5 min read
Ethereum software incubator ConsenSys announced on Wednesday that it has raised $200 million from Coinbase Ventures, HSBC, and a host of other investors. The funding round, which values the the company at $3.2 billion, comes just six months after ConsenSys raised $65 million from JP Morgan and MasterCard.
Since launching in 2014 as a topsy-turvy home for dozens of Ethereum startups, Brooklyn-based ConsenSys has evolved into a behemoth of the Web 3 era thanks to its flagship products: wallet MetaMask and Ethereum developer kit Infura. (ConsenSys also funds the editorially independent Decrypt.)
ConsenSys CEO Joe Lubin, who was a co-founder of Ethereum, says the company's operations are profitable and it has plenty of capital on its balance sheet as well as a treasury of ETH and other tokens. But he says ConsenSys decided to raise outside funds in order to facilitate "hyper growth" and to facilitate potential acquisitions.
In describing the company's evolution, Lubin says ConsenSys worked to fashion the scattered startups it funded into a cohesive hub for Ethereum software developers. He likens the company to a flywheel powered by Infura and other services that help developers build Web 3 apps, with MetaMask serving as a consumer gateway for many of those apps.
According to ConsenSys, MetaMask has grown 36-fold in the last year and now has 21 million monthly users. MetaMask makes money from a service called swaps used by some DeFi users, and from taking a commission when users convert fiat currency to Ethereum directly in the wallet. In the last year, ConsenSys has been also promoting an institutional version of the wallet.
Simon Morris, the company's Chief Strategy Officer, likens ConsenSys's flywheel approach to Amazon, which is known for rapidly entering a wide variety of markets. But he adds that, unlike the shopping and cloud service giant, ConsenSys does not intend to compete with the services it supports.
"[Amazon] has an unfortunate habit of copy and kill. We try to uplift companies," he says. “There would be organ rejection of our company if we took any other approach.”
Morris describes ConsenSys's financial performance this year as "spectacular" but declined to provide any specific figures.
Like the rest of the crypto industry, ConsenSys appears to have had a stellar year, which is reflected by its latest fundraising round. The rising price of ETH certainly helped. .
ConsenSys and Lubin were able to leverage being in on the ground floor of the Ethereum boom, and the price has soared from $13 in 2016 to nearly $5,000 today. But in the last year, the company has faced unprecedented new competition. So it remains to be seen whether ConsenSys can hold onto its lead.
On the infrastructure front, Infura-rival Alchemy has achieved eye-popping growth and attracted big league clients while raising $345 million. MetaMask, meanwhile, has long enjoyed being the default wallet service for Web 3 but now faces a growing list of rivals that include Coinbase Wallet and Rainbow.
More broadly, ConsenSys faces a new challenge in the form of other blockchains like Solana that offer the same features as Ethereum but at lower transaction costs. And as Bitcoin grows more versatile, Twitter CEO Jack Dorsey has said he plans to use it for his company's crypto and NFT ambitions—suggesting that it too could become a rival in the smart contracts field that Ethereum pioneered.
For now, Ethereum remains by far the dominant platform for Web 3, meaning ConsenSys is poised to keep making money from its core products and expand into new ones. Lubin says its recent funding round will help the company further its two priorities of hiring in an intensely competitive crypto labor market (ConsenSys says it currently has 400 open positions) and brand marketing.
The company also split into two corporate entities in early 2020—one called ConsenSys Software Inc., focused on MetaMask and the company's other software products, and another one called Mesh that maintains ConsenSys's traditional role as an investor and incubator (Decrypt is part of Mesh). Lubin says he plans to remain CEO of both entities.
In the coming year, Lubin says the software branch of ConsenSys plans to expand a new division focused on NFTs and, potentially, software development tools for gaming and other content.
As for the longer term, ConsenSys has no immediate plans to follow in the footsteps of fellow crypto giant Coinbase by going public. According to Morris, the company may do so one day but is waiting in part on regulators to permit an IPO-process that includes token sales.
"We'd prefer to become a public company using our own tools and ecosystem rather than an old-fashioned listing on NASDAQ," says Morris.
As for building brand awareness—one of the company's two main priorities—Lubin says ConsenSys doesn't plan to emulate the sports marketing strategy of exchange giant FTX, which has been plastering its logo on baseball umpires and an NBA arena.
"That's not our style," says Lubin, adding that if ConsenSys has sporting ambitions it will be along the lines of building Ethereum-based sports platforms.
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