#365: Zac Prince on Raising BlockFi's $50M Series C Financing
8/20/2020 · 43 min · transcript via mlx
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Key topics
— BlockFi closed a $50 million Series C funding round led by Morgan Creek Digital (Pompliano's firm), with participation from Valar, Winklevoss Capital, Fidelity, two university endowments, SCB10X (Thailand's largest bank's venture arm), and NBA player Matthew Dellavedova.
— BlockFi operates three core products: a cryptocurrency exchange for buying/selling Bitcoin and other assets; an interest-bearing account paying up to 8.6% APY on stablecoins and crypto; and collateralized loans against crypto holdings at conservative 50% loan-to-value ratios.
— Revenue grew nearly 10x in seven months (from under $1M in December 2019 to ~$10M in July 2020), while assets under management increased from $200M to over $1.5B, all while maintaining a perfect lending performance record with zero defaults.
— BlockFi is launching a Bitcoin rewards credit card (first cards to employees, investors, and influencers this year; broader rollout early 2021) and expanding internationally with teams in London and Singapore.
— The company operates under an MSB (money services business) registration at federal level and is acquiring state-level money transmission licenses; all states can access lending and trading, but New York residents cannot earn interest on crypto holdings.
— CEO Zach Prince emphasized the strategic importance of deposits and payments as a foundation for building a comprehensive financial services platform that can add credit products, cards, and other services over time, creating customer stickiness.
Market & price signals
— Prince noted confidence that Bitcoin will hit new all-time highs within 6–18 months, and positioned this as a tailwind for BlockFi's growth. He attributed some of the pandemic-era growth to increased interest in Bitcoin as a hedge against monetary expansion and central bank responses to COVID-19, alongside general adoption of digital services. The current macro environment—with near-zero savings rates and the Fed signaling rates will remain low through at least 2023—makes BlockFi's 8.6% APY product particularly compelling relative to traditional banking alternatives.
Actionable insights
— Deposit-first strategy creates defensibility: BlockFi's focus on building deposits and payments before layering on lending, trading, and future credit products aligns incentives with users (they earn high yields) and creates stickiness comparable to traditional bank relationships, reducing customer acquisition costs over time.
— Collateralized lending over unsecured consumer lending: BlockFi's zero-default track record stems from lending against liquid crypto collateral at conservative ratios, analogous to securities lending, rather than unsecured consumer loans—a structural advantage that de-risks the business model versus peer-to-peer lending platforms.
— Timeline for mainstream adoption: The Bitcoin rewards credit card and expanded state licensing will unlock new user segments (those unfamiliar with crypto, those seeking passive Bitcoin exposure), positioning BlockFi to capture demand when Bitcoin reaches new ATHs and mainstream media attention resurges.
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— BlockFi allows you to keep your crypto, put it up as collateral, and receive a USD loan funded directly to your bank account. They do loans ranging from $2,000 to $10,000,000, and they're perfect for helping you reach your financial goals of all sizes. Visit blockfi.com/Pomp to learn more about putting your crypto to work without having to sell it.
— Pomp writes a daily letter to over 50,000 investors about business, technology, and finance, breaking down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at pompletter.com.