History of Hacker Entrepreneurship: How did Fireblocks grow into a Shopify in the Web3 field when its valuation tripled in half a year?
Original Source: Alpha Rabbit Research Notes
Original Source: Alpha Rabbit Research Notes
According to data from 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, an increase of 1,000% from a year ago.
As an important infrastructure in the encryption ecosystem, the company Fireblocks is worth studying. 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.
What is the story of Fireblocks' entrepreneurship? 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.
first level title
Company Profile
Founded in 2018, Fireblocks' core technology products mainly consist of Fireblocks Networks and MPC-based wallet infrastructure.
Customers are shown in the picture above, mainly including banks, financial technology companies, exchanges, liquidity providers, over-the-counter traders and hedge funds, etc. The main business is to build security infrastructure and custody services to help customers safely manage various products and Digital assets for services.
secondary title
What are MPCs?
Secure Multi-Party Computation enables multiple parties who do not trust each other to correctly calculate any function, and at the same time ensures 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.
first level title
Founding Team & Entrepreneurial Story
Between 2018 and 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.
image description
The three founders, with Shauolov in the middleBefore joining Fireblocks, Michael Shauolov participated in the founding of Lacoon Mobile Security, which was later acquired by Check Point.
However, when Fireblocks was founded, there was no extensive publicity, and it has been focusing on research and development before the official launch of the product.
secondary title
What was the opportunity to start a business?
A big event happened in 2017, when the North Korean hacker group Lazarus Group hacked into four South Korean exchanges 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.
In that survey, Shaulov found two trends:
First, the intrusion trend of cybercriminals has shifted from traditional finance to digital assets
Second, protecting digital assets in the enterprise environment at that time was complex and lacked solutions.first level title
financing history
financing history
Financing situation: the valuation has tripled in half a year
Currently, Fireblocks has received five rounds of financing:
June 2019: A round of financing 16Million USD;
In November 2020, the B round of financing was 30Miilion USD, and Paradigm participated in the investment;
In March 2021, the C round of financing was 133Miilion USD, with investors including Ribbit Capital, Coatue, and Stripes;
In July 2021, the D round of financing was 310Million USD. Investors included Sequia Capita, with a valuation of 2.5 billion USD;
Fireblocks’ valuation has soared 3x in just 6 months and it is now one of the three most highly valued private companies in Israel.
Main Business & Business Model
secondary title
Main business
According to the official website of Fireblocks, their main businesses mainly include the following categories:SWIFT in the Crypto field:
MPC As A Service：The first is the settlement service, which aims to be the SWIFT of the Crypto field, which solves the complicated, manual and risky settlement workflow of the previous platforms. Connect to 1200+ liquid exchanges and counterparties on one platform for instant settlement, rebalancing and payments.
Tokenization：Provide a platform that can safely store and transfer digital assets, while ensuring the operational efficiency of customers and trading teams.
Through the Tokenization engine of Fireblocks, stable coins and Security Tokens can be deployed, and the entire life cycle of mint, burn, and Transfer can be managed on Fireblocks.Security Services:
Combining multi-layer technologies of MPC, cryptography and hardware isolation to protect the security of funds; reduce the probability of external attacks, internal collusion and human errors.Anti-Money Laundering/Compliance:
Integrated with Crypto compliance providers, users can automatically detect and prompt high-risk transactions.Policy security:
Fireblocks' workflow authorization engine to meet regulatory compliance needs.secondary title
business model:business model:
Shopify for Crypto, what is the market demand?
Fireblocks can help enterprise users handle various security or compliance requirements in one stop, including all policies and workflows, and all kinds of complicated things that need to be completed by enterprises. Fireblocks can assist in completing them, 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 encrypted hosting products (white-label SaaS products are general products produced by third-party suppliers, and then renamed for different B-end customers), that is, customers can use Fireblocks products, and their own Brand integration. In this way, financial institutions can implement direct custody 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-end users with a safe way of handling,
Fireblocks is also launching a liquidity partner network where users can connect directly with 30 different exchanges, so that OTC desks and market makers can also settle on several different exchanges through Fireblocks.
secondary title
Users of FireblocksFireblocks currently has hundreds of B-side users (financial institutions).Its clients include global banks (Bank of New York Mellon, Credit Suisse, etc.), crypto-native exchanges, lending institutions, hedge funds, and OTC clients, etc., including a large number of traditional banks seeking to join the cryptocurrency space, as well as Revolut, Companies like BlockFi, Celsius, PrimeTrust, Galaxy Digital, Genesis Trading, Crypto.com, and public company Robinhood.
secondary title
what needs are met
Fireblocks is a bit like "banking as a service" but Fireblocks focuses on encrypted assets.
For the needs of anti-money laundering compliance, Fireblocks has also integrated with compliance providers Elliptic and Chainlysis, and enterprise users can mark and reject transactions according to the rules.
first level title
Company History
In 2021, with the popularity of the encryption market, Fireblocks also began to make great strides, announcing many cooperation projects with other (public chains, projects): in June 2021, it announced cooperation with BSC, and then announced cooperation with Dogecoin and Solana , Celo, Songbird, Optimism, Arbitrum, Fantom, Avalanche, Cardano, Polygon, Crypto.com;In 2022, continue to expand business areas:
Acquired First Digital, creating tools that integrate digital assets with everyday financial activities, why did you acquire First Digital?
Faced with the growing demand of consumers to pay with encrypted digital assets, payment service providers and merchants are actively seeking ways to support encryption and digital asset payments, however, wallet integration costs are usually very high. In particular, how to do manual KYC? How is AML screening performed? Other chain payments will be more complicated. Therefore, in February 2022, Fireblocks acquired First Digital, a stable currency and digital asset payment technology platform, to continue to expand its payment business.
By embedding First Digital into the Fireblocks technology stack, Fireblocks can expand support for B2C, B2B, cross-border and other forms of payment through USDC, Celo and other stablecoins and cryptocurrencies.
In May 2022, Fireblocks launched the Web3 engine;
first level title
Business & Revenue Data
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. Therefore, in late May 2022, Fireblocks launched its own Web3 engine.
secondary title
Where is the advantage? Time accumulation + pioneer advantage
Regarding the company's strengths, Shaulov mentioned in an interview:
Secondly, Fireblocks’ previous plans and predictions about the development direction of NFT, DeFi and digital payment markets have been verified by the current market, and the development of many businesses is also relatively smooth as set in the strategy;
secondary title
In 2021, the company has updated its annual forecast four times. At the beginning, the revenue forecast was US$8 million. Later, when it was found that it was still increasing, it was adjusted to US$25 million, then US$35 million, and finally adjusted to US$45 million. In 2021, Fireblocks revenue reached $60 million: an increase of more than 600% in one year, and in 2022, it is estimated that Fireblocks' pre-revenue will triple.
first level title
Investor's point of viewMetrics for business growth, quality of product delivery, and customer feedback are all very good.
other comments
secondary title
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 current valuation of the company is indeed a bit high.But the valuation spike is due to solid business growth.
Today's soaring valuation, I don't think it has much 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, and many venture capitalists have received Amazing returns, which brings a higher multiplier to the amount of funds, and some money may come absurdly. "
secondary title
Will Fireblocks be acquired?Shaulov replied: "The future is unpredictable,But when analyzing today's market structure, a large part of the value we provide comes from Fireblocks' network. If someone acquires us, a large part of the business will be lost.
For example, after Coinbase acquired Unbound, it stopped cooperating with most of Unbound's customers, and after PayPal acquired Curv, it stopped cooperating with most of Curv's previous customers.See who has the ability to acquire Fireblocks, such as Visa? Visa has $400 billion in cash, but that's not enough.And Fireblocks is solidifying our dominance, which will take us to the public markets of the future. "
secondary title
How to view competitors
The giant's repeated acquisitions of Fireblocks' competitors have given Fireblocks some kind of recognition. Here's how Shaulov sees it when it comes to competition:
"Technically speaking, Curv is the closest to Fireblocks' solution. Curv was founded in 2014, initially to provide 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.
Unbound and Fireblocks are the least similar. Coinbase announced six months ago that it wanted to enter the field of wallet technology. At first, it wanted to try to develop its own products. Later, after chatting with us and other industry researchers, it found that it was too troublesome to do it, so it chose to acquire Unbound, mainly for development capabilities. Complementary to the business and Coinbase, especially if the center in Israel is established.
Thoughts brought to us by Fireblocks:
Entrepreneurs with a technical background usually have good engineering capabilities. Fireblocks is a good observation case. How to communicate and cooperate to connect a large number of partners (public chains and game parties) in such a short period of time? How to continuously improve management ability and commercialization ability (marketing, ability to deal with capital), how should I train my sense of product and business?
