Chainalysis expands Series B round, raising US$13M

Chainalysis was founded in New York in 2014 by Michael Gronager and Jonathan Levin. Gronager serves as the CEO while Levin serves as the CSO of the company. Prior to founding Chainalysis Gronager was the COO of global crypto exchange Kraken.

The company was founded to design and develop anti-money laundering software for Bitcoin businesses. Chainalysis also offers activity monitoring reports and diligence tools, which allow analysts to estimate criminal’s revenues and emerging threats.

Two years after launching, the company announced that they are collaborating with Europol’s European Cybercrime Center. The agreement came about as digital currencies such as bitcoin were becoming more popular and were seen as potential rivals to established online payment mechanisms, but were also a target for criminals to commit fraud and extortion.

The company also announced its first round of funding in 2016, which was a US$1.6M seed round. The round was led by Point Nine Capital, with participation from Techstars, Digital Currency Group, FundersClub, and Converge Venture Partners.

The company now offers two core products; REACTOR, an interactive and investigation tool that identifies offenders, visualises data, and shares results with people and organisations, and API, a transaction based risk scoring solution that contains source and destination of funds to measure risk.

The startup also offers activity monitoring reports and diligence tools, which allow analysts to estimate criminal’s revenues and emerging threats. It offers web-based investigation software for due diligence, verification of customers for bitcoin business, and web-based investigation tools to identify cyber-criminals, identification of bitcoin extortion payments made by victims to criminals, and attribution for cyber threat intelligence industries.

Two years after raising the seed round the company was already profitable and revenue had grown threefold. The company had hundreds of customers and 70 employees spread between offices in Washington, New York, and Copenhagen.

In April of 2018, the company announced that they had raised US$16M in a Series A round led by Benchmark. Benchmark previously invested in Uber, Snapchat, Tinder, Stitch Fix, and many other companies.

As part of the investment, Sarah Tavel joined the Chainalysis board. Tavel is also a Partner at Benchmark and an ex-Pinterest employee.

Following the Series A round the company launched and deployed its real-time anti-money laundering and compliance software for cryptocurrencies, called Chainalysis KYT ("Know Your Transaction"). The firm also expanded its coverage beyond Bitcoin (BTC) to include Ethereum (ETH), Litecoin (LTC), Bitcoin Cash (BCH), and stablecoins.

In February 2019 Chainalysis secured a US$30M Series B financing led by Accel. Benchmark also increased its investment. Accel’s investment was led by Amit Kumar and Philippe Botteri. Botteri will represent Accel on Chainalysis’s board of directors.

The new funding was earmarked for supporting strategic product development of new cryptocurrency usage, and opening an office in London that will act as a hub for its research and development lab and regional expansion.

"Thanks to its deep crypto expertise and unique technology, Chainalysis has quickly become the industry benchmark for blockchain analysis and compliance technology," said Botteri, partner at Accel and board member at Chainalysis.

To add to this investment round, Chainalysis announced that they have received US$6M in investment from Japanese financial group Mitsubishi UFJ Financial Group Inc and Sozo Ventures in April 2019.

According to the company, Chainalysis had been growing in the Asia Pacific region, having more than doubled the number of clients there over the previous year. Gronager also mentioned that they are looking into opening an office in Japan in the next year, but there is no specific timeline.

The most recent announcement states that the company has raised an additional US$13M to expand its Series B round to US$49M with an investment from Ribbit Capital and Sound Ventures. Sigal Mandelker, General Partner at Ribbit Capital and former Under Secretary for Terrorism and Financial Intelligence at the US Department of the Treasury, will join as an advisor to Chainalysis.

Chainalysis also stated they will grow and deepen their government relationships and “further unite the public and private sectors to fuel the cryptocurrency industry’s growth through the addition of software engineers, government sales, and other business roles.”

"Chainalysis has done terrific work providing blockchain analysis and tools to financial institutions, government agencies, and exchanges, while working to track, analyze, and disrupt illicit activity," said Mandelker. "As the digital assets industry continues to evolve and grow in positive ways, I’m excited to work with the Chainalysis team to help develop public-private partnerships, enhance ground-breaking technologies in financial services, and root out illicit networks."

Clients of Chainalysis include Paxos, TrustToken, Binance, Gemini, Bitstamp, Square, Barclays and a range of other cryptocurrency businesses, financial institutions and government agencies.