FalconX closes US$17M funding round

FalconX has successfully closed a funding round, raising US$17M from a range of leading traditional venture firms as well as crypto venture funds. Investors include Accel, Accomplice VC, Coinbase Ventures, Fenbushi Capital, Flybridge Capital, Lightspeed Venture Partners, and Avon Ventures, a venture capital fund affiliated with FMR LLC, the parent company of Fidelity Investments.

The number of traditional investors in FalconX’s round indicates that there is still interest from traditional investors in some crypto-focused companies with significant traction and a strong founding team.

FalconX is a Silicon Valley-based firm founded in 2018 by Raghu Yarlagadda and Prabhakar Reddy. Yarlagadda has held various product leadership roles, including at Google, where he played a key role in scaling Chromebooks to a multi-billion dollar revenue business.

Prabhakar is an investor, engineer, and a serial entrepreneur, who previously drove blockchain and enterprise SaaS investments at venture capital firm Accel, who are also investors in FalconX.

Accel is one of the oldest venture capital firms in the world and has invested in some of the largest tech companies in existence. The Accel portfolio includes companies like Facebook, Slack, Atlassian, Dropbox, Spotify and Flipkart. The investment in FalconX seems to be Accel’s second investment in the crypto space, with the first being Chainalysis.

"FalconX demonstrated exceptional growth with institutional counterparties through their focus on technology and reliability during volatile market conditions. They’ve proven themselves at scale without compromising on enterprise-grade security and high compliance standards – capturing a tremendous opportunity to serve the next generation of institutions looking to enter the digital asset space," stated Shekhar Kirani, General Partner at Accel.

The funding has been earmarked to introduce new products, expand FalconX’s trade execution suite and scale infrastructure to support growing institutional demand for cryptocurrency.

According to a blog post announcing the fundraise, over the last 10 months, FalconX has generated US$7B in global trading volume at a quarterly growth rate of over 600%. This is a result of the platform providing tight spreads, eliminating slippage and hidden fees, and maintaining enterprise-grade security.

The core product FalconX has built provides liquidity through a combination of liquidity pools (exchanges) and proprietary dark pools. The company’s client base includes over 100 financial institutions across traditional finance including hedge funds, proprietary trading firms, payment gateways, over-the-counter trading desks, cryptocurrency miners, and exchanges.

Brad Koeppen, Head of Trading and Business Development at CMT Digital, a proprietary trading and financial services firm, founded in 1997, said, "FalconX allows us to operate a more productive trading desk by solving for some of the major inefficiencies in the crypto markets. I have been extremely impressed with FalconX’s relentless focus on delivering value-added solutions and superior customer service." CMT Digitals venture arm is also an investor in FalconX.

FalconX has outlined two phases on the pathway “to radically improve the economic universe. Our goal is closing the gap between traditional finance and the digital-asset ecosystem while serving the market with the most trusted trading platform in the world.” Yarlagadda stated, “Cryptocurrency trading is the first use case but NOT the only use case of FalconX.”

The company believes that the number of institutions seeking secure and reliable digital asset trading services continues to rise, but the market remains drastically underserved. The first phase was to provide a solution for institutions and develop unmatched liquidity.

Leveraging FalconX’s deep liquidity and execution from Phase 1, the team is now looking to power B2B cross border payments in Phase 2. According to FalconX B2B, cross-border payments are 100X larger than C2C or B2C remittances, with US$127T in total volume and a total addressable market of US$127B. The company plans on using the same connective tissue to power this market leveraging cryptocurrency as the transmission rail.

According to Yarlagadda, the key benefits of crypto transmission is that it is fast and affordable as it avoids a significant amount of intermediaries who would all charge a fee. It is transparent which allows users to track real-time the status of their transactions and it is reliable as most blockchains have never gone down, operate 24/7, and are immune to the inefficiencies of any single central party.

To execute these phases, which represent “the beginning of our blockchain journey,” the two founders have assembled a team of individuals from the fields of data science, technology and finance. The FalconX founding team brings experience from Google, Citadel, Goldman Sachs, Jump Trading, PayPal, Pantera Capital, WorldQuant, Kraken, and PEAK6 Investments.