the ego death side in our venture capital arm we had seen a number of companies looking to build products on top of STRC um uh some of which could be levered uh and so we we you know that that you certainly gave me some red flags. Um uh combined with just Trady leverage. If you have one thing, you know, pretty low volatility with a high yield and you can borrow at a lower yield than that. Um there's a lot of investors out there uh either retail or institutional that might want to try to lever that trade and it comes with certain risks. Um so my second question was, you know, are

you monitoring leverage built on top of STRC? Uh and would you kind of encourage or discourage that that type of thing? um in the months that followed um generally speaking their their USD reserve dipped below their their two to threeyear guidance that they had given and you know when they were gathering questions for their next earnings call which I I wasn't on but I did on on social media provide that question which was I point out that the the dollar reserve fell to 18 months outside of their their two to threeyear range and if they have updated guidance um you and then in the in the month or so that followed after that it at one point dipped all the way to down to six months of dividends of um uh of reserves. And to their to their credit, it wasn't because they, you know, they they just

aped into Bitcoin. They actually paid off one of their convertibles. So they they I I would assume that they they actually somewhat view that as a conservative decision. Um but I think kind of a chief, you know, if I were to be critical of the company is that they generally speak when a company sets guidance, especially things that is in their power to do uh the market generally expects them to follow that guidance. And so there's kind of surprises uh to that to you know to their operations um you know it can spook investors. So that combination of having I think a lower dollar reserve and then you know leverage built on top of STRC obviously that combination can create a very powerful volatility event.

Uh and then when that volatility event happens investors can get spooked about the ability to for the company to kind of continue supporting uh you know the dividends there. Um I so I I think that there are things you can be critical of of kind of the steps leading up to that. Um where I I do like the announcement that they did uh where they came out with that kind of updated plan where now they have a board level kind of line in the sand that they're that the reserve has to stay above 12 months unless the board authorizes otherwise. Um they also kind of authorized um pools of like buyback capital um you know for some of their preferred with a with an emphasis on STRC as well as potentially their own common stock. um they've always been trying to make their um my read of their

kind of um uh selling of Bitcoin uh is partially that they want to show um that they you know that reserve can be tapped to pay for dividends and things which unlocks obviously years of reserves assuming that Bitcoin doesn't just totally collapse in value or something. Uh and and you know obviously if in a in a perfect world they don't really want to sell their Bitcoin. They want Bitcoin to keep appreciating. um they want to be able to issue new capital with with positive MNAVs. Um but they do have that option to fall back to uh and so I think that there there is been some criticisms around say the path that pens to get here. Um it would have been I think better just not to let the the dollar reserve fall as low as it did. But I do think that the steps that they've done

since then uh have been you know about as ideal as I could consider. Like if I just found if I just found myself in that situation with you have six months of reserves, STRC just had a really big volatility event and it's still nowhere near its extended target. What steps do you do now X Y and Z? Uh I I I can't imagine what steps I would have taken differently than they would have since then. Uh even if I might have advised different steps in the the months leading up to that point. Yeah, I said this on some other shows, but it sort of felt like what happened was that it was more about the psychology of just whether or not you trusted their judgment anymore. It was like they said one thing, they, you know, did another thing there, you know,

not clear communication. Like there were just a bunch of missteps that I think caused investors to lose confidence in the decisions they were making. Um, and it's not about like, you know, whether or not they have enough Bitcoin to fund all the dividends or anything like that. Um, but you know, ever since they announced their new plan and you know, all these kind of rules about how they'll operate, we've seen that. So, first of all, um, MSTR uh, the MSTR MNAV is still at about one and STRC is well actually last night when I checked this it was at 85. I don't know what it's right now at this moment, but so it's not at the $100 it's supposed to be at.

So, you know, given this state of affairs, if you were strategy, what would you do? >> Uh, good set of questions. I mean, their latest actions have been to be building their dollar reserve. Uh, they actually, I think, I think announced one in the past 24 hours. They they got it up something like 22 months. Um uh so I think that's a reasonable kind of initial step is you just have this this USD reserve and some people are critical of it while it's building because it is is generally speaking dilutive in terms of Bitcoin per share to be building that reserve. Um you know obviously an ideal path is that you never dip the reserve in the first place so that you you know you might not have boosted per bitcoin per share as much uh but then you're not also pulling it back but again you you

can't really go back and change the past. So if you are rebuilding the reserve I think it's a reasonable first step. Um, two, uh, if if STRC stays in the 80s, um, they do have this authorization to to buy it back. Um, so that's that's that's an option that they that they can turn to, which I think can make sense. Um, I I also think a very reasonable approach at this current time is just a wait and see approach. Uh, it's still early. Um, you know, it generally takes a while to repair. Uh, like you brought up, you investor psychology around management. um if they deviated from guidance, they have this new guidance. Uh I think the market wants to see how credible that new guidance is. Uh I think the fact that it's backed by the board uh further uh

boosts the credibility. Uh but the market, you know, it takes time for information to go through the market. Um they I think they want to see months and quarters of of execution. Um and and so I think that some sometimes the best option is to not really change things and just and just keep doing what you said you would do and give the market time to adjust. Uh it can also be the case that the market um just currently weights STRC at a higher risk and it wants a higher yield. Um and so it's pricing it down so that it has that yield um uh you know at least for for new in you know for for investors that buy in. Um and and so um they have a couple of levels that they can pull. Um but I I you know I wouldn't say that

they have to overdo anything. I mean I think we're still in a Bitcoin bare market. So it's natural that just MNAVs are compressed and and and just overall demand for their products is relatively compressed especially after they had that you know that market scare that volatility event. So I I I think u you know just going for now and just continue to operate the way that they said they would is probably the the key first step. >> Okay. And I would love to ask two quick questions on Bitcoin. One is about BIP 110 which proposes a temporary soft fork in which nodes would for a year reject transactions that hold arbitrary data such as for inscriptions.

Do you agree with BIP 110 supporters that inscriptions and similar data on the Bitcoin blockchain are quote unquote spam? >> I'd say for the most part I I do view that as spam. Uh a lot of it is just speculation. Um uh you know I think that the amount of utility that has been used uh for Bitcoin's non-monetary space has been low. So you know there's that gets of a difficult question. It's like if you pay for it is it spam? uh generally speaking for a network that is designed primarily to be a a money I would consider that spam. Um one one thing you mentioned is that it it keeps arbitrary data out of Bitcoin. That that the challenging part of BIP 10 is it's not even fully the case. There's it limits

op return. Uh there's still ways to put a lot of non-monetary data into the blockchain especially uh through the more encryption route. So into that kind of witness uh of the blockchain. Uh and that's actually one of the biggest uh uh criticisms that opponents of it have uh or those that you know might even be sympathetic to the cause of of you know adding cost to to non-monetary uh data in the blockchain. They might say that this you know this doesn't necessarily solve the problem. It just kind of moves the problem around. Uh and then of course there's different debates within the Bitcoin space. Are certain types of of how that non-monetary data is organized better or worse than others?

like if you break it into chunks, does that fix it? Uh or or is it still a problem? That that's kind of the ongoing debates. In general, I I think it's it's one of those things where there are reasonable concerns that the proponents of that of that BIP have um you know, about either elicit material winding up in Bitcoin uh or just just the overall kind of bloat that can happen. Um uh but I think that anytime you try to rush a soft fork in Bitcoin uh you know I think one of the one of the probably the one of the probably the biggest single you know attribute of Bitcoin that that brings a lot of us to it is it is very very hard to change. Uh if Bitcoin was easy to change um you know that that kind of makes its sound money aspect uh

reduced. So I think the fact that Bitcoin is very resistant to changes. There were those just a couple years ago that really tried aggressively to make Bitcoin more expressive uh you know to take on just just more kind of script expressivity in Bitcoin. Uh and you that kind of ran into the a wall of not going to happen at least not in that time frame. Uh and now it's kind of interesting that we're seeing kind of the other angle which is how to make Bitcoin even more conservative uh in some sense. Um, and so I I think there's a a long-term discussion to be had around non-monetary data in Bitcoin. Uh, but in general, I view some of the marketing around the BIP to be somewhat disconnected from what is the actual that the BIP is kind of able to do on a

technical level as it relates to non-monetary data. >> Okay. And of course, I have to ask about the quantum threat to Bitcoin. I'm sure you know that this is something that a lot of people have their eyes on in terms of what is potentially a long-term threat that obviously would hit most of crypto and and you know a lot of other things in the world. But the threat is almost existential for Bitcoin just because of certain things around you know Satoshi's coins and the different key signatures some of which are quite vulnerable. There's um just you know a whole set of things around also the culture of Bitcoin that you know are causing people to have concern about

whether or not the community will be ready to face that threat once it comes. How do you think about that? >> Good question. I I would separate the different concerns. So I I view Satoshi's coins as less of a concern than most because we're talking about 5% of coins roughly speaking. Uh and then there's you know there's a number of loss coins as well. Um I I you know I view that as a volatility event more so than existential. I think the bigger topic is the other one you brought up which is that and that I mentioned the prior question which is that Bitcoin is very resistant to change. Um so there's a lot of systems that are quantum uh vulnerable should should a you know a highowered quantum computer emerge. Um but some of those can be changed faster than a than a system that is inherently

decentralized and inherently resistant to uh rapid change. Uh and then even when you do the change uh if you for example if you introduce a new address type it takes time for existing coins to migrate over to that. There's only so much throughput that Bitcoin can do. Uh and so you you generally speaking want to get that change uh earlier than later. Um uh I I do think it's a good thing that there are researchers working on this problem. One of the worst things you can do is is overestimate the threat and then rush a solution. Um because you know quantum resilient signatures are still evolving. It's still not clear what the best one's going to be years down the line in terms of what is what is most data efficient. Uh what is, you know, most resilient uh to the attacks,

what has been kind of fully vetted. Uh and so putting in one that is maybe not up to par in a number of years just just to get one in there uh could be worse could be worse than doing nothing at all. So uh I am glad that people are working on it. I don't you know I don't view it as a near-term risk in say five or 10 years like some of the the really big quantum bulls do. I do think that there's a much bigger difference between kind of theoretical growth uh in this field and actually bringing a uh cost-effective quantum computer to market at this scale. Uh generally speaking, the hardware takes longer than than you know kind of many people think when they're just kind of theory crafting it. Um but I do think it's something that can't be fully dismissed.

And you know, I I've talked to some of the people that that have, you know, they, you know, they're the ones working on the BIPS to eventually add quantum resilience signatures to Bitcoin or other solutions to to make it more resilient. And I I for one, I'm just glad that there are people looking into that uh to hopefully have solutions in place well before we need them. Uh and that we've vetted kind of all the possible things that we could do to find whatever signature types are the best for it rather than just kind of the first one that that we rushed. All right, Lynn. Well, as usual, it's been such a pleasure having you on Unchained. Thanks for coming on.

>> Thanks for having me. >> Nothing new here on Unchained is investment advice. This show is forformational and entertainment purposes only, and my guest and I may hold assets discussed on the show. For more disclosures, visit unchainedcrypto.com.