Chainalysis raises $100 million, underscoring surging demand for blockchain surveillance

Chainalysis, a blockchain tracking firm whose client base includes government investigators, crypto exchanges and even financial institutions, has raised $100 million in a funding round that highlights the surging demand for cryptocurrency compliance infrastructure.
The Series D round, which values ​​the New York-based company at $2 billion, was led by Paradigm, with participation from Additional Capital, Ribbit and Marc Benioff’s Time Ventures. It follows a $100 million Series C round in November at a $1 billion valuation. In six years, Chainalysis has raised a total of $266 million.
Chainalysis, one of the largest cryptocurrency investigations firms in the U.S., is building software to unravel the tangled web of blockchain transaction records, which are public but difficult for non-experts to decipher without context, such as flagged wallet addresses and blacklisted coins.
That has turned into a multimillion-dollar opportunity for Chainalysis. Government agencies use its products to combat criminal gangs tied to bitcoin, while exchanges turn to it to help audit and sometimes freeze stolen cryptocurrency. U.S. government agencies are a particularly big customer: The FBI, Internal Revenue Service (IRS), Department of Homeland Security (DHS) and other federal offices spent more than $10 million on Chainalysis in 2020, according to records reviewed by CoinDesk.
But the firm is also planning to pursue international deals, particularly in Asia, where Chief Executive Michael Gronager hopes to revive pre-pandemic expansion plans by investing in its Tokyo and Singapore outposts. Those offices were opened amid uncertainty brought on by the coronavirus but have so far been hampered by hiring woes, Gronager said.
Chainasys, which says a growing global roster includes government agencies in 30 countries and companies in 60, said its annual recurring revenue more than doubled year-on-year, driven in large part by a six-month surge that coincided with a bitcoin price boom.
Gronager said private sector partnerships remain the primary source of new relationships for Chainalysis, while its government business is “super solid” on the one hand, but also means staying put on the other. He hinted that financial institutions are also beginning to show interest.
Gronager said onboarding new customers is an expensive proposition, so the money will be used to advance that development.
“We’re an enterprise product company,” he said. “Every time we need to sign another $1 million or $2 million contract, we need to hire another sales rep.” (CoinDesk)