New York-based ConsenSys, the 900-staff Ethereum development studio, is looking to raise $200m from investors, according to a report from The Information. The article revealed that in 2018 the startup earned $21 million in revenues primarily from its enterprise consulting business.
In December last year, the company cut 13% of its workforce as the value of Ether dropped below $100. ConsenSys founder Joe Lubin was also an Ethereum founder and early financial backer and is thought to have used Ether gains to fund ConsenSys. Today the price of Ether is back up at $164 but still a long way off its peak of almost $1,400.
The Information also claimed that the company is looking at a valuation of at least $1 billion and there was pushback from some potential investors. Based on $21 million in revenues, that could be a challenge. The issue could be that ConsenSys is a mini-conglomerate.
One part is a development agency for enterprise blockchain. The company has some very high profile clients including the European Union Blockchain Observatory & Forum and trade finance consortium komgo. If corporates are considering Ethereum, there’s a good chance that ConsenSys will be asked to pitch. This part may be viewed as less “sexy” from a valuation multiple perspective. However, it points to ConsenSys having some standalone brand value.
The other significant segment of ConsenSys is its Venture Production Studio which would be valued differently. The portfolio includes high profile ventures such as Metamask which enables users to run Ethereum dApps in a web browser and Kaleido the Blockchain as a Service offering.
ConsenSys is also tightly linked to Ethereum’s success. In the past 18 months, there’s been a lot of newcomers to the protocol space, so Ethereum isn’t viewed as untouchable anymore. Significant technical changes are happening to the protocol which are taking time to implement. Performance and scalability are two of the biggest issues being addressed.
So ConsenSys will be valued on the combination of the significant elements of its business as well as a view about whether Ethereum will be able to maintain its position as the platform of choice for public blockchain applications.
Ethereum could be eclipsed at a technology level. Provided performance issues don’t become a roadblock, blockchain could be one of those spaces where the best technology may not be the winner. First movers have bigger advantages where network effects matter.