Fireblocks entrepreneurial history: the valuation has tripled in half a year, and Shopify in the Web3 field

Original title: "Hacking Entrepreneurship History: Fireblocks, 3 times the valuation in half a year, Shopify in the Web3 field"

Original author: Alpha Rabbit, Alpha Rabbit Research Notes

According to the data of the US Federal Trade Commission: From October 2020 to March 2021, nearly 7,000 people lost more than $80 million in the encryption field due to security issues, 1000% more than a year ago;

As an important infrastructure in the encryption ecosystem, Fireblocks This company is worth researching. The founder is a Hacker from Israel, a serial entrepreneur, whose valuation has tripled in half a year. In March this year, he also participated in the Innovation Summit of the Bank for International Settlements, and talked about his views on digital assets as a representative of entrepreneurs.

(Note, hackers in this article refer to experts who are passionate about network security technology, not hackers suspected of computer crimes)

What is the story of the startup of Fireblocks? What enlightenment can the development of Fireblocks bring to today's entrepreneurs and investors? Is its valuation too high? These are the questions that this article attempts to explore.

Company Profile  

Established in 2018 Fireblocks, the core technology product is mainly composed of Fireblocks Networks and MPC-based wallet infrastructure.

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Fireblocks Network, essentially a type of information transmission infrastructure layer, allows institutions to conduct secure settlements on different blockchains at present, without being vulnerable to various attacks, and simplifies the operation process. Fireblocks is currently providing services to more than 1,000 financial institutions, ranging from hedge funds and trading platforms to well-known large banks in the world. It also cooperates with many payment service providers and has monitored many cases of illegal transfer of assets.

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Customers see the picture above, mainly including banks, financial technology companies, trading platforms, liquidity providers, over-the-counter traders and hedge funds, etc. The main business is to build security infrastructure and custody services to help customers secure Manage digital assets of various products and services efficiently.

What is MPC?

MPC, Secure Multi-Party Computation

Secure Multi-Party Computation Allows multiple parties that do not trust each other to correctly calculate any function, while also ensuring the privacy of each party's input and output information. It can be understood as: multiple parties have their own private data, but they can perform collaborative calculations without leaking their own private data, and calculate the result of a certain objective function on the private data of each party. When the entire calculation is completed, each party does not know the private data of the other party.

Founding Team & Entrepreneurial Story

The founder and CEO of Fireblocks is Michael Shaulov (serial cybersecurity entrepreneur)

2018- Between 2019, Israeli security engineer Michael Shauolov joined forces with Idan Ofrat and Pavel Berengoltz to co-found Fireblocks, with Shauolov as CEO. In the past 20 years, the three founders have been active in the field of network security.

The three founders, the middle one is Shauolov

Before joining Fireblocks, Michael Shauolov participated in Founded Lacoon Mobile Security, later acquired by Check Point, Shauolov has given many speeches at world-renowned security conferences RSA Conference, BlackHat and Infosec conferences. Before going into business, Shauolov pioneered mobile security at the Israeli Military Technology Unit (8200) and received a special award from the President of Israel for his outstanding contributions. It is worth noting that Shauolov has also worked in several technology-related venture capital institutions.

LinkedIn from Shaulov

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Shaulov at the BlackHat conference: picture from BlackHat official website

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However, when Fireblocks was founded, there was no large-scale publicity. Before the official launch of the product, it has been focusing on research and development.

What is the opportunity to start a business?

A big event happened in 2017 when the North Korean hacker group Lazarus Group hacked four South Korean trading platforms and stole $200 million in bitcoin. At the time, Fireblocks’ current founder, Shaulov, was working at Check Point and was part of a task force investigating large-scale cyber breaches.

During that survey, Shaulov found two trends:

First, the intrusion trend of cybercriminals has shifted from traditional finance to digital assets.

Secondly, protecting digital assets in the enterprise environment at that time was complex and lacked solutions.

This is the reason why the three entrepreneurs jointly created Fireblocks:To build an easy-to-use digital asset security platform, by using MPC technology And patent-pending chip isolation technology to protect private keys, API credentials, helping financial institutions protect digital assets from theft or hacking.

Financing History

Financing situation: the valuation has tripled in half a year

Currently, Fireblocks has received five rounds of financing:

June 2019: Series A financing 16Million USD; 

November 2020, Series B financing 30Miilion USD, Paradigm participated; 

In March 2021, Series C financing of 133Miilion USD, investors include Ribbit Capital, Coatue, Stripes; 

In July 2021, investors in the D round of financing 310Million USD include Sequia Capita, with a valuation of 2.5 billion USD; 

December 2021, E-round financing of 550Million USD, investors including D1 Capital Partners, with a valuation of 8 billion USD;

The valuation of Fireblocks in just 6 Soared 3x in a month and is now one of the three most highly valued private companies in Israel.

Main business & business model

Main business

< p>According to the official website of Fireblocks, their main business mainly includes the following categories:

SWIFT in the Crypto field: The first is settlement The service aims to be SWIFT in the Crypto field, and solves the complex, manual and risky settlement workflows of previous platforms. Connect to 1200+ liquidity exchanges and counterparties on one platform for instant settlement, rebalancing and payments.

MPC As A Service: Provide a platform that can safely store and transfer digital assets, while ensuring the operational efficiency of customers and trading teams .

Tokenization: Through the Tokenization engine of Fireblocks, Stablecoin and Security Token can be deployed, and mint, burn and Transfer can be managed on Fireblocks the entire life cycle.

Security service: Combine multi-layer technology of MPC, cryptography and hardware isolation to protect the security of funds; reduce external attacks and internal collusion and the probability of human error.

Anti-Money Laundering/Compliance: Integration with Crypto compliance providers allows users to automatically detect and alert high-risk transactions.

Policy Security: Fireblocks workflow authorization engine to meet regulatory compliance requirements.

DeFi Permissioned Business/DeFi:Fireblocks' secure wallet infrastructure that can be used in permissioned DeFi projects. , access DeFi applications for trading, lending, and staking with enterprise-grade protection and customizable governance and policy controls. Trade on a decentralized exchange (DEX), plan your strategy, and design your DeFi portfolio.

Business model: Shopify for Crypto, what is the market demand?

Fireblocks can help enterprise users handle all kinds of security or compliance needs in one stop, including all policies and workflows, all kinds of complex tasks that need to be completed by enterprises Things, Fireblocks can help complete, a bit like Shopify For Crypto.

Fireblocks is currently mainly engaged in To B business, customers include Banks, fintech startups and other financial institutions, the point of demand is that many financial institutions are looking for a solution to store cryptocurrencies and diversify their balance sheets.

Fireblocks' technology can be white-labeled for crypto hosting products (white-labeled SaaS products are generic products produced by third-party End client renaming) That is, customers can use Fireblocks products and integrate with their own brands. In this way, financial institutions can implement direct custody by themselves without having to rely on third parties, which helps to expand the use cases of digital assets from cryptocurrencies to payments, games, NFTs and digital securities, and ultimately helps enterprises to link digital asset businesses.

Fireblocks provides these B-side users with a secure way of processing,that is, processing private keys through multi-party computation. Specifically, key generation is done by several different devices.

Fireblocks is also launching a liquidity partner network where users can connect directly with 30 different trading platforms, so that OTC desks And market makers can also settle through Fireblocks on several different trading platforms.

Fireblocks users

Fireblocks currently has hundreds of B-end users (financial institutions ). Clients primarily include businesses that already support encryption and digital assets, as well as those that are considering entering the crypto space. Its customers include global banks (Bank of New York Mellon, Credit Suisse, etc.), encrypted native trading platforms, lending institutions, hedge funds and off-exchange clients, etc., including a large number of traditional banks seeking to join the cryptocurrency field, as well as Revolut, BlockFi, Celsius, PrimeTrust, Galaxy Digital, Genesis Trading, Crypto.com and other companies, as well as the listed company Robinhood.

What needs are met

Fireblocks is a bit like "banking as a service" but Fireblocks focuses on crypto assets.

Fireblocks offers a large number of integrated services with the entire encryption ecosystem, as enterprises want to start from scratch and build in-house These integrations, especially if cryptocurrencies are not a core element of an institution's business, are resource-intensive and costly.

For anti-money laundering compliance needs, Fireblocks has also integrated with compliance providers Elliptic and Chainlysis, and business users can mark and reject transactions according to rules .

Company development history

In 2021, with the boom in the encryption market, Fireblocks also began to make great strides, announcing many cooperation projects with other (public chains, projects): In June 2021, announced cooperation with BSC, and then announced cooperation with Dogecoin, Solana, Celo, Songbird, Optimism, Arbitrum, Fantom, Avalanche, Cardano, Polygon, Crypto.com cooperate;

2022, continue to expand business areas: Acquisition of First Digital, creating tools that combine digital assets with everyday financial activities, why did you acquire First Digital?

Facing the growing demand of consumers to pay with encrypted digital assets, payment service providers and merchants are actively seeking to support encrypted and digital asset payments method, however, wallet integration costs are usually very high. In particular, how to do manual KYC? How is AML screening done? Other chain payments will be more complicated. Therefore, in February 2022, Fireblocks acquired Stablecoin and First Digital, a digital asset payment technology platform, to continue to expand its payment business.

By embedding First Digital into the Fireblocks technology stack, Fireblocks can expand access to B2C, B2B, cross-border and Support for other forms of payment.

In 2022, the official announcement of cooperation with Moonbeam;

In May 2022, Fireblocks Web3 engine launched;

Business & revenue data

2021, Fireblocks' revenue forecast for 2021 continues to rise, rapidly scaling the business, growing its customer base from 100 to 800, and growing revenue by 600% in one year, eventually reaching $50-$100 million on its platform Assets guaranteed doubled to $2 trillion. Fireblocks' employees have grown from 70 to 260 within a year, half in New York and half in Tel Aviv, and growing.

Shaulov believes that the development of the metaverse and the NFT industry will also bring certain opportunities to Fireblocks. Many game companies are studying the layout of the encryption field, so, In late May 2022, Fireblocks launched its own Web3 engine.

What are the advantages? Time accumulation + pioneer advantage

About the advantages of the company, Shaulov mentioned in an interview:

First of all, Fireblocks gives the industry Set the standard, Fireblocks is currently dominant in the security asset custody business;

Secondly, Fireblocks previously had a strong understanding of NFT, DeFi and digital payments The planning and prediction of the market development direction have been verified by the current market, and the development of many businesses is also relatively smooth as set in the strategy;

The annual revenue has increased by 600 %

In 2021, the company has updated its annual forecast four times. At the beginning, the revenue forecast was 8 million US dollars, but later it was found that it was still increasing, so it was adjusted to 25 million US dollars , then $35 million, and finally adjusted to $45 million. In 2021, Fireblocks hit $60 million in revenue: an increase of more than 600% in one year, and in 2022, it is estimated that Fireblocks' pre-revenue will triple.

Investor's point of view

< p>Sequoia partner Ravi Gupta believes that Fireblocks is "the world's leading back-end infrastructure for encryption." Ravi Gupta also pointed out that the Fireblocks team has great potential to build a long-lasting and large-scale business that is native to encryption. Served by corporations, traditional financial institutions, Fireblocks' business growth, product delivery quality, and customer feedback metrics are all very good.

Other comments

One question: Is Fireblocks overvalued?

In six months, the valuation has more than tripled? Is it rising too fast?

In response to this question, Shaulov answered this way: "The company's valuation is indeed a bit high at present, but the soaring valuation is due to The business has grown solidly. In 2014, many start-up companies emerged and got a lot of money. We felt that many products in the market did not match the market well enough. However, the market has washed away many companies today. And the infrastructure in the market as a whole is better.

Such a valuation surge today, I think It has little to do with a certain company itself, mainly because of the macroeconomic fluctuations of the Covid-19 pandemic. The US dollar has been over-issued. Many venture capitalists have received amazing returns on paper and IPO. This is a testament to the amount of funds With a higher multiplier, some of the money could be ridiculous."

Will Fireblocks be acquired?

Shaulov replied: "The future is difficult to predict, but we provide great value when analyzing today's market landscape Part of it is the network from Fireblocks. If someone acquires us, it will lose a large part of its business. For example, after Coinbase acquired

Unbound, It stopped working with most of Unbound's customers, and after PayPal acquired Curv, it no longer cooperated with most of Curv's previous customers.

Look who can afford to buy Fireblocks, like Visa? Visa has $400 billion in cash, but it's not enough. Although traditional institutions have a lot of money, they are far behind in the crypto space, Market understanding is insufficient, and management and board of directors are not necessarily motivated enough. And Fireblocks is solidifying our dominant position, which will take us to the public market of the future."

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How to view competitors

The giants have repeatedly acquired Fireblocks’ competitors, Gave Fireblocks some sort of endorsement. Regarding the competition, Shaulov sees it this way:

"Technically, Curv is the closest to Fireblocks Founded in 2014, Curv initially provided general-purpose technology for network applications, and later decided to enter the encryption field. However, from the perspective of Curv's business, the market penetration rate is still limited.

And Unbound and Fireblocks have the least similarity. Coinbase announced six months ago that it wanted to enter the field of wallet technology. I also chatted with us and other industry researchers, and found that it was too troublesome to do it myself, so I chose to acquire Unbound, mainly because the development capabilities and business complement Coinbase, especially if the center in Israel is established.

Thoughts brought to us by Fireblocks:

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Entrepreneurs with a technical background usually have good engineering capabilities. Fireblocks is a good observation case, how to communicate and cooperate in such a short period of time Just access a large number of partners (various public chains, game parties)? How to continuously improve management capabilities and commercialization capabilities (marketing, ability to deal with capital), and how to train your sense of products and business?

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These are Topics that require continuous thinking.

References

1.https://www. fireblocks.com/

2. https://techcrunch.com/2021/07/27/crypto-infrastructure-provider-fireblocks-raises-310m-triples-valuation-to-2-2b-in -five-months/‍

3. https://www.crunchbase.com/organization/fireblocks/signals_and_news/timeline

4. https://www.forbes.com /companies/fireblocks/?sh=323a302416b4

5. https://www.reuters.com/technology/crypto-firm-fireblocks-buys-payments-tech-platform-100-mln-2022- 02-16/

6.https://www.calcalistech.com/ctech/articles/0,7340,L-3917851,00.html

7.https:/ /www.fireblocks.com/blog/secure-institutional-access-to-dogecoin/

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