Chainalysis doubles valuation to $ 2 billion with support from Benioff

Marc Benioff, Co-CEO of SalesForce, speaks at WEF in Davos, Switzerland on January 22, 2019.

Adam Galica | CNBC

Chainalysis, a start-up that sells blockchain data analysis tools, announced on Friday that it has raised $ 100 million in an investment round valuing the company at $ 2 billion.

That’s double what Chainalysis was worth four months ago. The round was led by cryptocurrency-focused venture capital firm Paradigm, with additional support from Salesforce CEO Marc Benioff, who invested through his investment fund Time Ventures. Existing shareholders Addition and Ribbit have increased their stakes, Chainalysis said.

Unlike some in Silicon Valley, Benioff isn’t that outspoken about bitcoin. However, Time Magazine – which the billionaire bought last year – recently posted a vacancy for a chief financial officer who is “familiar with bitcoin and other cryptocurrencies.” Benioff declined to comment on his views on bitcoin when asked by CNBC.

What is Chainalysis?

Founded in 2014, Chainalysis helps governments and private sector companies detect and prevent the use of bitcoin and other cryptocurrencies in illegal activities such as money laundering with its investigation and compliance software. The New York-based company competes with Ciphertrace, which is based in California, as well as London-based Elliptic.

Chainalysis co-founders Michael Gronager and Jonathan Levin.

Chain analysis

Chainalysis, Elliptic and CipherTrace aim to legitimize the cryptocurrency market, which is fraught with high profile hacks and other illegal activities. Last year, Chainalysis helped track down $ 1 billion in bitcoin linked to the Silk Road darknet market, which was subsequently seized by the US government.

Michael Gronager, CEO and co-founder of Chainalysis, told CNBC that the company’s latest round of funding came at a time of increased momentum for cryptocurrencies, with institutional investors and companies like Tesla piling up in bitcoin.

“When we raised our last lap, we actually saw a lot of that in its infancy,” Gronager said in an interview. “What we see now is that the market is growing and some, often traditional players, are embracing crypto in ways we haven’t seen before.”

“What has changed in the last four months is the opportunity and the speed at which we will grow into more customers and more revenue has just gone up,” added Gronager. “That means we now have to build a lot more.”

Chainalysis said its annual recurring revenue has more than doubled in the past year – without disclosing an exact amount – while its customer base has also doubled. According to LinkedIn, the company now has 233 employees and plans to use the new money to hire hundreds more.

Is bitcoin going mainstream?

Major Wall Street players have warmed up to bitcoin in recent months as the cryptocurrency’s price soared to new records. Goldman Sachs restarted its cryptocurrency trading desk earlier this year, while Morgan Stanley last week became the first US bank to offer asset management clients access to bitcoin funds.

Bitcoin recorded a new record price of more than $ 61,000 earlier this month. It is currently trading around $ 53,000 but is still up about 80% so far by 2021. Some investors say it is attractive as an asset due to its scarcity, with total supply of up to 21 million units, and it is also being seen as a possible hedge against inflation. .

Still, skeptics question the sustainability of the bitcoin rally. The digital currency is known to have been hugely volatile in the past, having once surged to nearly $ 20,000 in 2017, before plunging by 80% the following year. Meanwhile, officials such as US Treasury Secretary Janet Yellen and European Central Bank President Christine Lagarde have raised the alarm about bitcoin’s use in illegal transactions.

“We are involved in talks with regulators in the US and around the world,” said Gronager. “What’s important to note is that this space has changed a lot and the amount of criminal activity is decreasing a lot. It’s getting more and more legitimate use cases.”

According to a report by Chainalysis, illegal activity accounted for only 0.34% of the total cryptocurrency transaction volume last year, compared to about 2% a year earlier. Ransomware incidents – where hackers encrypt files and then demand ransom to restore access – were up 311% year over year as criminals exploited people working from home during the pandemic.