Crypto startup Blockdaemon continues its acquisition process by acquiring Sepior – TechCrunch

Crypto infrastructure provider BlockDaemon has acquired Danish startup Sepio, a digital asset security company that provides key management services for institutional clients, for an undisclosed amount. The deal marks the startup’s fourth acquisition in two years, the latest being Blockdaemon’s purchase of fiat-to-crypto onramp Gem.com in March of this year.

Crypto markets have been trending down since April, and Web3 companies are flush with cash as a result. So it’s somewhat unexpected to see Blockdaemon, a venture-backed crypto startup, providing funding to continue its inorganic growth strategy.

Certainly, a well-capitalized company is a company that catches startups at the right time, in part because valuations across the board are low. 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 business has felt the effects of the market downturn, Sepior may have too, meaning Blockdaemon may have picked it up at a steep discount.

BlockDaemon appears to be growing rapidly, another sign it can make bold moves in a risky 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.

Constantine Richter, CEO and Founder of BlockDamon. Image Credits: blockdamon

We follow a standard VC type. [guidance]That ultimately means a 30-month runway, where we want to invest in acquisitions and growth,” Richter said.

The company aims to be a one-stop shop for institutions using crypto, including “on- and off-ramps, node APIs, high-availability clustering for transactions, staking, liquid staking – all in one seamless interface.” he said.

Richter said Blockdamon was looking for a supplier like Sepior to support the stock offering.

“Especially to do the key part, if you want to be really fast and balance assets and share assets with institutions, you have to touch keys, not what we want to do, because we want to be guardless. So Sepiore’s key management solution solves two of our problems because they provide institutional level key management; “That’s actually very rare,” Richter said.

Many large crypto companies have been integrating multiparty computing (MPC) capabilities by buying smaller players in the space, Richter said. Coinbase made a similar move in November 2021 when it acquired Israeli firm Unbound Security.

“He’s lonely,” Richter added. [institutional-grade key management provider] Left Note” when Blockdaemon went out to buy it. Once the two parties reached an exclusive agreement to merge, Richter added, BlockDaemon discovered that several other parties had tried to buy Sepio.

Another reason why Sepior looks so attractive to BlockDemon is that it generates significant cash flow in a traditional SaaS-style business model, though Richter didn’t disclose specific numbers. BlockDaemon itself makes 70% of its revenue in tokens and 30% in cash, Richter said. BlockDaemon said it was profitable in 2021 and remained “steady” throughout the fall in revenue, with the company’s rapid growth offsetting the decline in token prices, even though it didn’t make a profit last quarter.

While buying a company in a different regional market is challenging and has slightly extended the deal’s timeline, Richter said the acquisition is a good fit with BlockDaemon’s focus on acquiring customers. Blockdaemon adds that the average customer’s contract size triples every year after bringing on a customer.

“I think one of the things that is often underestimated, when you’re a young company, is how you can build a playbook and learn how to acquire companies and integrate them well. “I feel like we’ve done that in terms of the complexity of the acquisitions and the type of companies we buy, so Sepiore is a great play for us,” Richter said.

What’s more, the two companies share many customers and there will be overlap from Citibank and other financial institutions, Richter said. Sepior today has 25 to 50 customers, while Blockdaemon serves about 250, he added. In terms of size, Sepior employed ~20 people when the acquisition was announced, compared to BlockDemon’s ~270.

“We see this as a huge opportunity to capture market share,” Richter said of slowing crypto prices. “We’re the most capitalized company in the space. We’re already the market leader. We feel we have a unique product mix that makes us unique, and so we invest heavily in customer acquisition, and obviously, we do it carefully.”