Blythe Masters, once considered the “Babe of Investment Banking” in view of her long tenure and celebrity senior role at JPMorgan—which included her being credited for helping to create those snarkly financial derivative products known as credit default swaps (CDS), has since aspired to become known as either the “Blockchain Batgirl” or the “Babe of Blockchain” through her latest career role as CEO of the bitcoin-buttressed fintech startup Digital Asset Holdings. But, now that Blythe is no longer flying with the superpowers that came with her JPMorgan superhero costume, she is rapidly discovering that startup land has more sharp elbows than JPM’s bond trading floor.

Despite the fact Ms. Masters is undeniably a bona fide member of any Masters of the Universe Club (sic Tom Wolfe/Bonfire of the Vanities)—and however much “blockchain technology” has inspired a cadre of brokerdealers and banks to get on board a train that could evolutionize the financial industry at large, and even despite a potential “death-knell magazine cover”  courtesy of October’s Bloomberg Markets Magazine, Masters’ foray into the world of fintech startup funding is proving to be bumpy at best. The “blue ocean” this famously-fetching, blue-eyed blonde banker is now swimming in is populated not only with sharks, but with migrant bankers’ bodies floating ashore and otherwise left beside the yellow-brick road to billion dollar Unicorn valuations.

Notes NY Times business news journalist Nathaniel Popper—one of the 4^th estate’s leading bitcoin industry experts (and a MarketsMuse in his own right), Digital Asset Holdings is running into the types of startup funding challenges that mostly all mortals encounter when pitching ideas scrapped from a whiteboard: questionable valuation, untested technology value proposition, a highly-fragmented and often dysfunctional target audience, and last but not least, an investment structure that is being increasingly challenged across the institutional investing world for giving preferential ownership treatment to a select group of early investors. In this case, Digital Asset Holdings is providing a very sweet deal and a very exclusive suite of follow-on round financing options to its anchor investor, which happens to be her former employer, JPMorgan.

Here’s an excerpt from Popper’s piece—“Cash Call For a New Technology” which appeared on the front page of the 29 December edition of the New York Times business section.

The newest venture from Blythe Masters, until recently a star banker at JPMorgan Chase, appeared to be an overnight success story in the making.

Her start-up, Digital Asset Holdings, is working in one of the hottest areas of growth on Wall Street today: the blockchain technology that underlies the virtual currency Bitcoin. And Ms. Masters has already received a promise from JPMorgan, her former employer, to be the lead investor on the new project, pitching in around $7.5 million.

But Ms. Masters’s company has been struggling for months to close the deal with other investors. Most recently, large banks including Goldman Sachs and Citigroup have balked at putting money into Digital Asset Holdings after learning that JPMorgan was being given better terms than other investors, according to several people briefed on the deal.

The banks and financial firms looking into investing, the people said, have also expressed doubts about the actual software solutions Ms. Masters’s start-up is working on, much of which has been put together through purchases of smaller start-ups.

“The deal would need to improve materially for us to get involved,” said one executive at a financial firm, who has been looking at putting money into Ms. Masters’s company, speaking on the condition of anonymity because negotiations were continuing. “It’s not supercompelling.”

Digital Asset Holdings’ chief marketing officer, Beth Shah, said assertions that the company was facing challenges in raising funds were inaccurate but she declined to provide further details. All of the potential investors declined to comment.

The challenges that Ms. Masters is facing reflect in part the increasingly difficult environment facing start-ups of all sorts as investors have begun to worry that the tech industry has been overhyped and overvalued, pushing down values for companies both public and private.

She is also contending with the difficulty of building a viable business around the virtual currency Bitcoin and the various technological concepts it has introduced to the financial industry, most of all the blockchain.

Digital Asset Holdings is proposing to build something similar to the blockchain database, in order to provide a cheaper and faster way to trade other sorts of financial assets, such as loans and foreign currencies.

The problem for Ms. Masters is that several other start-ups are trying to do something similar, and there is no guarantee that any of the start-ups will ultimately succeed. Many industry experts think that it could take years to get to the point where the blockchain technology can be used effectively by banks — if it works at all.

The New York-based start-up ItBit, which is building its own blockchain-like technology, had been out trying to raise $100 million based on the assumption that the company was worth $250 million. More recently, it has scaled that back and is now hoping to get $50 million from investors, with a valuation of $135 million.

Ms. Masters hopes to raise from $35 million to $45 million, valuing the company at $100 million.

In recent months, the software that Ms. Masters has shown to potential investors allows for the issuance and trading of so-called syndicated loans — large loans broken into pieces and sold to different investors. It can take weeks for trades in this market to go through, a time span that D.A. is trying to shorten.

Investors who have looked at the software, though, say they are not convinced that Ms. Masters’s technology will fix the problems in the loan market, which are attributed as much to human cooperation as to bad software.

There are also indications that Digital Asset Holdings has not had an easy time integrating all the outside technology start-ups it bought. For example, two of the three employees who worked at Blockstack, which the company acquired in October, have already negotiated to leave D.A., people briefed on the situation said.

“All employees who were offered permanent positions at the time of the acquisitions of Bits of Proof, Hyperledger and Blockstack are still with the company,” said Ms. Shah, D.A.’s chief marketing officer.

One of Ms. Masters’s competitors, known as R3, has approached the problem from a different angle and is trying to determine how the banks want to use the blockchain before building specific software. With that strategy, R3 has signed on over 40 banks as partners in recent months, including all of the big banks that Ms. Masters is trying to persuade to invest in her company.

None of this has scared off JPMorgan, which has agreed to lead the Series A investment round in Digital Asset Holdings, people briefed on the negotiations said. To reward JPMorgan, the people said, D.A. plans to grant it warrants to buy a bigger share of the start-up in the future at the same price it is getting now. JPMorgan is said to have committed to helping Ms. Masters’s company improve and secure adoption of its technology.

Some of the other banks looking into investing in D.A. raised concerns about the JPMorgan deal in a meeting this month at the Sandler O’Neill offices that included Citi, Goldman and Bank of America representatives. Smaller financial companies, like Nasdaq and Markit, have also remained on the fence, the people briefed on the negotiations said.

For the full story from the NY Times, please click here