Victoria-based Bitcoin infrastructure company Blockstream is joining a slew of Canadian tech enterprises that have reached billion-dollar valuations during the COVID-19 pandemic, after raising US$210-million in capital.
Founded in 2014, Blockstream has built an array of products that enable the use and storage of Bitcoin and the settlement of cryptocurrency transactions. One of its major focus areas is Bitcoin mining, a process in which computers generate the cryptocurrency by solving complex equations, known as proof of work. Blockstream co-founder Adam Back is a pioneer in developing the Bitcoin mining process, and was one of the first people to correspond with Satoshi Nakamoto, the pseudonymous creator of Bitcoin.
The financing, backed by U.K-based private equity firm Baillie Gifford and Hong Kong-based iFinex, which runs cryptocurrency exchange Bitfinex, values Blockstream at US$3.2-billion.
“We have enormous respect for Blockstream’s founders and management team,” Baillie Gifford said in a statement. “We believe its settlement network for bitcoin-based assets and securities has the potential to transform the design and operation of capital markets.”
Samson Mow, Blockstream’s chief strategy officer, said the capital will accelerate the company’s growth and help to grow its mining operations. Blockstream recently acquired Spondoolies, a manufacturer of ASICs, devices that mine Bitcoin. The company will use the product for its own operations, and develop it to sell on the retail market.
“We’re aiming to have it sometime in 2022, so there’s a long-time horizon before we’ll be able to get it to market,” Mr. Mow said.
Mr. Mow said that many of Blockstream’s growth initiatives require large amounts of capital, and that the company may raise more cash in “probably the coming months.”
In the past year, Blockstream has introduced multiple projects meant to improve the Bitcoin mining process. In June, it launched Blockstream Energy, which gives electricity producers the opportunity to monetize surplus energy by using it to mine Bitcoin. It also deploys satellites to remote areas, which makes it possible to mine Bitcoin in areas with poor internet service. Bitcoin mining is often criticized for being an energy-intensive process that requires heavy electricity use.
“I’m confident [our team] will be able to work together to get greater efficiency in ASICs and our ability to mine Bitcoin,” Mr. Mow said.
With the funding, Blockstream will be the 15th Canadian company since the start of the pandemic to become a “unicorn,” a nickname commonly accorded to private technology companies that achieve valuations of US$1-billion or more. While the term implies a rare status, the surge of private-capital providers increasingly chasing deals has spawned a proliferation of US$1-billion companies in Canada’s maturing tech sector.
Blockstream may be the first unicorn founded in Victoria, which has become a more popular home for startups in recent years.
“Victoria has changed a lot since I was growing up there,” Mr. Mow said. “Back in the day, you either worked for some tourist industry or for the government, but now there’s actually a thriving tech scene.”
Other newly minted Canadian unicorns of the past year include subscription software providers FreshBooks, Ada Support, Clio and Benevity; online financial services firms Clear Finance Technology Corp. and Wealthsimple Technologies Inc.; online identification verification provider Trulioo Information Services Inc.; and artificial intelligence semiconductor maker Tenstorrent Inc.
Private Canadian technology companies have raised more than 25 separate nine-figure venture financings this year, smashing the previous full-year record of 12 set in 2019. Canada is on course to set a new single-year, inflation-adjusted record for venture capital raised by domestic companies, topping the previous high mark set during the dot-com bubble peak year of 2000.
The expanding interest in online companies since the start of the pandemic has also led to a surge of initial public offerings and secondary offerings by Canadian technology companies unseen since the original internet boom, although many newly public companies have subsequently traded down from their issue prices.
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