Data analytics startup Flipside Crypto, already backed by Coinbase Ventures and Digital Currency Group, has raised another funding round to solidify its service offerings.
Galaxy Digital, headed by hedge fund veteran (and runway model) Mike Novogratz, led a fresh $7.1 million round in Flipside Crypto this summer. Previous investors, such as Castle Island Ventures, also participated.
In total, Flipside has raised more than $11.6 million since it was founded in 2017. CEO Dave Balter told CoinDesk the startup is now valued at $32.1 million. He plans to grow from roughly 14 employees to 21 by the beginning of 2020.
“We have sophisticated tools to determine behavioral segmentation on top of [blockchain data], to understand specific stakeholder activity,” Balter said. “The ultimate framing of the service is trying to identify activities and, justifiably, what they do to the price of the asset.”
Although Balter said 75 organizations have signed up to receive the free Flipside Analytics suite, only a few dozen users like Algorand are paying customers so far. For those customers, understanding specific metrics – such as who is staking tokens on a network and how their voter behavior compares to other networks – can help guide business decisions.
Algorand COO Sean Ford told CoinDesk real-time insights help his startup “stay ahead.”
“We work with several other data service providers, but none like Flipside,” Ford said. “The biggest difference with Flipside for us has been the ability to customize your approach to data and analysis of results.”
Whether it’s looking at voting patterns, developer activity or users’ trading habits, Flipside’s Balter said many projects are specifically looking for activities that correlate with increased token prices. This isn’t unique to Flipside Crypto clients. One unaffiliated market maker told CoinDesk many prospective customers also prioritize price gains as the leading metric of success.
Castle Island co-founder Nic Carter, who also co-founded the separate analytics firm Coin Metrics, told CoinDesk:
“The interesting thing about crypto is that these networks/crypto assets trade in real time, so naturally you have price feedback for any new fundamental developments. That’s both a bug and a feature. Startups aren’t repriced whenever they sign a new client, so that growth isn’t as evident. But in crypto assets, it’s manifested in real time, so the price conversation tends to dominate.”
According to Flipside Crypto’s analysis of 520 cryptocurrencies, it appears the perception of a network or asset’s future potential has a stronger impact on the market than its actual usage.
Balter highlighted one “abnormal” pattern compared to non-crypto startups and assets: a growing customer base doesn’t directly impact price.
“You can’t associate those two things [real users and price] just yet,” Balter said, adding that he expects this to shift as the market matures. “Related to insights, in one case Flipside identified an issue with a token provider’s auction program.
However, Avon Ventures partner and Flipside Crypto investor Sachin Patodia said in a press release that analytics are crucial to guiding long-term growth as projects “mature” into “mainstream businesses.” As such, some investors see equity in analytics firms as bets that complement other crypto investments.
The leading blockchain analytics firms (not including those specializing in law enforcement and compliance) often share overlapping investors. For example, Balter is personally an investor in Coin Metrics, the same way Carter’s firm invested in Balter’s startup.
Both men said they don’t view these analytics startups as direct competitors because Flipside is doubling down on serving blockchain projects themselves, while Coin Metrics is focused on investors evaluating those networks and assets.
“If you can get detailed insight into how some protocol tweak alters the economics of a network, that is very valuable for the people designing these things,” Carter said, adding:
“We think there will be a multiplicity of blockchain analytics firms that succeed, because the blockchain industry is so data-rich, as these things are natively transparent.”
Team image via Flipside Crypto