Kevin de Patoul (Keyrock): "The external perspective of our investors enables us to plot the right future path"

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Although Keyrock operates in a highly volatile sector, the cryptocurrency market maker has been recording a stable growth since its inception in 2017. To raise the funds it requires to continue that boom, the Belgian company recently opted for a new round of funding. It raised 72 million dollar and promptly won ‘Best Venture Capital Deal - Technology 2023’ at the M&A Awards. “Once all markets are digital, we want to be one of the largest financial institutions in the world.”

Keyrock is a crypto market maker that develops and deploys software to align supply and demand in markets of bitcoins and other digital currencies. With its algorithms, it constantly determines appropriate buying and selling prices of digital assets, thereby facilitating transactions and trading. “We founded Keyrock with the ambition to create a system that would allow us to provide liquidity to all digital assets, with the vision in mind that all assets will eventually become digital”, states Keyrock CEO Kevin de Patoul. “That is exactly what we are building towards.”

After two previous rounds of funding that raised 1 million dollar and 4.5 million dollar respectively, September 2022 saw a capital injection of a somewhat different kind. Within the framework of a Series B funding, players such as Ripple, SIX FinTech Ventures, Middlegame Ventures and Belgium's Volta Ventures invested 72 million dollar in Keyrock, resulting in the well-deserved recognition at the M&A Awards. “This award means a lot”, says de Patoul. “It is a recognition of five years of hard work and of the validity of our hypotheses and decisions.”

Long-term growth

To pave the way for the vital technological and operational investments and to keep the speed and robustness of the system on point, Keyrock once again pursued a search for fresh capital. The company is constantly orienting its gaze towards the future. “There is always a willingness to accelerate”, Kevin de Patoul looks back at the reasoning behind the latest venture capital deal. “As you build a company, you reach certain milestones that allow you to attract external capital, which makes it possible to go faster.” In other words, fresh capital is the lever for growth par excellence.

Keyrock intends to fundamentally secure that growth over the long term. “A very distinctive part of our approach is the timeframe in which we optimise our activities. We see crypto digital assets as something that will fundamentally transform how we exchange value worldwide. For that reason, we do not take shortcuts to optimize for this year or the next year. Instead, we always build solutions that make sense in the long term. That is what enables us to achieve systematic growth over a long period of time.”

A challenging sector

Keyrock’s long-term perspective is both refreshing and essential in the industry in which it operates. Consider, for example, the scandals that have cast the broad crypto market in a bad light in recent years, or the (associated) plummeting market value of some assets. De Patoul himself highlights the inherent instability of the market. “In a sector like crypto, one of the main challenges is the volatility. The industry itself is a start-up, so to speak. It is still very immature and there is not a clear regulatory framework yet. The situation is certainly improving, but there is still a lot of uncertainty around this market. That results in very strong cycles with lots of ups and downs. By adopting a long-term focus, we can filter out that noise.”

The fact that Keyrock's well thought-out strategy led to constant growth and to such a successful major capital round, despite the particularly precarious context, is obviously a strong argument for winning the award. Also noteworthy is the fact that in terms of price volatility, and especially in terms of its elimination or containment, the company clearly plays an important role in this industry. “The purpose of a market maker is making the market as liquid as possible. And the more liquid the market, the more efficient and the less volatile it is.”

Current investors join the next chapter

How do you find investors in such a challenging context? And does it cost a lot of effort to convince candidates? “It depends on which investor you talk to”, Kevin de Patoul says. “If you first have to explain everything about crypto or digital assets in general before elaborating on the practice of market making, the negotiations are quite burdensome. With investors that are already convinced of digital assets and their durability, the process obviously runs a lot smoother.” This deal clearly qualifies under the second category, as lead investor Ripple is one of the biggest players in digital assets across the globe.

“Ripple has been a client of Keyrock for more than three years. Moreover, all other participants in this capital round were already investing in our company. They know us very well and have been following our progress over the last few years.” According to Kevin de Patoul, that pre-existing relationship makes a huge difference. “First of all, it is a positive sign that they remain connected to our story. Secondly, it allows us to continue, to raise those new funds in a fairly difficult environment. When, by contrast, you would start collaborating with investors that do not know you yet, there is a significant asymmetry of information. The consequence is that the market conditions would have a much stronger impact on their perception of the deal.”

An external perspective

Ripple enters as a minority shareholder with no operational control over the company. Following previous funding rounds, Keyrock's board of directors does however include a number of investor representatives. "That is very useful, because they observe the market in a different way. A certain diversity of perspectives and opinions makes discussions valuable and provides the building blocks to plot the right future path for the business."

In a capital deal of this magnitude and in terms of the general relationship between a company and its investors, Keyrock's CEO puts great importance on the keyword transparency. “There needs to be a very clear alignment on what the company stands for, where it is going to, what the main challenges are and what the capital is being raised for. You could see it as a marriage: the aim is to optimise the relationship for a very significant period.”

“Keyrock never stops”

The question remains: what was or is the exact purpose of the resources raised? Kevin de Patoul distinguishes two facets: expanding the number of products and services, but also taking existing products to the next level. “For going from one product or business line to multiple, you need a strong team. Since the capital increased, we hired a hundred new colleagues. We now have around 180 people in approximately 28 countries.” Both to keep current and additional activities on point, that broad geographical scope within the workforce is very important. “We keep investing in being able to operate 24/7. Keyrock never stops, we trade continuously on all those markets. The new money raised definitely helps us massively in being active in every time zone.”

Great ambitions

Non-fungible tokens (NFTs) and OTC private markets are high up on the agenda, but Keyrock deliberately maintains a broad focus. “For us, all digital assets that are traded on the secondary market are interesting. And as we believe that eventually all assets will be digital, the total addressable market is extremely wide. Currently, there is a strong trend towards real world assets or the tokenization of traditional assets. Of course, that’s continuously interesting for us.”

Hence, Keyrock continues to look forward with great ambitions. “We want to continue provide liquidity to digital assets and unlock the potential of tokenized economies. We think there lies a tremendous disruption power in having all value tokenized and we want to make sure that we participate in that development. Once all markets are digital, we want to be one of the largest financial institutions in the world.”

Keyrock emerged as the winner at the M&A Awards 2023 in the category of Best Venture Capital Deal – Technology 2023.

Knowledge Partner Vlerick Business School  | Principal Sponsor Ansarada | Platinum Partner M&A Community PwC

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