Crypto M&A Heats Up As Big Deals Price Startups

Morning Report: Circle is buying Poloniex, putting it closer into competition with Coinbase.

Good morning, good Monday, and welcome to the week. I presume you are taking a second read of the Dropbox S-1 over lunch, so we’ll deal with crypto this morning.

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The key news out of the crypto world isn’t that bitcoin re-slouched over the $10,000 mark. Rather, it’s that M&A in the crypto sector just put some points on the board. Circle has bought the Poloniex exchange according to Fortune.

If you’ll allow me the bullet points, here’s what caught our eye from the deal:

• Fortune pegs the deal’s price tag at $400 million, making the transaction big enough to matter even without its sector sticker.
• “Circle’s revenues over the past three months, excluding February, exceeded $250 million,” the magazine details. That’s a run rate of a billion or more, making Circle about as big as the recently-filed Dropbox in terms of revenue. (There’s nuance there, but grant us the room to make the comparison).

Those data points are notable in that they show that more crypto companies have reached material scale in normal-world terms. And we use the plural there as we know of at least one other company that fits the bill.

We’ve known, for some time, that Coinbase’s growth over the past year or so has been meteoric. Scuttlebutt around the venture world was that Coinbase’s top line was essentially tracking north with bitcoin’s price, reaching tens of millions per month.

So Coinbase and Circle mean that there are at least two crypto-centered companies based in the United States with nine-figure revenues.

But let’s have some fun before we go. According to CoinMarketCap, Poloniex has, at last count, $149.9 million in daily crypto exchange volume. And that’s worth $400 million. GDAX, an exchange that belongs to Coinbase, has $474.1 million. So that’s worth around $1.2 billion, according to our very-terrible-envelope-graffiti math. Toss in the rest of Coinbase at a reasonable revenue multiple and it’s worth maybe $2 billion or so.

Which is surprisingly close to its $1.6 billion post-money valuation that Crunchbase has listed. Hey, maybe the crypto world isn’t as crazy as we thought. Provided, of course, that the recently falling bitcoin volume isn’t whacking exchange revenue.

From The Crunchbase Daily:

Circle buys crypto exchange Poloniex

• Cryptocurrency-focused financial services firm Circle announced that it is buying crypto exchange Poloniex. Circle didn’t disclose terms, but Fortune reports the deal is valued around $400 million.

Inside Dropbox’s S-1

• Dropbox publicly filed its IPO prospectus, providing a peek into the finances of one of the most closely watched software unicorns. The filing reveals a fast-growing company with positive cash flow that generated around $1.1 billion in revenue last year.

Nokia acquires Unium

• Nokia is acquiring Unium, a developer of software for solving complex networking problems in Wi-Fi applications, for an undisclosed sum. Seattle-based Unium, which was founded back in 2002, previously raised $27 million in venture funding.

VCs embrace the great outdoors

• Venture capitalists have been putting more money lately into startups focused on outdoor recreation, Crunchbase News reports. Most recently, that’s translated into large rounds for a pair of companies offering RV rentals.