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Grayscale-parent Digital Currency Group tops $10 billion valuation with SoftBank, Alphabet investments

Grayscale-parent Digital Currency Group tops $10 billion valuation with SoftBank, Alphabet investments

01 Nov 2021

Barry Silbert, Founder and CEO, Digital Currency Group 

David A. Grogan | CNBC

Digital Currency Group is selling shares to SoftBank and Alphabet’s venture capital arm in a deal that values the crypto conglomerate at more than $10 billion. 

The Manhattan-based, private company announced a secondary round on Monday, in which existing investors are selling shares to new backers. The $700 million deal was led by SoftBank and included Ribbit Capital and CapitalG, which is a subsidiary of Google’s parent company Alphabet, among others. 

Digital Currency Group is the parent company of several big names in the crypto space. Until now, its valuation was somewhat of a mystery as it had only raised $25 million in primary capital since launching six years ago.

One subsidiary, Grayscale Investments, is the world’s biggest digital asset manager with $50 billion under management. Its flagship Grayscale Bitcoin Trust is the largest bitcoin fund in the world, and recently applied to convert into an ETF. DCG, as it’s also called, owns prime brokerage and institutional lending firm Genesis, as well as news outlet CoinDesk, and has backed more than 200 blockchain companies.

“We’re the best proxy for investing in this industry,” Barry Silbert, founder and CEO of Digital Currency Group, told CNBC in an interview. “We were looking for the type of backers that could be, and hopefully will be with, with us on this journey for the next couple of decades.” 

Silbert said CapitalG brings Alphabet and Google’s expertise in data and consumer companies, while Softbank has the global footprint and ability to turbo-charge portfolio companies. The investment also signals new interest by venture capital firms looking for exposure to the digital asset class outside of bitcoin.

CapitalG founder and general partner David Lawee said he saw this as a way to back a potential winner in crypto financial services. Lawee has invested in Lyft, Airbnb, Robinhood and Snapchat during his time at CapitalG and before that, founded an online gaming community that was acquired by Viacom. The crypto space is evolving faster than anything Lawee said he saw in the dot com era, making the ability for companies to adapt even more important.

“When I think back to the nineties, very few companies I met still exist — it’s very hard to evolve as quickly as technology evolves — you need to be a pretty nimble company to take advantage of it,” Lawee said. “DCG has a lot of flexibility to make investments and to get into new businesses.”

DCG also holds various digital assets, including bitcoin. The world’s largest cryptocurrency hit an all-time high above $66,000 in October and ended the month up more than 40%. Silbert is bullish on the world’s largest cryptocurrency, which he described is unstoppable at this point.” But most are worthless, he said.

“Ninety nine percent of the digital assets that exist today are overvalued, and most don’t really have a reason to exist,” Silbert said. “But I’m also a believer in creative destruction and that’s okay that they aren’t going to be valuable —  what’s going to come out of it is some incredibly valuable, impactful protocols.” 

DCG is now among the most valuable privately held companies in the space alongside Ripple, Kraken and Circle. Silbert said he wouldn’t rule out an IPO, but it’s “not in the plans and not being discussed right now.” The company is profitable and is on track to top $1 billion in revenue for the year, according to its CEO. Silbert also said he did not sell shares in this secondary round.

“The typical reason companies do go public or rush go public is to address liquidity, or to raise money for acquisitions but we don’t have those pressures,” Silbert said. “I enjoy building this as a private company.”