Blockchain.com Needs Cash As Valuation Plunges 70%: Will VCs Back The Struggling Startup?

Cryptocurrency exchange Blockchain.com is in the midst of a down-round fundraising campaign, which may result in a valuation reduction of more than 70%.

According to a Bloomberg report, the company plans to raise money at a fraction of the $14 billion valuation it earned earlier this year.

Discussions are still in the early stages, and UK-based investment firm Kingsway Capital is believed to be leading the effort. Blockchain.com's other backers include Lightspeed Venture Partners and Baillie Gifford & Co.

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Valuation down by over 70%

The digital assets company is anticipated to raise money at a valuation between $3 billion and $4 billion. That's a far cry from when Blockchain.com was valued at $14 billion in a Series D fundraising round headed by Lightspeed Venture Partners at the end of March.

The London and Miami based company did not disclose the exact amount raised at the time.

Last year, it raised around $300 million at a valuation of $5.2 billion.

Amid the market slump since the beginning of this year, major cryptocurrencies like Bitcoin BTC/USD, Ethereum ETH/USD, Ripple XRP/USD, and CardanoADA/USD have lost nearly 60-70% of their values since their all-time highs seen in November last year.

According to a research report by PitchBook, VC funding for crypto companies decreased by 37% YoY to $4.44 billion in Q3 2022.

The reduction is nearly 50% when compared to Q1 2022 when VC investors invested a record $8.83 billion into cryptocurrency and blockchain startup companies.

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Blockchain.com's loans to 3AC cost it $250M

The bankrupt crypto hedge fund Three Arrows Capital (3AC) "is rapidly becoming insolvent and the default impact is approximately [USD] 270 million worth of cryptocurrency and US dollar loans from Blockchain.com," according to Blockchain.com CEO Peter Smith, in a letter to shareholders written at the beginning of July.

Blockchain.com "remains liquid, solvent, and our consumers will not be impacted," Smith emphasized at the time.

To save costs, the company fired 150 employees, or 25% of its workforce, in July.

One of the oldest firms in the cryptocurrency sector, Blockchain.com was founded in 2011.

It created one of the first web wallets and blockchain explorers.

According to the platform, one-third of all transactions on the Bitcoin network are made through it, and there are 37 million confirmed users.

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