The volatility of the crypto market has raised serious doubts about its value, and one of the biggest drawbacks has been the lack of ability to use crypto as a true financial instrument. BlockFi is building out the crypto infrastructure to offer financial products and services centered around crypto. BlockFi presently offers free crypto trading, compound interest accounts, and loand products. For the first time through BlockFi’s lending arm, crypto can be used as collateral when applying for a loan. Once a user applies for a loan and puts up their crypto assets as collateral borrowers receive USD in their bank accounts. This entire process takes a little over an hour. BlockFi has plans to expand its offering to provide more products and services with the goal of bringing crypto to the mainstream.
AlleyWatch interviewed Zac Prince to learn more about BlockFi, the state of the crypto markets, the future plans including plans for a crypto rewards credit card, and the company’s recent funding round which brings the total funding raised to $108.7M across five rounds.
Who were your investors and how much did you raise?
BlockFi raised $30M in Series B funding led by Valar Ventures. Other participating investors include Morgan Creek Digital, PJC, Akuna Capital, CMT Digital, Avon Ventures, Castle Island Ventures, Purple Arch Ventures, Kenetic Capital, Winklevoss Capital, Arrington XRP Capital, and Hong Kong-based HashKey Capital.
Tell us about the product or service that BlockFi offers.
BlockFi is the only crypto company to offer a suite of financial products that seamlessly interact with one another. These products include crypto-based interest accounts providing up to an 8.6% annual percentage yield on Bitcoin, Ether, and stablecoins; crypto-backed loans which allow investors to access liquidity up to 50% of an asset’s value in USD; and zero-fee trading. We now boast more than $650M in assets on the platform, with a 0% loss rate across our entire loan portfolio since we began lending in January of 2018.
What inspired the start of BlockFi?
I was a crypto investor and had a personal experience when my crypto assets weren’t being considered as collateral when I applied for a loan. This really illustrated how underdeveloped the ecosystem of financial products around crypto was, and this inspired us to create products that would advance the digital asset economy and let people do more with crypto.
Flori Marquez, who cofounded the company with me, also had personal experience that highlighted the need for products like what we’re building at BlockFi. She saw what it was like for her family in Argentina, who didn’t have access to banking services as we have in the US. We realized that using crypto as payment rails could change this. Together, we saw the potential to recreate global banking using crypto as payment rails.
How is BlockFi different?
BlockFi is the leading financial services company creating products for retail consumers using crypto. We are looking to bridge the worlds of traditional finance and crypto. We differentiate ourselves by leveraging our background in financial services to build a platform that prioritizes regulatory compliance and access to institutional capital. We are looking to cut through the noise in the blockchain industry to build financial products that everyone can use easily on their phones.
What market does BlockFi target and how big is it?
BlockFi targets two markets. On the retail side, we’re looking to work with existing crypto investors and the crypto-curious. For those clients, we offer three flagship products — crypto-backed loans, the BlockFi Interest Account (BIA), and zero-fee trading. This market can expand beyond the US over time. We believe the addressable market for global banking products has a size of $11 trillion.
On the institutional side, we’ve built a lending desk that works with large financial institutions such as Fidelity and Susquehanna.
Who do you consider to be your primary competitors?
Within crypto, we are the leading financial services firm for retail consumers. We consider our primary competitors to be large fintech companies moving into our space.
Nominations are now open for AlleyWatch’s 2020 NYC Tech Influencers feature. Know someone amazing who belongs on this list? Nominate them today here. Nominations open until 2/14. Looking to drive targeted response from the NYC Tech community at scale, learn more about partnering with AlleyWatch on this initiative here.
What’s your business model?
We build the bridge between institutional finance and retail consumers. Our business model is simple: we access low-cost capital and attractive yields from our institutional partners, and we flow those rates through to our retail user base in the form of 8.6% interest accounts and USD loans starting at 4.5%.
What was the funding process like?
The initial stages of funding were quite difficult. We call it the “crypto premium” – we have to be 2x better than a regular company because traditional VCs are not comfortable investing in such a new space.
What are the biggest challenges that you faced while raising capital?
Two years ago, many VCs asked us why we didn’t do an ICO. We believed that having a token in our model didn’t make sense. While we could have accessed $30M or more doing an ICO, we believed that the traditional VC funding model would allow us to build a company that was in compliance with US regulations and would have a greater ability to scale in the long term. So far, our thesis has been proved out.
What factors about your business led your investors to write the check?
Our revenue grew 20x in 2019. We built and shipped three entirely new products: the interest account, zero-fee trading, and an institutional lending desk. Our investors gave us access to more capital to catapult our growth forward and allow us to continue to launch new products at a rapid pace.
What are the milestones you plan to achieve in the next six months?
In the near term, we’ll be using these funds to continue to launch a mobile app, build integrations with banks so that people can connect their bank accounts directly to BlockFi and launch the world’s first crypto-rewards credit card. We think the credit card will be game-changing. Most rewards encourage people to spend more money – miles to buy more flights, points to book more hotels, etc. Our credit card will let clients invest and earn money in the long term, in the form of bitcoin.
Most rewards encourage people to spend more money – miles to buy more flights, points to book more hotels, etc. Our credit card will let clients invest and earn money in the long term, in the form of bitcoin.
What advice can you offer companies in New York that do not have a fresh injection of capital in the bank?
Raising VC capital is difficult. However, what investors are really looking for are working products and results. While the timeline to raising funds is often longer than you originally map out, never let the lack of capital stop you from building your company.
Where do you see the company going now over the near term?
In the near-term, we’re looking to expand our products for audiences beyond existing crypto investors – opening BlockFi to everyday consumers. Most people don’t know that you can access 8.6% in interest rates on USD equivalents. Our focus is to make sure that everyone in the US knows that they can access this product, with no minimum account size.
What’s your favorite restaurant in the city?
Bar Tabac.
Nominations are now open for AlleyWatch’s 2020 NYC Tech Influencers feature. Know someone amazing who belongs on this list? Nominate them today here. Nominations open until 2/14. Looking to drive targeted response from the NYC Tech community at scale, learn more about partnering with AlleyWatch on this initiative here.
