Coincover raises $30 million to protect digital assets from hacks and human error • TechCrunch

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Coincover, a digital asset protection company, has raised $30 million in funding led by Foundation Capital to protect people and their digital assets from hacks or human error, David Janczewski, CEO and co-founder of Coincover, shared with TechCrunch.

“We made this investment not despite the tumultuous year in crypto, but precisely because of it,” Charles Moldow, general partner at Foundation Capital, told TechCrunch. “One of the most important limitations to the use of digital assets, both at the individual and institutional level, is the fear of loss or theft of assets.”

The platform, which was founded in 2018 and launched in 2019, has raised $41.6 million to date, Janczewski said. Previous investors include Volt Capital, Avon Ventures, DRW Venture Capital, SMT Digital, Valor Equity Partners, Element, Fintech Collective and Susquehanna International Group, according to the website.

Coincover co-founders David Janczewski (CEO) and Adam Smith (CTO). Image credit: Coin cover

The new capital will be used to recruit talent, update products and add partnerships to protect against crypto hacks or human error. “We have reached a turning point in the industry; as a result, we have seen demand for our product increase dramatically,” said Janczewski.

Coincover works with over 300 businesses, including crypto companies like BitGo, Fireblocks and Bitso, as well as hedge funds, family offices and banks.

The firm’s two main products, Disaster Recovery and Theft Protection, aim to help anyone dealing with digital assets prevent theft and loss.

“The opportunity is already huge today – crypto is a $1 trillion asset class, but the digital asset protection industry is still small, and billions were stolen in the last year alone,” Moldow said. “Beyond the dollar amount is the lasting stigma of having suffered a breach – digital asset providers have to avoid this at all costs, so the willingness to pay is very high.”

Since the FTX collapse, there has been an increase in inquiries to Coincover, Janczewski said.

“All companies are concerned about losing access to crypto and want to protect end users’ funds from being stolen,” Janczewski added. “For our customers, private key backup provides an additional layer of protection that enables recovery of assets if they lose their keys or their platform becomes unavailable. We have also seen a sharp increase in demand for seed phrase backups where we provide a path to recovery of funds.”

Seed phrases, or recovery phrases, are a series of random words that act as a password to one’s crypto wallet. It is given to users when they first create a wallet, but is never shared further. Sometimes people misplace their phrases and fail to access their wallet, resulting in the inability to access funds.

Attacks in the crypto space have also become more sophisticated as more people enter the space, and the industry has had to respond to that, Janczewski noted.

“All companies must invest in mechanisms to protect themselves, their employees and their end users,” he added. “Businesses often want an independent third party to help them back up their data or protect against malware, for example. So in that sense, what we’re doing is not revolutionary – it’s almost mandatory.”

For Coincover, it’s about “tackling the next frontier of risk, which is social engineering,” Janczewski said.

“If someone convinced you to send a lot of money and you did, that’s considered fraud, not theft,” Janczewski said. “In traditional finance, the banks do not have the option of refunding users when they have willingly sent money in this way, even if you have been deceived. At Coincover, we are working to solve this problem by harnessing the power of blockchain technology combined with our own risk data.”