FTX, a crypto derivatives exchange, has just raised the industry’s largest private equity round, nearly doubling the previous record. FTX Trading Ltd., the Hong Kong-based exchange’s owner and operator, announced today a $900 million Series B fundraise at a $18 billion valuation – a significant milestone for FTX, which was only worth $1.2 billion a year ago.
Sequoia Capital, Third Point, Lightspeed Venture Partners, Coinbase Ventures, Softbank, Sino Global Capital, Multicoin, the Paul Tudor Jones family, VanEck, Circle, and hedge funders Izzy Englander and Alan Howard were among the over 60 investors who contributed to the fundraise.To close the round, FTX’s team worked directly with investors Paradigm, Ribbit, and BTIG, rather than relying on an investment banker.
The exchange, which debuted in May 2019, set itself apart from industry giants like Binance and Coinbase by providing advanced functionality and sophisticated investment products, such as options, futures, volatility products, and leveraged tokens, to even inexperienced traders.According to a company statement, FTX has increased revenues tenfold this year and 75 times since its Series A funding round closed in mid-2020, averaging over $10 billion in daily trading volume.
“The primary goal of the raise was to [find] strategic allies who can help FTX grow its brand,” says Sam Bankman-Fried, the exchange’s 29-year-old founder and CEO, “but the capital itself will be primarily used for acquisitions.”“Any of those are businesses where we think we have a lot of value to add, implementing the tools that we’ve built, and frankly, us implementing what they’ve built,” he says. The funds will also be used to expand globally and accelerate growth.
Binance, the world’s largest cryptocurrency exchange by market volume, is noticeably absent from the list of investors, despite the fact that it is currently under investigation by financial regulators around the world. It made an undisclosed strategic investment in its Hong Kong-based peer in December 2019.According to Forbes, Binance CEO Changpeng Zhao (also known as CZ) recently sold his company’s equity stake in FTX: “We’ve seen tremendous growth from them, which we’re very pleased with, but we’ve completely exited.”He describes the withdrawal as part of “a normal investment cycle” that was completed amicably: “We’re still friends, but we don’t have any equity relationship anymore.”
FTX now has over one million users, ranging from individual investors to sophisticated day traders, family offices, and experienced institutional traders.Multiple high-profile sports sponsorships it has struck this year could also be attributed to its rapidly growing popularity.In March, FTX was awarded a $135 million 19-year naming rights deal to the Miami Heat’s home arena, marking the first time a cryptocurrency exchange has sponsored a professional sports venue in the United States. Last month, the company announced multi-year brand partnerships with TSM and Major League Baseball (MLB), as well as the appointment of National Football League quarterback Tom Brady as its ambassador.Gisele Bundchen, Brady’s supermodel wife, joined FTX as an environmental and social initiatives adviser. Brady and Bundchen are both shareholders in the company.
As a result of the investment, Bankman-Fried, whose fortune was estimated by Forbes to be worth $8.3 billion as of last month, stands to increase his wealth by at least $7.9 billion to $16.2 billion, cementing his status as the wealthiest known crypto billionaire.However, with bitcoin’s price dropping 3% in the last 24 hours, along with much of the rest of the crypto markets, that wealth could be short-lived. He owns a whopping 58 percent of the company’s stock. FTX paid $150 million for Blockfolio, a popular portfolio tracking app, in August 2020.
Many will also wonder if FTX is preparing for a public debut, which is becoming increasingly popular among crypto startups. Coinbase became the first major cryptocurrency company to list its stock on Nasdaq in April.Circle, a digital infrastructure provider, and Bullish, a yet-to-be-launched crypto exchange, have recently announced their plans to enter the public markets as well.
“This is something we’re going to think about a lot, and we’re not sure how this is going to end.”So what we want to do is put ourselves in a position where we can do it if we want to [and] when the time comes,” Bankman-Fried says. There is no “clock ticking” on our need to go public.