BlockFi, the company pioneering the financial services infrastructure of crypto, makes crypto more accessible and useful to the everyday consumer. With $100M in projected revenue across the next 12 months, BlockFi has emerged as a leader that is bridging the gap between cryptocurrencies and traditional financial and wealth management products. BlockFi’s premiere product includes a crypto-based interest account that provides up to 8.6% APY on bitcoin and other coins. BlockFi also offers crypto-backed loans starting at a 4.5% interest rate. BlockFi’s recent product launches include a new mobile app and the global rollout of its zero-free trading and institutional lending platform. BlockFi will continue to create products to expand the crypto ecosystem including a credit card wit crypto rewards that will launch later this year.
AlleyWatch caught up with CEO and Cofounder Zac Prince to discuss the company’s impressive traction, product pipeline, the state of crypto, and the company’s most recent funding round. Fundraising at a blazing pace, BlockFi has closed its A, B, and C rounds all within a period of 12 months.
Who were your investors and how much did you raise?
We raised $50M in Series C funding led by Morgan Creek Digital. Other participating investors include Valar Ventures – the lead investor in BlockFi’s Series A and B – CMT Digital, Castle Island Ventures, Winklevoss Capital, SCB 10X, Avon Ventures, Purple Arch Ventures, Kenetic Capital, HashKey, Michael Antonov, NBA player Matthew Dellavedova and two prestigious university endowments.
Tell us about the product or service that BlockFi offers.
BlockFi offers a suite of financial products that enable clients to build and manage wealth through digital asset investments.
These products include crypto-based interest accounts providing up to an 8.6% annual percentage yield on bitcoin, ether, and stablecoins; crypto-backed loans that allow investors to access liquidity up to 50% of an asset’s value in USD; and zero-fee trading.
We now boast more than $1.5B in assets under management on the platform.
What inspired the start of BlockFi?
I was a crypto investor and had a personal experience where my crypto assets weren’t being considered as collateral when I applied for a loan. It really illustrated how underdeveloped the ecosystem of financial products around crypto was and inspired us to create products that would advance the digital asset economy, increase consumer adoption and simply let anyone—from average consumers to institutional investors—do more with cryptocurrencies to achieve their financial goals.
How is BlockFi different?
We’re the only fintech brand in the crypto space that has achieved institutional backing at our scale, which is a testament to our team and our approach to maturing the overall digital asset ecosystem.
BlockFi is a financial services company of a new breed, creating a bridge between cryptocurrencies and traditional financial and wealth management products to advance the overall digital asset ecosystem for individual and institutional investors.
What market does BlockFi target and how big is it?
BlockFi targets retail and institutional investors to provide them with more options to use digital assets as a tool to build wealth in a vein not dissimilar from how banks service their clients to build wealth through fiat currencies.
What’s your business model?
BlockFi builds a bridge between institutional finance and retail investors. Our business model is simple: we access low-cost capital and attractive yields from our institutional partners, and we flow those rates through to our retail user base in the form of up to 8.6% APY interest accounts and USD loans starting at 4.5%.
How has COVID-19 impacted the business?
BlockFi’s Series C comes amid turbulence in world markets, with many retail and institutional investors reassessing their portfolios to better hedge against ongoing economic uncertainty, such as inflation or a sudden drop in the stock market. As many are starting to embrace bitcoin as an uncorrelated asset from equities and other commodities, BlockFi has uniquely capitalized on these macroeconomic trends and is capturing a large influx of new customers seeking new ways to diversify their portfolios.
What was the funding process like?
This was an opportunistic funding round for us, and we, fortunately, had a couple of options for lead investors in the round. We decided to work with the Morgan Creek team as a lead because we have worked with them previously and they are a valuable partner to the company on a number of fronts. After finalizing the lead terms, we spoke with our existing investors and quite a few of them wanted to participate. We also added a couple of new strategic investors in this round.
What are the biggest challenges that you faced while raising capital?
When we started, many VCs asked us why we didn’t do an ICO. We believed that having a token in our model didn’t make sense. While we could have accessed $30M or more doing an ICO, we believed that the traditional VC funding model would allow us to build a company that was in compliance with US regulations and would have a greater ability to scale in the long term. So far, we’ve been right.
What factors about your business led your investors to write the check?
Our revenue has grown ten-fold over the past year, putting the company on pace to reach $100M in projected revenue over the next 12 months. We’ve launched a mobile app, making it even simpler for consumers to invest in crypto, and have developed our interest account, zero-fee trading and institutional lending on a global scale. With access to more capital from our investors, we’ve been able to invest in top talent to help us build world-class products that can be rolled out globally as cryptocurrencies and bitcoin specifically continues to gain mainstream appeal.
What are the milestones you plan to achieve in the next six months?
In the near term, we’ll be using these funds to develop and launch our highly anticipated crypto-rewards credit card, roll out ACH payments allowing clients to fund their BlockFi Interest Accounts directly from their bank accounts while continuing development on our mobile app. We’ll also be adding support for more cryptocurrencies gradually in response to customer demand.
We think the credit card will have a huge positive impact on bringing crypto to mainstream consumers. While most rewards encourage people to spend more money – miles to buy more flights, points to book more hotels – ours will truly benefit clients by letting them invest and earn money in the long term, in the form of crypto – something we feel will uniquely capitalize on shifting consumer trends during a global pandemic.
We think the credit card will have a huge positive impact on bringing crypto to mainstream consumers. While most rewards encourage people to spend more money – miles to buy more flights, points to book more hotels – ours will truly benefit clients by letting them invest and earn money in the long term, in the form of crypto.
What advice can you offer companies in New York that do not have a fresh injection of capital in the bank?
Raising VC capital is difficult, especially in the midst of the economic uncertainty the world is experiencing. However, investors are always looking for innovative products with proven results, and nothing spurs innovation like a crisis. While raising funds can often take longer than you originally plan for, you should never let the lack of fresh capital stop you from building your company.
Where do you see the company going now over the near term?
BlockFi is committed to further developing the crypto market and making digital assets more accessible to everyday consumers. Most people don’t know that you can access 8.6% in interest rates on USD equivalents, so our focus is to educate consumers and expand our products to audiences beyond crypto investors. We’re doing this by building products that are easy to use, simple to understand, and show strong ROI.
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