Chainalysis doubles valuation to $ 2 billion with support from Benioff

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

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

Unlike some in Silicon Valley, Benioff doesn’t talk much about bitcoin. However, Time Magazine – which the billionaire bought last year – recently published a list of jobs for a chief financial officer who feels “comfortable with bitcoin and other cryptocurrencies”. Benioff declined to comment on his views on bitcoin when questioned by CNBC.

Founded in 2014, Chainalysis helps governments and private sector companies to detect and prevent the use of bitcoin and other cryptocurrencies in illicit activities such as money laundering with their investigations and compliance software. The New York-based company competes with Ciphertrace, based in California, and also with Elliptic, based in London.

Chainalysis, Elliptic and CipherTrace aim to legitimize the cryptocurrency market, which has been replete with high profile hacks and other illegal activities. Last year, Chainalysis helped track $ 1 billion in bitcoin linked to the Silk Road darknet market, which was then confiscated by the U.S. government.

Michael Gronager, CEO and co-founder of Chainalysis, told CNBC that the company’s latest round of financing came at a time of great momentum for cryptocurrencies, with institutional investors and companies like Tesla accumulating bitcoins.

“When we lifted our last round, we were basically seeing a lot of that in his childhood,” said Gronager in an interview. “What we see now is that the market is growing and that some traditional players are adopting encryption in a way that we have never seen before.”

“What has changed in the past four months is the opportunity and the speed with which we will grow and have more customers and more revenue has simply increased,” added Gronager. “It means that we need to build a lot more now.”

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

Leading Wall Street players have been enthusiastic about bitcoin in recent months, as the price of cryptocurrency has hit new records. 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 reached a new record price of more than $ 61,000 earlier this month. It is currently trading around $ 53,000, but is still up 80% so far in 2021. Some investors say it is attractive as an asset thanks to its scarcity, with the total supply limited to 21 million units, and it is also seen as a potential protection against inflation.

Still, skeptics question the sustainability of the bitcoin rally. The digital currency was known to be extremely volatile in the past, having risen to almost $ 20,000 in 2017, before dropping 80% the following year. Meanwhile, officials like U.S. Treasury Secretary Janet Yellen and European Central Bank President Christine Lagarde have raised the alarm about the use of bitcoins in illegal transactions.

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

Illegal activity accounted for just 0.34% of the total volume of cryptocurrency transactions last year, according to a Chainalysis report, up from about 2% a year earlier. However, ransomware incidents – where hackers encrypt files and demand a ransom to restore access – have increased by 311% year on year, as criminals exploited people who worked at home during the pandemic.