Point Nine Land
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Point Nine Land

Building the back-office infrastructure for the next generation of businesses

Our investment in Cryptio

This week, we announced that we led a $10M Series A in Cryptio (Coindesk article here). After Bitbond 8 years ago, Chainalysis 7 years ago, Kaiko in 2019, and Tenderly in 2021, this is the 5th crypto infrastructure company we are proud to partner with at Point Nine. As a sign of our excitement (and not only of the timing of this round in the funding market ;)), it’s also one of the largest rounds we’ve ever led!

The crypto infrastructure businesses in the P9 Family

It feels like a good time to take a step back and share a few thoughts on the evolution of the crypto ecosystem and why it felt right to start partnering with a back-office software for corporates adopting token-based financial products.

Where are we in the crypto adoption lifecycle

This is probably a topic for a much longer blog post, but here are a few interesting data points, mainly coming from a16z’ great report published a few days ago.

It’s still early days….

Looking at the number of active Ethereum users vs. the number of Internet users during the previous innovation cycle, a16z argues that we’re still “in 1995” of the web3 innovation cycle. But one could also make the point that cycles are moving faster with crypto following a mechanism that a16z calls the “price-innovation cycle.” Being early is rewarded financially by being able to buy cheap tokens that will increase in value as products are more widely used.

…but adoption is growing quickly and in multiple directions

In terms of adoption, consumers are ahead of corporates (B2B often follows B2C), but corporates are increasingly diving into crypto. I find it astonishing that in France alone, >15% of consumers have already bought some crypto tokens. On the corporate side, Tesla and Paypal made headlines last year by storing very significant amounts of cash in crypto. There is also an increasingly large number of companies that have started accepting payments in crypto. Fidelity, one of the largest US financial institutions, just announced that they were hiring 110 tech people to offer crypto products to their clients.

Now, if we look at crypto native companies, one can start dreaming big about the number of things any business could do with crypto-based financial products in the future. Crypto-native companies often hold tens (if not hundreds) of tokens in tens (if not hundreds) of wallets across their organisations, get paid by their clients in crypto, pay their suppliers and their employees in crypto, and sometimes place their reserves and/or borrow money through DeFi products.

We might argue that the typical corporate will never get where crypto-native companies are today (we won’t do that here) and that it might very well take 15 years to get there. But if they get there, one thing is certain… this paradigm shift in the structure of these financial products will create an accounting and reporting nightmare for CFOs. Companies will suddenly need to track the value of tens of tokens (assets) in order to properly monitor their finances and close their books.

Enter Cryptio

Cryptio powers the back office of organizations that adopt crypto-based financial products. The product consists of (i) a data layer that indexes natively blockchain protocols, exchanges, and custody providers and (ii) a financial reporting and accounting software layer on top.

Here’s a tweetstorm of Antoine, the founder, who explains well how the product works and why it matters.

Let’s take a step back as to why Cryptio could become a “gigantic” company :).

Why is it exciting?

A horizontal market

ERP is one of, if not the largest software categories alongside CRM. SAP for Enterprise, Netsuite for midmarket, and Quickbooks or Xero on the SMB side are all examples of multi-billion dollar businesses powering the back-office of organisations. Cryptio’s addressable market grows with the adoption of crypto in organisations. As explained in the first part, if we dream big, any company could start adopting crypto-based financial products and at that point would need a back-office solution specifically for their crypto activities.

Must-have product:

While the accounting rules are still changing geo by geo, they will eventually stabilize, and companies will need to be compliant with the tax authorities in the geos in which they operate. Companies will also need to accurately monitorthe the resources they have locked in tokens. All of this will make having a solution like Cryptio a must.

Impressive list of clients

Cryptio now mainly goes after the early adopters in this market, those that have the highest level of sophistication when it comes to using crypto. For now, these are mainly “crypto-native” companies like protocols. As a good testament to the quality of their product, we were amazed to see that a good number of these (Consensys, Aave, NEAR, Protocol labs) are already clients of Cryptio, despite the (relatively small) size of its organisation when we invested.

Some of Cryptio’s clients

Differentiated product approach focused on data accuracy

It’s not that often that a new category of software is being created, and this obviously attracts competition. Taxbit, Lukka, and Bitwave are well-funded players going after a similar/adjacent opportunity in the US. We believe that Cryptio’s (product) focus on the indexing/data layer is the right way to provide the level of granularity that’s needed to provide Enterprise-grade back-office software. Mistakes in reporting can often be pretty expensive in terms of taxes ;).

Potential for scale/network effects

The focus on the indexing layer is also a strong basis to build barriers to entry as the company grows. As Antoine explains well, crypto products are like legos in that they are built relying on one another. Indexing multiple blockchains creates scale (if not network) effects that could make this opportunity a SaaS opportunity with marketplace-style barriers to entry. It’s (at least conceptually) pretty fascinating I find.

Antoine and his team

Antoine has been working on the problem since “the equivalent of 1990” in the adoption cycle of web3 ;) He’s also built a team of crypto (and product) passionates around him that make a strong (cultural) foundation to build a great company over the long run. We’re excited to be onboard!

If you want to join the ship, they’re hiring across their offices in Paris, London, and NY.

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P9 is an early-stage VC focused on B2B SaaS and marketplaces. Point Nine Land is where the P9 team (and sometimes members of the wider P9 Family) share their thoughts on SaaS, marketplaces, startups, VC, and more.

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Louis Coppey

Louis Coppey

VC @pointninecap, @MIT grad, writing about #VC, #SaaS, and #Automation.

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