Chainalysis doubles its valuation with support from Benioff to $ 2 billion
Marc Benioff, Co-CEO of SalesForce, speaks on January 22, 2019 at the WEF in Davos, Switzerland.
Adam Galica | CNBC
Chainalysis, a startup that sells blockchain data analytics tools, announced Friday that it raised $ 100 million in a $ 2 billion investment round.
That is twice as much as the chain analysis four months ago. The round was led by the crypto-focused venture capital firm Paradigm, which was additionally supported by Salesforce CEO Marc Benioff, who invested through his mutual fund Time Ventures. Existing shareholders Addition and Ribbit increased their stakes, Chainalysis said.
Unlike some in Silicon Valley, Benioff wasn’t as vocal about Bitcoin. Time Magazine, which the billionaire bought last year, recently published a job advertisement 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 chain analysis?
Established in 2014, Chainalysis helps governments and private sector companies with its investigation and compliance software to detect and prevent the use of Bitcoin and other cryptocurrencies in illegal activities such as money laundering. The New York-based company competes with California-based Ciphertrace and London-based Elliptic.
Chainalysis co-founders Michael Gronager and Jonathan Levin.
Chainalysis, Elliptic and CipherTrace aim to legitimize the cryptocurrency market, which is fraught with high profile hacks and other illegal activity. Last year, Chainalysis helped track down $ 1 billion worth of Bitcoin in connection with the Silk Road darknet marketplace, which was then confiscated by the US government.
Michael Gronager, CEO and co-founder of Chainalysis, told CNBC that the company’s latest funding round came at a time of increasing momentum for cryptocurrencies, with institutional investors and companies like Tesla piling up in Bitcoin.
“When we upgraded our final lap, we basically saw a lot of this in its infancy,” Gronager said in an interview. “What we are seeing now is that the market is growing and that some often traditional players are adopting crypto in ways that we have not seen before.”
“What has changed in the last four months is the opportunity and the speed at which we will grow to more customers and more sales,” added Gronager. “That means we have to build a lot more now.”
According to Chainalysis, annual recurring sales more than doubled in the past year – with no exact amount given – while the customer base has also doubled. According to LinkedIn, the company now has 233 employees and plans to use the fresh money to hire hundreds more.
Is Bitcoin going mainstream?
Big Wall Street players have warmed to Bitcoin in the past few months as the price of the cryptocurrency hit new records. Goldman Sachs restarted its cryptocurrency trading desk earlier this year, while Morgan Stanley became the first U.S. bank to offer wealth management clients access to Bitcoin funds last week.
Bitcoin hit a new record price of more than $ 61,000 earlier this month. It currently trades around $ 53,000, but it’s still around 80% by 2021. Some investors say that due to its scarcity, with total supply limited to 21 million units, it is attractive as an asset and is also seen as a potential hedge against inflation.
Still, skeptics are questioning the sustainability of the Bitcoin rally. The digital coin has been known to be extremely volatile in the past, having once surged to nearly $ 20,000 in 2017 before falling 80% the following year. Meanwhile, officials like US Treasury Secretary Janet Yellen and European Central Bank President Christine Lagarde have sounded the alarm over Bitcoin being used in illegal transactions.
“We are involved in discussions with regulators in the US and the rest of the world,” said Gronager. “It’s important to note that this area has changed a lot and the amount of criminal activity is decreasing. It’s becoming more legitimate use cases.”
According to a report by Chainalysis, illegal activity accounted for just 0.34% of total cryptocurrency transaction volume last year, compared to around 2% last year. However, ransomware incidents, where hackers encrypt files and then demand a ransom to restore access, increased 311% year over year as criminals exploited people who worked from home during the pandemic.