One of the world’s leading cryptocurrency startups, Circle, is seeking to raise $250 million according to sources directly involved with the initiative. Circle is the operator of the Poloniex cryptocurrency exchange, currently ranked 74 in the world by volume on Coinmarketcap. The firm acquired Poloniex for $400 million and also runs an institutional trading branch called Circle Trade.
Circle was valued at a formidable $3 billion at the time of its last funding round when it raised $110 million, largely from Bitmain, the world’s leading manufacturer of bitcoin and cryptocurrency mining hardware. Circle has raised $246 million to date over six different rounds, with other investors including Goldman Sachs, IDG Capital, and Baidu of China.
The $3 billion valuation may have decreased since then, with some analysts estimating that it has since shrunk to $750 million as a result of the recent crypto-economic downturn.
A successful fundraising round at this time would make the company one of the first to attract an investment of that size since the recent decline in the markets.
The so-called “crypto winter” has already seriously impacted major cryptocurrency and blockchain firms, resulting in widespread staff layoffs and downsizing even among well-established heavy hitters like ShapeShift, Steemit, and ConsenSys.
Steemit recently fired 70% its workforce, citing major losses due to the bear market resulting in an inability to pay staff wages. ShapeShift, one of the earliest and well-regarded cryptocurrency exchanges, let one-third of its staff go last month, calling crypto a “harsh mistress.” Meanwhile, Ethereum giant ConsenSys announced layoffs of 60% in December, as well as plans to axe underperforming projects.
Circle itself has approximately 300 employees in five different offices in locations such as Boston, New York, and London, and in October announced that it was acquiring SeedInvest, a crowdfunding platform.
Circle CEO Jeremy Allaire stated that the company is constantly seeking alternative sources of capital, neither confirming nor denying that the company is in dire straights or that the funding round is to alleviate the negative impact of the downturn. Whether the funds are for expansion or simply to allow the firm to tread water is, as of yet, unclear. At this time it’s also unclear whether the firm will be able to raise the money at its current valuation, or whether it will receive funding during the harsh crypto winter at all.
Investors have pointed out that the decline in the value of bitcoin has resulted in other firms accepting emergency funds at lower valuations.
Allaire did state that the firm, which generates revenue from trading fees, has of course been hurt by the crash, although was quick to point out that Circle’s revenue actually grew between 2017 and 2018. Circle Trade has also been performing well, handling over $24 billion in cryptocurrency trades last year, according to the company blog.
Allaire has remained bullish on Bitcoin throughout the price correction, predicting massive gains in Bitcoin prices over the next few years.
Circle is the latest to announce a major fundraising round, but far from the only firm in need of a cash injection these days. Coinbase raised $300 million in October in a round led by Tiger Global Management, and Kraken recently stated that it was working on shoring up the last stages of a $100 million round of funding.
While downturn investments are always risky, the crypto winter is also the perfect storm for some, allowing venture capitalists to swoop in and buy up major chunks of struggling crypto startups at cheaper valuations in the hopes that they will skyrocket in value when the crypto market recovers.
Last modified: March 4, 2021 3:18 PM