Crypto startup Blockdaemon continues acquisition spree and acquires Sepior
Crypto infrastructure provider Blockdaemon has acquired Danish startup Sepior, a digital asset security company that provides key management services for institutional clients, for an undisclosed price. The deal marks the startup’s fourth acquisition in two years, the latest being Blockdaemon’s purchase of NFT aggregator Gem in March this year.
Crypto markets have been in a downward trend since April, and web3 companies are cash-strapped as a result. So it’s somewhat unexpected to see Blockdaemon, a venture-backed crypto startup, doling out cash to continue its inorganic growth strategy.
To be sure, it’s a well-capitalized company scooping up what was likely a relatively cheap, smaller competitor, in part because valuations across the board are down. Blockdaemon last raised funding from its investors in January, bringing in $207 million at a post-money valuation of $3.25 billion. Although its own value today is significantly lower, Sepiors may have been as well, meaning Blockdaemon may have picked it up at a significant discount.
Blockdaemon also appears to be growing rapidly, another sign it can afford to make bold moves in a dangerous market. The first and second quarters of the year were “record” periods for the company’s sales growth, founder and CEO Konstantin Richter told TechCrunch in an exclusive interview.
Konstantin Richter, CEO and founder of Blockdaemon Photo credit: Block daemon
“We follow that kind of standard VC [guidance]which ultimately means three months of runway while we look to make acquisitions and invest in growth,” Richter said.
The company’s goal is to be a one-stop shop for institutions using crypto to manage their backend, including “on and off ramps, node APIs, highly available clusters for transactions, staking, floating staking – all in one seamless interface.” Richter said
Richter said Blockdaemon had been looking for a vendor like Sepior to support its stake offering.
“To specifically do the stake part, if you want to be very fast and rebalance assets, and stake funds for institutions, ultimately you have to touch the keys, which we don’t want to do, because we want to remain non-custodial. So Sepior’s key management solution solves a couple of these issues for us because they provide key institutional governance, which is actually very rare,” Richter said.
Many larger crypto companies have integrated multi-party computation (MPC) capabilities by buying smaller players in the space, Richter said. Coinbase made a similar move when it acquired Israeli firm Unbound Security in November 2021.
Richter added that Sepior was “the only one [institutional-grade key management provider] of note left” when Blockdaemon went out to make an acquisition. Once the two parties had entered into an exclusive agreement to merge, Richter added, Blockdaemon found out that several other parties had also tried to buy Sepior.
Another reason Sepior looked so attractive to Blockdaemon is that it generates significant revenue in cash through its traditional SaaS-style business model, although Richter did not disclose specific numbers. Blockdaemon itself, meanwhile, earns 70% of its revenue in tokens and 30% in cash, Richter said. He noted that Blockdaemon was profitable in 2021 and that revenues have remained “static” throughout the downturn, with the company’s rapid growth offsetting the downward movement in token prices, even though it did not turn a profit last quarter.
While acquiring a company in a different regional market was challenging and somewhat extended the timeline for the deal, Richter said the acquisition was a strong fit with Blockdaemon’s focus on customer acquisition. After Blockdaemon picks up a customer, on average, the customer’s contract size triples in a year, he added — part of the reason it’s so focused on expanding its product line.
“I think one of the things that is often underestimated is that when you’re a young company, it’s also an experiential thing to learn how to build a playbook and buy companies and then integrate them really well. I feel like we’ve worked our way up in terms of the complexity of acquisitions and the type of companies we acquire, so Sepior is a very good play for us, Richter said.
Also, the two companies share many clients, with overlap from Citibank and other financial institutions, Richter said. Sepior has 25 to 50 customers today, while Blockdaemon serves about 250, he added. In terms of their own size, Sepior employed ~20 people compared to Blockdaemon’s ~270 at the time of the acquisition announcement.
“We see this as a huge opportunity for us to gain market share,” Richter said of cooling crypto prices. “We’re the most capitalized company in the space. We’re already the market leader. We feel like we have a really unique product mix that really sets us apart, and so we’re going to invest heavily in customer acquisition, and of course we’re going to do it carefully.”
