While many companies in the cryptocurrency sector are cutting jobs or freezing withdrawals, at least one company seems to be thriving in what's becoming known as the "crypto winter."
FalconX, which operates a cryptocurrency exchange for institutional investors, announced Wednesday it's raised a $150 million Series D round. As part of the deal, which came about 10 months after its Series C round, the San Mateo startup's backers boosted its valuation from $3.75 billion to $8 billion.
"These investors recognize that this is a fundamental shift that's happening in the world," Jon Kaplan, FalconX's chief revenue officer, told the Business Journal. He continued: "What they like about us is that we have been profitable."
GIC, Singapore's sovereign wealth fund, led the funding round alongside New York-based B Capital. Thoma Bravo, Wellington Management, Adams Street and Tiger Global Management also invested in the deal.
FalconX's new round comes as the value of nearly all cryptocurrencies has plunged from last year's record highs; some companies in the industry, including Coinbase Inc., have announced layoffs; and skeptics of the business have become increasing vocal.
Legally known as Solios Inc., FalconX is a bit different from other companies in the industry. Instead of catering to everyday investors and cryptocurrency enthusiasts, it counts hedge funds and traditional investment banks among its clients. Despite the turmoil in the industry, it added a record number of customers in the first and second quarters, Kaplan said.
The key to FalconX's success is, in part, its "methodical" growth, he said. While many companies in the industry have been on big hiring sprees, Kaplan's workforce since February has only increased by 15 employees to 165 total.
The company also has placed an emphasis on managing its risk from volatile cryptocurrencies. It doesn't invest in or trade digital currencies for its own accounts, Kaplan said.
That and similar policies have have helped safeguard the company from recent downturns in the market, including the crash of the Terra USD stablecoin and the decline in the price of Bitcoin, Kaplan said.
"When these things happen, there's the potential for contagion in the market," he said, continuing, "Everybody's really tightening their risk profiles ... We're also making sure that we're ready if anything else were to spread."
Even though the cryptocurrency market has been reeling lately, Kaplan believes in its long-term potential.
In the early 2000s, he worked for Google LLC's financial services sales team in the United States. While there, he advised customers on how to transform their companies into digital enterprises. At the time, many businesses were still struggling to imagine how the Internet could benefit their bottom lines.
The cryptocurrency industry today reminds him of those days, he said.
"I see so many corollaries between that time and now with what's happening with crypto," Kaplan said. "We're just at the beginning stages."
