Chainalysis doubles valuation to $ 2 billion with backing from Benioff

Chainalysis, a start-up that sells blockchain data analysis tools, said on Friday it had raised $ 100 million in an investment round valuing the company at $ 2 billion.
That’s double what Chainalysis was worth just four months ago. The round was led by crypto-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 holdings, Chainalysis said.

Unlike some in Silicon Valley, Benioff hasn’t talked as much about bitcoin. However, Time Magazine – which the billionaire bought last year – recently posted a job posting for a CFO “comfortable with bitcoin and other cryptocurrencies”. Benioff declined to comment on his take on bitcoin at CNBC’s request.

Chainalysis, Elliptic, and CipherTrace aim to legitimize the cryptocurrency market, which has been laden with high-level hacks and other illicit activity. Last year, Chainalysis helped track down $ 1 billion worth of bitcoin linked to the Silk Road darknet marketplace, which was later seized 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 when cryptocurrency dynamics are accelerating, with institutional investors and companies like Tesla entering the market. bitcoin.

“When we lifted our last round, we were basically seeing a lot of it in its early days,” Gronager said in an interview. “What we’re seeing right now is that the market is growing and some often traditional players are embracing crypto in ways we’ve never seen before. ”

“What has changed over the past four months is the opportunity and speed with which we will become more customers and more revenue has just increased,” added Gronager. “It means we have to do a lot more construction now. ”

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

Major Wall Street players have warmed to bitcoin in recent months as the price of cryptocurrency hits new highs. Goldman Sachs restarted its cryptocurrency trading desk earlier this year, while Morgan Stanley last week became the first U.S. bank to offer wealth management clients access to bitcoin funds.

Bitcoin landed a new record price of over $ 61,000 earlier this month. It is currently trading around $ 53,000, but is still up around 80% so far in 2021. Some investors say it is attractive as an asset because of its scarcity, with an offer total capped at 21 million units, and it is also considered a potential hedge against inflation. .

Still, skeptics question the sustainability of the Bitcoin rally. The digital coin has been known to be extremely volatile in the past, having soared to nearly $ 20,000 in 2017 before plunging 80% the following year. Meanwhile, officials like US Treasury Secretary Janet Yellen and European Central Bank President Christine Lagarde have sounded the alarm bells about the use of Bitcoin in illegal transactions.

“We are involved in conversations with regulators in the United States and the rest of the world,” Gronager said. “What is important to note is that this space has changed a lot and the amount of criminal activity is decreasing a lot. The use cases are more and more legitimate. ”

Illicit activity only accounted for 0.34% of all cryptocurrency trading volume last year, according to a report from Chainalysis, down from around 2% a year earlier. However, ransomware incidents – where hackers encrypt files and then demand a ransom to restore access – have increased by 311% per year, with criminals exploiting people working from home during the pandemic.