Flipside Crypto, a nine-month-old cryptocurrency investment service based in the South Station area, announced on Wednesday it had closed a $3.4 million equity financing round.
The venture capital round, which serial entrepreneur and Flipside Crypto CEO Dave Balter qualified as of seed stage, was led by True Ventures, a recurring investor in Balter's companies — they backed both his last two companies Smarterer, which was acquired by Pluralsight in 2014, and Mylestone, which shut down a month after Balter left to focus on Flipside Crypto.
The Chernin Group, Resolute Ventures, Boston Seed Capital (which was also among Smarterer's investors), Converge and Founder Collective also took part in the round. As part of the announcement, Adam D’Augelli, a partner at True Ventures, will join Flipside Crypto’s board of directors.
The capital will be used to continue to develop and refine the data tools and the algorithms that scan the cryptocurrency online market and are at the foundation of the company's investment recommendations to customers.
"At our heart, we are a data company."
"At our heart, we are a data company," Balter said.
To understand the position of the company in the cryptocurrency space, here's a simple way to think about it. As Balter explained, there are three steps to complete in order to own cryptocurrencies. Step No. 1: you need to find a place to buy your liquid currency, like exchanges or OTC desks. Step No. 2: you need a place to store it, a software that holds the keys to access your digital currency commonly known as "digital wallet." Step No. 3: you need a safe place to put your digital wallet.
"In our business, there are four steps, because there's a step before all of it where we're analyzing the cryptocurrencies that are available to be bought and... our algorithm is providing insights in what could be acquired that we think might have long term value," Balter said.
Balter added that one of the reasons why Flipside Crypto has worked so far (he mentioned that the company makes almost half a million in revenue) is because the process of "buying, walleting and custoding" is complex, and people just don't have the time or knowledge to do it.
The company takes care of all the four steps on behalf of the investors. After putting an initial capital to invest in the hands of Flipside Crypto and paying a service fee, customers get a dashboard to track their holdings and access to a private Slack community to share information with other investors. It's worth noting that the minimum investment is $15,000, which comes with a flat service fee of $2,000 for the first year.
Flipside Crypto will use part of the funding round to improve the company's management tools suite, or the "three steps" that come after the algorithms provide buying recommendations.
Balter noted that the company's algorithms can't guarantee results, as no predictive algorithm analyzing the traditional stock market could do. "We believe that our algorithms are doing quite a good job... We've been benchmarking against other way of investing and the results have been good so far."
To make predictions, Flipside Crypto's algorithms take into account several factors. The first algorithm looks at the level of activity of traders on live exchanges; the second is more on the developers side, while the last one places notes inside the blockchain (the technology behind cryptocurrencies) and use them to understand the movement of the digital currencies.
Balter added that over the year, Flipside Crypto will have five new open positions, including one for a data scientist and one for a data engineer, to join the current eight-people team.
