Access for the next 300m, or why we invested in Tangany!

The crypto industry has gained a great momentum in recent years and is definitely here to stay. Accordingly, we at Nauta are more than excited to welcome the founders of the Munich-based white-label crypto custodian Tangany, Martin, Christopher and Alexey, into our portfolio. Nauta is leading the €7m Seed round together with C3 VC Fund and existing investor HTGF*.

Back in 2014 in a wonderful Berlin bar called Room77 (which has sadly fallen to Corona since then) my good friend Christian transferred 70 cents in Bitcoin to a newly installed wallet on my phone. Sadly, I’m not the accidental crypto billionaire I would like to be. This is partly because it would only be worth about €80 today, but also because I lost the password for this wallet.

Clearly, you should not trust me with safekeeping the passphrase to your crypto wallet. Honestly, I would not even trust myself. Early adopters of crypto have largely been tech savvy individuals, some of them more than capable to secure their own data, but even in this small fraction of the overall population (approximately 300m crypto users), security often is an issue. To onboard the next wave of adopters, the underlying technical complexities of crypto need to be removed and access needs to be simpler.

Wallets and custody

The crypto world is very technical and complex. Assets are stored on the blockchain and accessing them requires a private key, stored in a so-called crypto wallet (a physical note, a program, or a service which stores the public and private keys for cryptocurrency transactions).

In addition to storing keys, a wallet often also allows functionality like encrypting and/or signing information, for example executing a smart contract or for identification.

If the private key is lost the assets are inaccessible, or if stolen, whoever has the key is the new owner. Accordingly, companies and asset managers in this space need to securely store private keys as losing them means losing their stored value. In some cases, billions of EUR may be at stake. To add to that, large-scale crypto usage introduces additional complexity: how many people should have access to the key and who are these trusted people? What’s to stop them going rogue and stealing everything?

Apart from the basics, asset holders want to be up to speed with new protocols and technologies like NFTs, to tokenize their assets, or to put their crypto to work in DeFi to earn interest. Keep in mind that, despite the visibility, the blockchain technology and the crypto ecosystem are still in its infancy. At this moment in time, we can only imagine all the future use cases that will emerge with growing adoption.

Custody to the rescue

Tangany is a white-label custody provider, and all its features are banking-level secured and fully accessible via APIs. The company offers Wallets as a Service, i.e. they manage and hold private keys, so clients don’t have to. This makes Tangany a one-stop shop for clients like hedge funds that want to manage their own assets or for companies that want to offer crypto-asset management to their own clients. The team has built their technology to securely store cryptocurrencies and other tokens while balancing safekeeping of private keys with an easy online access for clients.

Tangany targets institutions/banks and other companies using blockchain technologies (e.g. startups like Exporo or entities like the Tezos Foundation) and is currently one of the four German companies licensed by BaFin (the federal finance authority) to offer such services. As cryptocurrencies cross the chasm from tech-savvy early adopters to the mainstream population, crypto custody is an essential building block for the ecosystem. Custody solutions, for example, allow neobrokers to offer crypto trading in their platforms, thus opening this formerly complex endeavour to the retail trader.

Team

Tangany was started by Martin Kreitmaier, Christopher Zapf and Alexey Utin. The trio had worked together previously and in 2017 they were convinced that the timing was right to build a blockchain-based business. Finally, in April 2018, supported by the EXIST program, the idea for a white-label crypto custodian was born.

Together with their team of 19 people, Tangany is working towards making crypto accessible to everyone everywhere.

Investment Thesis

We initially became aware of Tangany when listening to a podcast interview about crypto custody with Martin. Subsequently the name Tangany popped up in several conversations with crypto founders and we became convinced that their technology was a central piece in the German blockchain ecosystem.

Several elements make Tangany a good fit to Nauta’s investment strategy:

• Massive growth of the crypto economy: The overall crypto market capitalization is highly volatile, but at its peak has exceeded $3 trillion in 2021 (up from $770bn at the 2018 peak) and, overall, has been growing at a massive rate. The market pull is phenomenal, and we believe it to be the perfect timing for supporting crypto startups.
• Creating the infrastructure of an evolving market: The crypto market is changing quickly, and entirely new ecosystems are being built using blockchain. In such a fast-growing market we believe it is essential to create a defined position within the infrastructure in order to capture significant value. Companies doing so will benefit from all the different approaches currently under experimentation.
• Enabling technology for crypto adoption: We love to invest in enabling technologies and we believe that crypto custodians provide an essential building block for expanding the crypto ecosystem beyond tech-savvy early adopters and experts. We foresee the emergence of many end-user focused crypto companies that abstract away the crypto complexities and will be based on a secure and solid infrastructure.
• Well-established team: Tangany’s team has worked together previously, and they have, during the last years, proven to be able to build a highly secure BaFin-regulated custodian technology.

Thank you — in advance

I am a tech-savvy person and love to try out new technologies. But having painfully lost €80 in Bitcoin wealth I am more than happy that a great company like Tangany keeps my assets safe.

Team Tangany, welcome to the Nauta Family, we are excited to back you on an amazing journey!

🤓 Learn more about Tangany > https://tangany.com
👩‍💻 Work with a great & experienced team > career page
🎟️ Get in touch and try out their sandbox > here

*Part of the transaction is still subject to approval of the BaFin.