A company spokesperson characterized Kraken’s course as a mirror to much larger rival Coinbase: Coinbase, which has more than 25 million customers, made its name as a retail service before targeting institutional customers; Kraken, which does a brisk business with large traders and counts 4 million customers, is now broadening its service to attract smaller investors.
$100 Million from ‘Crypto OGs’ and others
In an unusual move, Kraken did not turn to the venture capitalists and other traditional investors that supplied its early rounds of funding for its recent $100 million fundraising effort.
Instead, Kraken invited its larger customers to purchase a stake. This is consistent with a Coindesk report in December, which stated the company was emailing clients as part of an effort to raise a “war chest” of an undisclosed amount, one that valued the company at $4 billion. Powell confirmed the valuation to Fortune and said the new round is “just about all spoken for.”
Kraken’s earlier investors include Hummingbird Ventures, Blockchain Capital, and Digital Currency Group. It would not disclose the identities of its new investors. Powell described them as everyone from “crypto OGs to funds to random guys who trade and believe in the company.”
Kraken did not need to register the round with the SEC, Powell said, because the company only approached accredited investors and others covered by an exemption. Most of the new investment came from outside the U.S., he added.
The decision to approach Kraken’s clients for funding is a way to promote the interests of its users, Powell said. “My personal philosophy is that shareholders are at often at odds with users’ interests,” he said. “Look at Facebook looting from their users in order to pay off shareholders—that wouldn’t happen if users were shareholders themselves. It’s good to keep interests aligned.”
The Kraken CEO, like many established figures in the crypto world, is known for his unorthodox views and strident language. This has included a Twitter tirade against New York regulators, who he likened to an “abusive controlling ex” in part because of the state’s controversial permit known as the Bit License, which cryptocurrency businesses must obtain.
Powell says he continues to share a vision set out by Satoshi, Bitcoin’s pseudonymous founder, of a world where people control their own money outside the constraints of government. “If you asked me seven years ago, I would have said Bitcoin would take over the world by 2015,” he said. “I still think it’s going to take over.”
In the second month of 2019, though, Bitcoin was trading at about $3,400—a far cry from its almost $20,000 height in December 2017. Powell acknowledged that Bitcoin and other cryptocurrencies have struggled to find a use case that will persuade more everyday consumers to use it. But adoption will take off as payment platforms embrace virtual currencies and society relies less on cash, he said. And that’s when things could get interesting.