Venture capital firms are shoveling cash at companies building Web3. Here’s what comes next
If traditional private market investors needed a vote of confidence in Web3—the shorthand for a decentralized, new iteration of the internet—the last 24 hours should suffice.
Alchemy, a San Francisco-based Web3 development company, announced this morning it has raised $200 million in an extension of its Series C round from Lightspeed Capital and Silver Lake, and all its major previous investors—notching a valuation of $10.2 billion. And just yesterday, Polygon, a layer 2 blockchain (meaning a secondary protocol built on an existing blockchain), said it had raised $450 million in a token treasury sale led by Sequoia Capital India with investors like SoftBank, Tiger Global, and Galaxy Digital. Polygon now boasts a public valuation of $2 billion and a token market cap of around $15.6 billion.
The Web3 ecosystem is blowing up—from artists auctioning off 10,000 NFT digital sloth portraits to interactive games like Axie Infinity or metaverse projects like Decentraland. Most of these projects are being built upon Ethereum blockchain, but it’s gotten bogged down with all the activity. A single transaction uses about the same amount of energy as a U.S. household does in a workweek, and gas fees (the sum paid to Ethereum miners for validating a transaction) can add hundreds of dollars in fees to a single trade. That’s why Ethereum is in the process of building Ethereum 2.0, now called the “consensus layer,” and it’s why layer 2 blockchains like Polygon emerged—to make the transaction process faster and cheaper and to divert activity off Ethereum to help it scale.
Polygon surpassed Ethereum in terms of daily active users at the end of last year, and developers have flocked to its platform—it now boasts more than 7,000 decentralized apps on its blockchain.
“Exactly a year ago, the number of transactions on the Polygon chain was like 500 per day. Today, it’s 4 million transactions per day,” Polygon co-founder Sandeep Nailwal told me in an interview.
Companies like Alchemy are speeding up the innovation process, providing things like developer tools and APIs and node infrastructure for Web3 builders.
But Web3 is largely still in exactly that: build-mode. Its use cases outside the crypto universe are in infancy. So what’s next? A lot of work is being done in the inner plumbing, with Ethereum’s transition to proof of stake (randomly selected miners validate transactions) from proof of work (processing power-intensive method of virtual miners trying to solve a math problem first). Polygon has set aside $1 billion for developing zero-knowledge technology, which is essentially technology where you can verify transaction data without handing over control of that information. This technology is the “best chance to scale blockchains for years to come,” Shailesh Lakhani, who led the investment in Polygon for Sequoia Capital India, told me in an email.
Continued mayhem at Peloton: The exercise equipment company is replacing its chief executive (quite soon) after activist investor Blackwells Capital sent a scathing note with a laundry list of grievances against CEO John Foley. Barry McCarthy, former Spotify CFO, will replace him, and Foley will become executive chairman.
But Blackwells may not hold back unless the company decides to sell. Just yesterday, the alternative asset manager published a presentation that blasted Foley repeatedly, demanded the board fire CFO Jill Woodworth and, again, insisted that the board put the company up for sale.
No meta: Renowned venture capitalist and Republican Party donor, Peter Thiel, is planning to step down from the Meta Platforms Board to focus his attention on backing candidates who support former President Donald J. Trump’s agenda for the midterm elections. He has been a Meta board member since 2005 and was one of the first investors to back the company.
Rare IPO plans in 2022: Nvidia withdrew its $40 billion proposed acquisition of Arm, a Cambridge, U.K.-based semiconductor manufacturer, due to regulatory challenges. Now SoftBank Group is planning an IPO in the U.S. for the company.
I fly out to Salt Lake City this evening, so I’ll be writing to you in Mountain Standard Time the rest of this week. Unfortunately, I’m not doing in-person meetings at the moment, but drop me a note about what’s intriguing you about the startup scene or deals in the area. Restaurant recommendations are always welcome, too.
See you tomorrow,
Correction: This essay has been updated to reflect the proper name of Silver Lake.
- Protix, a Dongen, Netherlands-based insect-based animal feed company, raised €50 million ($57.1 million) in funding from investors including the European Circular Bioeconomy Fund, BNP Paribas, the Prince Albert II Foundation, The Good Investors, Aqua-Spark, Rabo Investments, and Invest-NL.
- Radar, a New York-based geofencing platform, raised $55 million in Series C funding led by Insight Partners and was joined by investors including Accel, Two Sigma Ventures, and Heavybit.
- Happy Money, a Tustin, Calif.-based unsecured lending fintech that partners with credit unions, raised $50 million in Series D funding from investors including Anthemis Group and CMFG Ventures.
- Shift5, a Rosslyn, Va.-based OT cybersecurity company for military platforms and transportation systems, raised $50 million in Series B funding led by Insight Partners.
- Airmeet, a Lewes, Del.-based event-led engagement platform, raised $35 million in Series B funding from investors including Prosus Ventures, Sistema Asia Fund, RingCentral Ventures, KDDI Open Innovation Fund, DG Daiwa Ventures, Nexxus Global, Sequoia Capital India, and Accel India.
- HealthCare.com, a Miami, Fla.-based data-driven insurtech platform, raised $31.5 million in Series C funding from Hildred Capital Management.
- Endgame, a Los Angeles-based product-led sales solution, raised $30 million in Series B funding led by EQT Ventures and was joined by investors including Lachy Groom, Menlo Ventures, Upfront Ventures, and Unusual Ventures.
- LoanStreet, a New York-based platform for sharing, managing, and analyzing loans, raised $25 million in Series B funding led by Portage Ventures and was joined by investors including Curql Fund I, Coastal Financial Corporation, Sterling Bancorp, Third Prime Capital, and Arbor Ventures.
- Rondo Energy, an Oakland, Calif.-based industrial decarbonization technology developer, raised $22 million in Series A funding co-led by Breakthrough Energy Ventures and Energy Impact Partners.
- Rewire, a Tel Aviv, Israel-based digital mobile banking platform for facilitating cash remittances, raised $25 million in funding from investors including Migdal, Standard Bank of South Africa, BNP Paribas, Opera Tech Ventures, Viola Fintech, Moneta Capital Partners, Renegade Partners, OurCrowd, Yehuda Zisapel, and former Yahoo! co-founder Jerry Yang.
- Taxfyle, a Miami, Fla.-based online tax filing platform, raised $20 million in Series B funding led by Fuel Venture Capital and IDC Ventures.
- Rift Finance, a decentralized protocol to help DAOs achieve sustainable token liquidity, raised $18 million in funding led by Pantera Capital and was joined by investors including Two Sigma Ventures, Coinbase Ventures, Spartan Group, Defiance Capital, Hashed, Jump Capital, Vessel Capital, and Morningstar Ventures.
- Daffy Charitable, a Los Altos, Calif.-based non-profit community for donations and giving, raised $17.1 million in Series A funding for Aside, the company building its technology. The funding was led by Ribbit Capital and was joined by investors including XYZ Capital, Coinbase Ventures, Reid Hoffman, Aaron Levie, Amy Chang, and others.
- Modumetal, a Snohomish, Wash.-based nano lamination coating technologies provider, raised $14 Million in Series A funding led by Atlas Innovate and Rotor Capital.
- Empowerly, a San Francisco-based edtech startup and data-driven college counseling platform, raised $10 million in seed funding led by Goodwater Capital and was joined by investors including FJ Labs, Scrum Ventures, Translink Capital, Azure Capital Partners, Spero Ventures, Thinkplus Ventures, and Mentors Fund.
- Sportening, an Amsterdam-based social app for sports fans, raised £5.3million ($7.2 million) in seed funding from Ballon d’Or winner Luka Modric, Superbet Group founder Sacha Dragic, and former Sequoia Capital Global Equities COO Ralph Ho, and Clarium Capital.
- Infina, a Ho Chi Minh City, Vietnam-based retail investing app, raised $6 million in seed funding from investors including Sequoia Capital India’s Surge, Y Combinator, Saison Capital, Starling Ventures, Alpha JWC, and AppWorks.
- Leverage, a New York-based AI-driven supply chain visibility platform, raised $5 million in funding led by Las Olas Venture Capital, Mark Cuban, Gaingels, and Great Oaks.
- Revere, a Madison, N.J.-based capital markets network and deal marketplace for commercial real estate brokers, developers, owners, lenders, and investors, raised $5 million in funding led by RET Ventures and was joined by investors including Related Companies, Holland Partner Group, The Feil Organization, Driftwood Capital, Davis Development, and Essence Development.
- Linguix, a Miami, Fla.-based online writing assistant company for preliminary English-speaking and non-native professionals, raised $1 million in pre-seed funding. Grishin Robotics and Antler New York led the round and were joined by investors including Flyer One Ventures.
- Permira and BlackRock Private Equity Partners invested $312 million in Series G funding in GoCardless, a London-based account-to-account payments platform.
- Altor Solutions, a Compass Diversified portfolio company, acquired Foam Concepts, an Uxbridge, Mass.-based packaging and componentry solutions provider. Financial terms were not disclosed.
- Amadys, backed by Equistone, acquired SKG Netzwerktechnik, an Austrian active and passive product supplier for telecom and datacom networks, and Muth Kommunikationstechnik, a Kabelsketal, Germany-based electrical and communication technology wholesaler. Financial terms were not disclosed.
- Fibrix Filtration, backed by Branford, acquired Americo Manufacturing Company, an Acworth, Ga.-based floor pads and cleaning accessories producer. Financial terms were not disclosed.
- Syntrio, an Inverness Graham portfolio firm, acquired ClearView Strategic Partners, a Toronto-based ethics reporting & management systems and whistleblower technology solutions provider. Financial terms were not disclosed.
- TripActions, backed by Greenoaks Capital Partners, Vista Equity Partners, and other investors, acquired Comtravo, a Berlin, Germany-based online travel management company. Financial terms were not disclosed.
- McKinley Paper Company, a Bio Pappel portfolio company, acquired Midwest Paper Group Holdings, a Combined Locks, Wis.-based recycled containerboard manufacturer for corrugated packaging and recycled bag products, from Industrial Opportunity Partners. Financial terms were not disclosed.
- Autodesk agreed to acquire Prodsmart, a San Francisco-based real-time record system tech company for data collection, management, and analysis of manufacturing processes. Financial terms were not disclosed.
- Snap acquired a minority stake in Aleph Group, a Miami, Fla.-based digital media services company. Financial terms were not disclosed.
- WeWork acquired a minority stake in Upflex, a coworking aggregator and global flexible workplace startup. Financial terms were not disclosed.
- Kurly, a Seoul, Korea-based mobile app for fresh grocery delivery, plans to raise approximately $1 billion in its initial public offering, per Bloomberg. A deal could value the company at around $4 billion to $6 billion.
- Aleph Group, a Miami, Fla.-based digital media services company, filed for an IPO in the U.S. The company posted $131.1 million in net revenue in 2021 and $26.3 million in net income. Sony Pictures Television, CVC, Twitter, Snap and MercadoLibre back the firm.
FUNDS + FUNDS OF FUNDS
- Omega Venture Partners, a Palo Alto, Calif.-based technology venture capital firm, raised $115 million for a new fund focused on AI-enabled companies.
- CapitalG, Alphabet’s San Francisco-based independent growth fund, promoted Jesse Wedler to general partner, James Luo to investment partner, Jackson Georges Jr. to growth partner, Brian Osimiri to associate general counsel, Xiaoping Feng to staff data scientist, and Sadasia McCutchen to growth vice president.
- IVP, a Menlo Park, Calif.-based venture capital firm, promoted Cack Wilhelm to general partner.
- Lakestar, a Zurich, Switzerland-based venture capital firm, hired Sam Gyimah as venture partner. He is a former U.K. government minister.
- Spark Capital, a Boston-based venture capital firm, hired Sarah Meyohas and Ben Simon as venture partners.