Coincover, a digital asset protection company, has raised $30 million in funding led by Foundation Capital to protect people and their digital assets from hacks or human error, David Janczewski, CEO and co-founder of Coincover, shared with TechCrunch.
“We made this investment not in spite of the tumultuous year in crypto, but precisely because of it,” Charles Moldow, general partner at Foundation Capital, told TechCrunch. “One of the most significant limitations to digital asset adoption, at both the individual and institutional levels, is the fear of loss or theft of assets.”
The platform, which was founded in 2018 and launched in 2019, has raised $41.6 million to date, Janczewski said. Prior investors include Volt Capital, Avon Ventures, DRW Venture Capital, SMT Digital, Valor Equity Partners, Element, Fintech Collective and Susquehanna International Group, according to its website.
The new capital will be used to recruit talent, update products and add partnerships to protect against crypto hacks or human error. “We’ve reached an inflection point in the industry; as a result, we’ve seen demand for our product increase dramatically,” Janczewski said.
Coincover works with over 300 businesses, including crypto companies like BitGo, Fireblocks and Bitso, as well as hedge funds, family offices and banks.
The firm’s two main products, Disaster Recovery and Theft Protection, aim to help anyone dealing with digital assets prevent theft and loss.
“The opportunity is already vast today — crypto is a $1 trillion asset class, yet the digital asset protection industry remains minuscule, and billions were stolen in the last year alone,” Moldow said. “Beyond the dollar amount is the enduring stigma of having suffered a breach — digital asset providers must avoid this at all costs, so the willingness to pay is very high.”
Since the FTX collapse, there’s been an increase in inquiries for Coincover, Janczewski said.
“All companies are concerned with losing access to their crypto and want to protect their end users’ funds from being stolen,” Janczewski added. “For our customers, private key backup provides an additional layer of protection that enables the recovery of assets if they lose their keys or their platform becomes unavailable. We’ve also seen a sharp increase in demand for seed phrase backup where we provide a route to recovery of funds.”
Seed phrases, or recovery phrases, are a series of random words that act as a password to one’s crypto wallet. It’s given to users when they first create a wallet, but is never reshared. Sometimes, people misplace their phrases and are unable to access their wallets, resulting in the inability to access funds.
Attacks in the crypto space have also become more sophisticated as more people enter the space, and the industry has had to respond to that, Janczewski noted.
“All companies need to invest in mechanisms to protect themselves, their staff and their end users,” he added. “Businesses will often have an independent third party to help them back up their data or protect against malware, for example. So, in that sense, what we’re doing isn’t revolutionary — it’s almost compulsory.”
For Coincover, it’s about “tackling the next frontier of risk, which is social engineering,” Janczewski said.
“If someone’s convinced you to send a lot of money and you’ve done it, it’s considered a scam, not theft,” Janczewski said. “In traditional finance, banks are not able to refund users when they have willingly sent funds in this way even if you have been duped. At Coincover, we’re working on solving this problem by leveraging the power of blockchain technology combined with our own risk data.”