Crypto Asset Manager Valkyrie Lost the Biggest Investor in Its $11M Funding Round
Valkyrie is seeking other ways to raise the money, which the company initially said it didn’t really need.
Months after announcing it had raised $11.15 million, crypto asset manager Valkyrie Investments earlier this month revealed – quietly – that the biggest participant in the funding round reneged, leaving Valkyrie scrambling to find others to fill the gap.
In a letter that went largely unnoticed until now, Valkyrie CEO Leah Wald wrote that an entity she called CSA Evolution VC Fund was no longer able to contribute $5 million toward the transaction.
"We had a signed subscription doc in-hand, and their [limited partners] were blue chip firms that have impeccable reputations in the business," she wrote in the letter dated Oct. 7. "In the months that have since passed, though, those LPs backed out and the investor was unable to meet its obligation." She went on to say that Valkyrie was looking for other investors to step in.
When reached Wednesday, a Valkyrie spokesperson said, "we of course are in advanced talks with a number of potential investors who have expressed interest in our firm, and hope to have positive news in the coming weeks."
Before the publication of this story, there was a single Google search result for CSA Evolution VC Fund: Wald's letter. There are signs, however, that there is an association of some kind with Clear Sky Advisers, a Houston-based firm that describes itself as an investor in "environmental credits and companies focused on decarbonization, electrification and resource sustainability."
First, there's the obvious: Clear Sky Advisers can logically be shortened to CSA. But far more significantly than that, Valkyrie's June press release on the more than $11 million fundraising listed, among others, a participant it called "Clearsky." There was no mention of CSA Evolution VC Fund.
Furthermore, there's a person who clearly connects Valkyrie and Clear Sky Advisers. The CEO of the latter, Shawn Singh, is mentioned in Valkyrie regulatory filings for its exchange-traded funds (ETF). He is listed, for instance, as a trustee of the Valkyrie ETF Trust II.
Clear Sky Advisers declined to comment. Singh did not respond to multiple requests for comment.
In June, Valkyrie Chief Investment Officer Steven McClurg downplayed the importance of Valkyrie's raise. He told CoinDesk that Valkyrie had even declined some offers, which were unsolicited. In the end, the decision to accept the investments was “less about the money and more about [forming] strategic partnerships” with key industry players, McClurg said. “We really weren’t anticipating raising any capital right now."
That message conflicts with Valkyrie's own regulatory filings.
In March, the company told the Securities and Exchange Commission it was seeking to raise $20 million and already had $5.1 million in fresh capital banked. (Valkyrie's previous funding round was a $10 million Series A in June 2021).
And Wald's comments suggest Valkyrie is still hungry for capital.
"Over the past few months, we explored a number of avenues and potential solutions to get the promised investment in the door," she wrote. "In fact, the firm’s principal recently made an investment from his own personal funds." And now Valkyrie has "decided for now to pursue alternative funding sources, including additional investors."
Valkyrie had hoped to use venture capital money to fund its staking and mining operations and ultimately court more institutional investors in the digital assets space. The firm currently runs several operations, including a decentralized finance (DeFi) hedge fund, three ETFs listed on Nasdaq, several protocol trusts and a protocol treasury management business. In the second quarter, the firm reported $1.2 billion in assets under management.
"It pains me to have to write this letter," Wald wrote. "Thankfully, we are already talking to a handful of prominent investors who may be willing to step in and fill this gap, and are eager to move past this challenge."
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.