Marc Benioff, Co-CEO of SalesForce speaking at the WEF in Davos, Switzerland on January 22, 2019.
Adam Galica | CNBC
Chainalysis, a startup that sells blockchain data analytics tools, announced on Friday that it has raised $ 100 million in an investment round that values the company at $ 2 billion.
That’s twice what Chainalysis was worth just four months ago. The round was led by crypto-focused venture capital firm Paradigm, with additional backing from Salesforce CEO Marc Benioff, who invested through his investment fund Time Ventures. Existing shareholders Addition and Ribbit increased their stakes, Chainalysis said.
Unlike some in Silicon Valley, Benioff has not been as explicit about bitcoin. However, Time magazine, which the billionaire bought last year, recently published a job listing for a CFO who “is comfortable 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 bitcoins and other cryptocurrencies in illicit activities such as money laundering with its investigations and compliance software. The New York-based company competes with Ciphertrace, which is based in California, as well as the London-based company Elliptic.
Chainalysis Co-Founders Michael Gronager and Jonathan Levin.
Chainalysis, Elliptic, and CipherTrace all aim to legitimize the cryptocurrency market, which has been plagued by high-profile hacks and other illicit activities. Last year, Chainalysis helped trace $ 1 billion in bitcoin tied to the darknet market Silk Road, which was later seized by the US government.
Chainalysis CEO and co-founder Michael Gronager 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 hoarding bitcoin.
“When we raised our last round, we were basically seeing a lot of it in its infancy,” Gronager said in an interview. “What we see right now is that the market is growing and some often traditional players are embracing cryptocurrencies in a way that we haven’t seen before.”
“What has changed in the last four months is the opportunity and the speed with which we will become more customers and more revenue has just increased,” added Gronager. “That means we have to build a lot more now.”
Chainalysis said its annual recurring revenue more than doubled over the past year, without disclosing an exact sum, while its customer base also doubled. The company now has 233 employees, according to LinkedIn, and plans to use the fresh cash to hire hundreds more.
Is Bitcoin becoming more common?
Major Wall Street players have been closing in on bitcoin in recent months as the price of the cryptocurrency 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 wealth management clients access to bitcoin funds.
Bitcoin posted a new record price of over $ 61,000 earlier this month. It is currently trading around $ 53,000, but it is still up about 80% so far in 2021. Some investors say it is attractive as an asset thanks to its scarcity, with a total supply limited to 21 million units, and it is also he sees it as a possible hedge against inflation. .
Still, skeptics question the sustainability of the bitcoin rally. The digital currency is known to be wildly volatile in the past, having once climbed to nearly $ 20,000 in 2017 before dropping 80% the following year. Meanwhile, officials like US Treasury Secretary Janet Yellen and European Central Bank President Christine Lagarde have sounded the alarm 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. There are more and more legitimate use cases.”
Illicit activity accounted for just 0.34% of all cryptocurrency transaction volume last year, according to a report by Chainalysis, compared to about 2% the previous year. However, ransomware incidents, in which hackers encrypt files and then demand a ransom to restore access, increased by 311% year-over-year as criminals exploited people working from home during the pandemic. .