Galaxy Digital Remains Active in the Private Market

Funding saw a notable increase this week, rising 19.5% to $312 million from $261 million a week prior. Infrastructure and Web3 & NFTs were the two largest categories, raising $103 million and $70 million, respectively. This week’s largest deal was a $70 million Series C round raised by Chain Reaction. Chain Reaction is focused on building out infrastructure like semiconductors which are needed for the blockchain industry to continue scaling. Blockchain data is getting increasingly complex, and improved chip technology will help take complex computing to the next level.

Deal counts were concentrated in the Seed Round category, representing 42% of all deals and 32% of total funding. There were four M&A deals this week, with highlights including Consensys acquiring a blockchain notification company, Hal, and Galaxy Digital acquiring GK8, a digital asset custodian. The sale of GK8 stems from Celsius Network’s bankruptcy proceedings and should help accelerate Galaxy’s prime brokerage product offerings.

Deal of the Week

Chaos Labs, the risk solution provider for on-chain applications, raised $20 million in a Seed Round led by Galaxy Digital and PayPal Ventures. Other investors included Hashkey Capital, Lightspeed Venture Partners, Uniswap Ventures, and Coinbase Ventures. Chaos Labs is the first automated, on-chain economic security system enabling crypto protocols to optimize risk management and capital efficiency while protecting user funds. The $20 million will be used to build out additional risk and security products for blockchain companies. In Chaos Labs’ first year of operating, they have partnered with major DeFi players such as Aave, Chainlink, and Uniswap and plan to continue growing their client base.

Why Is This the Deal of the Week?

Exploits in crypto are more common than they should be. In 2022 alone, over $2 billion was lost in DeFi hacks or exploits, a 48% increase compared to 2021. As DeFi continues to grow, the incentives for malicious actors grows too. Chaos Labs is striving to alleviate this problem with its automated risk management platform. Chaos Labs’ current solutions include state-of-the-art simulation technology that tests theoretical attack vectors and potential downstream impacts and an incentive optimization engine that will help protocols maximize their economic impact. Leveraging Chaos Labs’ platform will grant protocols a comprehensive understanding of their platforms and customers, ultimately making their protocols safer and more efficient. As total volumes grow across the crypto ecosystem, safety and security will continue to prove paramount, driving demand for Chaos Labs’ product suite.

Selected Deals

Huma Finance is a DeFi (decentralized finance) platform aiming to create an income-backed protocol. Instead of a user having to borrow against token holdings, the platform’s first product will instead provide lending based on a user’s future income. The company has secured $8.3M in funding through its seed round, co-led by Distributed Global and Race Capital. In addition, the funding round included investor participation from ParaFi Capital, Circle Ventures, Folius Ventures, and others. 

Kaito is an infrastructure-based platform aiming to create a Web3-related search engine powered by AI (artificial intelligence). The platform plans to optimize the search engine by filtering content based on topic mining, recommendation, ranking, and more. The company has secured $5.3M in funding through its seed round led by Dragonfly Capital. The funding round also included investor participation from Jane Street, Sequoia Capital China, Alpha Lab Capital, Mirana Ventures, and others. Kaito’s institutional product is live, and it plans to launch its product for retail users in Q2 2023. 

Chain Reaction is an infrastructure-based platform with a focus on hardware. The company designs semiconductors for blockchain-related applications. The platform has secured $70M in funding through its Series C round led by Morgan Creek Digital. In addition, the funding round included investor participation from Jerusalem Venture Partners, Atreides Management, Blue Run Ventures, Hanaco Ventures, and others. Chain Reaction intends to use the capital raised for product production and workforce expansion. 

Kratos Studios is an Indian-based firm that invests in Web3 games and gaming-related infrastructure. The company has secured $20M in funding through its seed round at a $150M valuation. The funding round was led by Accel with participation from Nexus Venture Partners, Nazara Technologies, Courtside Ventures, and others. Kratos Studios also announced the acquisition of IndiGG through a token swap. IndiGG is a DAO (decentralized autonomous organization) aiming to onboard Web2 gamers to the Web3 gaming ecosystem and become the world’s biggest gaming-related DAO.

Blocto is an infrastructure-based platform focusing on developing a multichain wallet. In addition, the platform provides its users access to an NFT marketplace and a Wallet SDK (software development kit). The company has secured an undisclosed amount of funding through its Series A round at an $80M valuation. The funding round included investor participation from IPX, 500 Global, and Mark Cuban. Blocto intends to use the capital raised to create infrastructure that will ease the onboarding process for new crypto users.