Crypto

Polygon raises $450M from Sequoia Capital India, SoftBank and Tiger Global

Comment

Image Credits: Getty Images

Polygon has raised $450 million in a new venture financing round as the firm, with a market cap of about $13 billion, aggressively expands its portfolio of Ethereum scaling solutions and works to attract the larger developer ecosystem.

Sequoia Capital India led Polygon’s first major financing round. Tiger Global and SoftBank as well as Galaxy Digital, Republic Capital, Makers Fund, Alameda Research, Alan Howard, Dune Ventures, Alexis Ohanian’s Seven Seven Six, Steadview Capital, Unacademy, Elevation Capital, Animoca Brands, Spartan Fund, Dragonfly Capital, Variant Fund, Sino Global Capital and Kevin O’Leary also participated in the private token purchase.

This is the first time many of these investors are making a bet on an Ethereum scaling solution, or broadly on the blockchain infrastructure play, according to Web3 Signals, a website that tracks venture investments in the crypto space.

Monday’s announcement confirms an early December TechCrunch report that outlined some of the early details of the deal.

Ethereum has attracted the largest developer ecosystem for any blockchain, but it’s plagued by slow speeds and high transaction costs (also known as gas fees).

Polygon is among a handful of so-called Layer-2 or side-chain firms that are attempting to help Ethereum’s network solve its growing pains by employing techniques to move a wide range of transaction information off the blockchain.

Moving a lot of details off the Ethereum blockchain allows Polygon to pack more transaction details on an Ethereum block and significantly scale the number of transactions it can process.

For the first few years, Polygon focused on a technique called Plasma to move information off the Ethereum blockchain, but the firm has in recent years expanded its focus on multiple technologies, including zero knowledge rollups, optimistic rollups and validium, to tackle this challenge.

Polygon has spent nearly $1 billion in recent quarters to acquire firms to broaden its offerings, said Sandeep Nailwal, co-founder of Polygon, in an interview with TechCrunch.

“Previously at MATIC Network [the former name of Polygon], we were building Plasma solutions,” he said. “Although 10 to 15 teams raised money on the Plasma hype, we were the only team that shipped a proper product with Plasma capabilities.”

“Then the overall community reached the consensus that there are certain limitations to this approach. So they moved to the optimistic rollup. Then they moved to zk rollup. Then validium. We have realized that we don’t want to play these hype cycles. We want to build a platform that stays there for decades to come.”

In the past two years, there has been a gold rush in the emergence of layer 1 and Ethereum scaling solutions and venture investors and hedge funds making early bold bets on what they think will become the mainstream blockchain and their companion in the coming years.

Nailwal drew parallels with this race to the desktop operating system wars we saw for more than a decade. “We don’t want to become approach-specific or technology-specific. Our goal is to provide internet-level scale to decentralized computation that blockchains are providing,” he said.

I asked Nailwal what kind of confidence Polygon has on the zero knowledge scaling approach. Polygon has acquired two zk rollup startups in the past two quarters. Nailwal said he believes zero knowledge will be the end game for blockchain scaling. (Ethereum co-founder Vitalik Buterin has shared his thoughts on Polygon.)

Polygon, which counts Mark Cuban among its backers, has emerged as one of the clear leaders among the Layer-2 or side-chain projects attempting to help Ethereum scale. As of January 20, the platform had processed more than 23 million blocks and 1.3 billion transactions. The rise in its popularity comes thanks to a fast adoption in the past year. Over 7,000 decentralized applications — including DeFi platforms Aave, Curve, Sushiswap, Pool, Uniswap and giant NFT marketplace OpenSea, and metaverse projects Decentraland and Sandbox — have deployed on Polygon.

(I asked Nailwal if he anticipates more apps to deploy on Polygon. “I anticipate all of them will move to Layer-2 chain,” he said. He said most people don’t realize just how far inroads Polygon has made.)

“The platform of choice to build on the blockchain today is Polygon. Thousands of developers across a range of applications are choosing Polygon and their complete set of scaling solutions for the Ethereum ecosystem,” said Shailesh Lakhani, managing director at Sequoia India, in a statement.

“This is an ambitious and aggressive team, one that values innovation at its core. Sequoia Capital India is thrilled to lead this significant financing round.”

The massive funding is a turnaround story for Polygon, which in its early years struggled to attract VCs. Many founders in the web3 space said they believe that Polygon — despite its technology prowess and speed of execution — was discounted earlier by others because the team was largely based in India.

“We are not new. We have been working very hard since 2017. We were written off until last year,” said Jaynti Kanani, co-founder of Polygon, which had raised just $750,000 in VC funding prior to the new round. He recalled conversations when the startup was struggling to raise money at less than $30 million valuation.

“The brown face has become golden face,” Nailwal laughingly quipped.

“Only in the last year, the community started to notice us after we brought so many applications and many of them went viral. Unlike Silicon Valley projects, we had to do bottom-up grind, full Indian style. I think that’s also sustainable in long-term,” he added.

Crypto’s networked collaboration will drive Web 3.0

He said bringing institutional investors will help Polygon with brand building and in striking partnerships.

“We have a very liquid token in the market and a decent treasury. We did not have to go to the market to raise funds. As the global market begins to look into the crypto world, we realized that even as by organic metrics — daily active users, transactions volume — we are 5 to 10 times bigger than Solana and 20 times bigger than Avalanche, we don’t have as much visibility as we should. The projects I mentioned have been able to do a lot of institutions-led marketing,” he said.

The funding will also help Polygon build larger developer ecosystems in several markets, he said.

“We wanted to have at least three to five years of well-cushioned runway for them.” The startup, which maintains a $100 million ecosystem fund, will also use the fresh capital to support and broaden such efforts with more accelerators, hackathons and grants, he said.

In the immediate future, another bet that Polygon is planning to make is on the identity space, Nailwal said. “The goal of Polygon is to become the AWS of Web3. AWS of Web3 will need an identity segment. So we will making some efforts on this space,” he said.

Having institutional investors will also help Polygon hire big names, said Kanani, pointing to the recent hire of Ryan Wyatt, who headed YouTube Gaming, as an example.

More TechCrunch

Companies are always looking for an edge, and searching for ways to encourage their employees to innovate. One way to do that is by running an internal hackathon around a…

Why companies are turning to internal hackathons

Featured Article

I’m rooting for Melinda French Gates to fix tech’s broken ‘brilliant jerk’ culture

Women in tech still face a shocking level of mistreatment at work. Melinda French Gates is one of the few working to change that.

6 hours ago
I’m rooting for Melinda French Gates to fix tech’s  broken ‘brilliant jerk’ culture

Blue Origin has successfully completed its NS-25 mission, resuming crewed flights for the first time in nearly two years. The mission brought six tourist crew members to the edge of…

Blue Origin successfully launches its first crewed mission since 2022

Creative Artists Agency (CAA), one of the top entertainment and sports talent agencies, is hoping to be at the forefront of AI protection services for celebrities in Hollywood. With many…

Hollywood agency CAA aims to help stars manage their own AI likenesses

Expedia says Rathi Murthy and Sreenivas Rachamadugu, respectively its CTO and senior vice president of core services product & engineering, are no longer employed at the travel booking company. In…

Expedia says two execs dismissed after ‘violation of company policy’

Welcome back to TechCrunch’s Week in Review. This week had two major events from OpenAI and Google. OpenAI’s spring update event saw the reveal of its new model, GPT-4o, which…

OpenAI and Google lay out their competing AI visions

When Jeffrey Wang posted to X asking if anyone wanted to go in on an order of fancy-but-affordable office nap pods, he didn’t expect the post to go viral.

With AI startups booming, nap pods and Silicon Valley hustle culture are back

OpenAI’s Superalignment team, responsible for developing ways to govern and steer “superintelligent” AI systems, was promised 20% of the company’s compute resources, according to a person from that team. But…

OpenAI created a team to control ‘superintelligent’ AI — then let it wither, source says

A new crop of early-stage startups — along with some recent VC investments — illustrates a niche emerging in the autonomous vehicle technology sector. Unlike the companies bringing robotaxis to…

VCs and the military are fueling self-driving startups that don’t need roads

When the founders of Sagetap, Sahil Khanna and Kevin Hughes, started working at early-stage enterprise software startups, they were surprised to find that the companies they worked at were trying…

Deal Dive: Sagetap looks to bring enterprise software sales into the 21st century

Keeping up with an industry as fast-moving as AI is a tall order. So until an AI can do it for you, here’s a handy roundup of recent stories in the world…

This Week in AI: OpenAI moves away from safety

After Apple loosened its App Store guidelines to permit game emulators, the retro game emulator Delta — an app 10 years in the making — hit the top of the…

Adobe comes after indie game emulator Delta for copying its logo

Meta is once again taking on its competitors by developing a feature that borrows concepts from others — in this case, BeReal and Snapchat. The company is developing a feature…

Meta’s latest experiment borrows from BeReal’s and Snapchat’s core ideas

Welcome to Startups Weekly! We’ve been drowning in AI news this week, with Google’s I/O setting the pace. And Elon Musk rages against the machine.

Startups Weekly: It’s the dawning of the age of AI — plus,  Musk is raging against the machine

IndieBio’s Bay Area incubator is about to debut its 15th cohort of biotech startups. We took special note of a few, which were making some major, bordering on ludicrous, claims…

IndieBio’s SF incubator lineup is making some wild biotech promises

YouTube TV has announced that its multiview feature for watching four streams at once is now available on Android phones and tablets. The Android launch comes two months after YouTube…

YouTube TV’s ‘multiview’ feature is now available on Android phones and tablets

Featured Article

Two Santa Cruz students uncover security bug that could let millions do their laundry for free

CSC ServiceWorks provides laundry machines to thousands of residential homes and universities, but the company ignored requests to fix a security bug.

2 days ago
Two Santa Cruz students uncover security bug that could let millions do their laundry for free

TechCrunch Disrupt 2024 is just around the corner, and the buzz is palpable. But what if we told you there’s a chance for you to not just attend, but also…

Harness the TechCrunch Effect: Host a Side Event at Disrupt 2024

Decks are all about telling a compelling story and Goodcarbon does a good job on that front. But there’s important information missing too.

Pitch Deck Teardown: Goodcarbon’s $5.5M seed deck

Slack is making it difficult for its customers if they want the company to stop using its data for model training.

Slack under attack over sneaky AI training policy

A Texas-based company that provides health insurance and benefit plans disclosed a data breach affecting almost 2.5 million people, some of whom had their Social Security number stolen. WebTPA said…

Healthcare company WebTPA discloses breach affecting 2.5 million people

Featured Article

Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Microsoft won’t be facing antitrust scrutiny in the U.K. over its recent investment into French AI startup Mistral AI.

2 days ago
Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Ember has partnered with HSBC in the U.K. so that the bank’s business customers can access Ember’s services from their online accounts.

Embedded finance is still trendy as accounting automation startup Ember partners with HSBC UK

Kudos uses AI to figure out consumer spending habits so it can then provide more personalized financial advice, like maximizing rewards and utilizing credit effectively.

Kudos lands $10M for an AI smart wallet that picks the best credit card for purchases

The EU’s warning comes after Microsoft failed to respond to a legally binding request for information that focused on its generative AI tools.

EU warns Microsoft it could be fined billions over missing GenAI risk info

The prospects for troubled banking-as-a-service startup Synapse have gone from bad to worse this week after a United States Trustee filed an emergency motion on Wednesday.  The trustee is asking…

A US Trustee wants troubled fintech Synapse to be liquidated via Chapter 7 bankruptcy, cites ‘gross mismanagement’

U.K.-based Seraphim Space is spinning up its 13th accelerator program, with nine participating companies working on a range of tech from propulsion to in-space manufacturing and space situational awareness. The…

Seraphim’s latest space accelerator welcomes nine companies

OpenAI has reached a deal with Reddit to use the social news site’s data for training AI models. In a blog post on OpenAI’s press relations site, the company said…

OpenAI inks deal to train AI on Reddit data

X users will now be able to discover posts from new Communities that are trending directly from an Explore tab within the section.

X pushes more users to Communities

For Mark Zuckerberg’s 40th birthday, his wife got him a photoshoot. Zuckerberg gives the camera a sly smile as he sits amid a carefully crafted re-creation of his childhood bedroom.…

Mark Zuckerberg’s makeover: Midlife crisis or carefully crafted rebrand?