What’s the number one question financial institutions are being asked?
Answer: “When will you get involved in crypto?”
Notice that it’s not “will you,” it’s “when will you.” And that’s assuming that they haven’t already jumped on the wave, just as BlackRock, Goldman Sachs, JP Morgan, and so many others have.
2020 saw a bullish crypto market, and 2021 is proving to be the start of widespread adoption, with 17% of the adult population now owning at least a bit of Bitcoin. Crypto assets are now a $1.5Tn+ investable asset class and large financial institutions are taking notice and accelerating their entrance into the space.
Enter Kaiko, the leading data provider for digital assets data and one of Underscore VC’s newest portfolio companies. Today Kaiko announced their Series A funding round co-led by Underscore VC and Anthemis. PointNine, the company’s seed investor, and new investors Alven and Hashkey Capital also joined the round.
Why is Underscore Proud to Back Kaiko?
Our conviction in Kaiko is based on three critical elements: Team (always Underscore’s number one consideration), total addressable market (TAM) growth, and Kaiko’s vision of a digitized financial future. Let me break those down in reverse order:
Our Digital Financial Future Requires Data
To understand why Kaiko is going to earn a multi-billion dollar valuation in the future, you first have to understand what the future of financial markets infrastructure will look like.
While we are in the early innings, crypto exchanges are already beginning to collateralize stock in the form of tokens, such as: FTX, Binance, and Bittrex Global. Moreover, even real estate investments like the St. Regis in Aspen have become “tokenized” — and while these are some of the first assets to become crypto native digital assets — they are only a harbinger of what is to come.
At Underscore we believe that all assets – stocks, bonds, real estate, derivatives, and others – will become tokenized digital assets in the next 10 years. In turn, this once niche “crypto asset” class will become the next generation of financial markets, requiring new data infrastructure to provide accurate pricing of assets (more on that in our Crypto-Asset Data Landscape).
Kaikos mission is to be the foundation of the digital finance economy by serving as a single source for consolidated quality financial market information. Today, their trade and order book data feeds are the most comprehensive, reliable, and granular in the industry, leveraged by leading firms including CoinShares, Paxos, Ledger, and Compass Financial Technologies. Kaiko also partners with traditional financial platforms S&P Capital IQ, Dow Jones Factiva, Refinitiv, and Factset to distribute original research and data.
Kaiko’s already robust list of customers brings me to my next point, a rapidly growing TAM.
Rapid Growth of the Total Addressable Market
Conviction in a future digital-first economy is growing – quickly.
Institutional investors the world over are paying attention to this previously niche asset class and looking for a data product that covers the breadth of the space. Currently, the market size of hedge funds getting involved is estimated at 1000+ crypto funds alone that will rely on a leading markets data provider. We see this as the tip of an iceberg, with all traditional financial institutions gearing up to take the plunge.
In a buy vs. build consideration, buy wins out. Why? It’s an incredibly difficult infrastructure and plumbing problem. Building a data product yourself would involve connecting to 100+ exchanges around the world, dealing with different data formats across 80,000 live traded instruments, and managing the volume, velocity, variety, and veracity of this type of data. Worst of all, you would be left without the historical data and reference rates, some of which will require regulatory validation, all of which Kaiko is providing. Even existing data infrastructure providers like Bloomberg are collaborating with Kaiko to define a set of open identifier standards for this market.
Not only does Kaiko have the longest-standing historical data, but they’ve also made it accessible and easily adjustable as an API. For all these reasons and more we believe that Kaiko will be the pedestal provider of capital markets infrastructure for digital assets.
Notably, Kaiko’s customer base isn’t limited to institutional investors. Exchanges themselves, custodians looking to provide accurate pricing of assets, the media, and even index providers are all looking for the right reference rates and they’re turning to Kiako.
The Team That Will Go The Distance
If I had to give a single reason for investing in Kaiko, it would be our conviction in Ambre Soubiran, Kaiko’s CEO. Hear from Ambre below and see for yourself why we have such conviction in her.
It was apparent when I met Ambre over 3 years ago that she’s a hard-pressing, hard-running founder with huge ambition. Her deep expertise, competitive spirit, and forward-thinking had me immediately ready to bet on her. As I dug deeper, I discovered her already full treasure trove of accomplishments with Kaiko.
As a talent magnet, Ambre has built an outstanding team of financial services veterans from Euronext, HSBC, and Silicon Valley Bank to support Kaiko’s mission and go the distance, which is why we are so excited to back this team into the next stages of growth.
What’s Next for Kaiko?
Kaiko will use its fresh capital to support the company’s expansion into U.S. and Asian markets. The team is also launching Kaiko Stream, a first-of-its-kind data service designed to connect institutional investors with consolidated crypto market data feeds that match the infrastructural robustness of traditional financial data products. And, of course, Kaiko is hiring. They have open roles in the areas of product, institutional sales, business development, and engineering. If you’re bullish on our digital finance future, We encourage you to check out Kaiko’s open roles here!