Paul Frambot has a message for the “suits” at traditional financial institutions. “I think TradFi is going to have to wear shorts,” said the 25-year-old, who was coincidentally wearing a pair of his own.
That’s an audacious challenge to Wall Street, but Frambot has reason to be confident. He’s the cofounder of the fast-growing crypto protocol Morpho, which offers blockchain-based lending and borrowing. And he has the backing of some of the largest investors in crypto. On Tuesday, he and his team announced that they had raised $175 million in a funding round led by Paradigm, Ribbit Capital, and Andreessen Horowitz’s digital assets arm, or a16z crypto. Other investors included Apollo Funds, Circle’s venture unit, and VanEck.
The investment was for Morpho’s cryptocurrency and valued the protocol at up to $2 billion. (Investors bought at the token’s average monthly price, and the exact cost depended on when participants put in their checks, Frambot said.)
“I’m a tech guy, by the way,” he added. “I’m not a finance guy. I don’t know anything about finance. I’m building infrastructure. I’m building code.”
Goodbye shorts, hello trousers
Morpho’s fundraise comes as crypto, which started as a libertarian industry pioneered by hoodie-wearing developers, is increasingly walking in lockstep with traditional financial institutions. Over the past two years, the New York Stock Exchange’s parent company has invested in the crypto exchange OKX, the asset management giant BlackRock has embraced digital assets ETFs, and banks are exploring how to put customer deposits on blockchains.
“I think the folks who live in FiDi and Wall Street maybe have to have casual Fridays,” said Guy Wuollet, general partner at a16z crypto. “And I think people in DeFi are, let’s say, dressing up ever so slightly.”
Morpho is a DeFi, or decentralized finance, protocol. Rather than allow one institution to determine whether someone can take out a loan, DeFi lenders create networks where anyone can lend assets, and anyone can borrow.
Decentralized lending isn’t novel. The incumbent Aave is dominant and has nearly $12.5 billion in assets locked up in its protocol, according to data from the crypto analytics provider DefiLlama. But Morpho, with $6.6 billion, is closing the gap, especially after Aave had significant exposure to a $290 million hack of other crypto protocols in April. (Following the exploit, crypto founders pledged funds to make Aave whole.)
Frambot, who’s from Paris, started Morpho when he was only 20 years old. He created the network with three other founders from France: Merlin Egalite, Julien Thomas, and Mathis Gontier Delaunay. Initially, he and his team built a lending network on top of Aave, but they eventually decided to create a way “for people to build their own Aave,” said Frambot.
In other words, Morpho users can create their own blockchain-based lending markets with their own risk parameters. And that proposition has caught on, even if Morpho itself hasn’t been immune to security incidents. (It had a minor exposure to the hack that affected Aave in April.) Companies using Morpho include top crypto exchanges like Coinbase and Kraken as well as top digital assets players like Anchorage Digital and Galaxy Digital.
And now, Frambot is targeting more traditional institutions, which he believes will wade into DeFi as they seek out the sector’s often higher yields. He even recently dressed up when he attended an event at the New York Stock Exchange. “I can also wear,” he admitted, “trousers.”
See you tomorrow,
Ben WeissX: @bdanweissEmail: [email protected] a deal for the Term Sheet newsletter here.
Joey Abrams curated the deals section of today’s newsletter. Subscribe here.
VENTURE DEALS
– City Therapeutics, a Cambridge, Mass.-based developer of RNA interference–based medicines, raised $99 million in Series B funding from Viking Global Investors, Sofinnova Investments, Casdin Capital, NYBC Ventures, and others.
– Stepful, a Detroit, Mich.-based online training platform for health care careers, raised $55 million in Series C funding. Oak HC/FT led the round and was joined by Foresite Capital, Hearst Ventures, the Citi Impact Fund, and others.
– PointFive, a New York City-based cloud and AI infrastructure optimization platform, raised $45 million in Series B funding. Accel led the round and was joined by Entree Capital and Salesforce Ventures.
– EDGE Markets, a Wilmington, Del.-based financial services platform designed for the gaming, crypto, and prediction markets space, raised $29.2 million in Series A funding. CoinFund led the round and was joined by Indicator Ventures, Mantis VC, StepStone Group, and Bullpen Capital.
– Rejuvenate Bio, a San Diego, Calif.-based developer of gene therapies for age-related and chronic diseases, raised $6 million in funding. VCapital led the round and was joined by Merck Animal Health, Kendall Capital Partners, Connecticut Innovations, and Digitalis.
– Zaro.ai, a London, U.K.-based AI platform, raised $5.1 million in pre-seed funding. Cherry Ventures led the round and was joined by Flourish Ventures and angel investors.
– Volteum, a London, U.K. and Budapest, Hungary-based fleet management software company, raised €2.5 million ($2.9 million) in funding. Movens Capital led the round and was joined by WakeUp Capital and Aidiom.
PRIVATE EQUITY
– Thoma Bravo agreed to acquire Kneat, a Limerick, Ireland-based provider of digital validation and quality management software, for CAD$650 million ($466 million).
– Cadogan Tate, backed by TSG Consumer, acquired Fully Loaded Deliveries, a Phoenix, Ariz.-based storage and logistics company serving the art and interior design industries. Financial terms were not disclosed.
– Godspeed Capital acquired JP Donovan, a Rockledge, Fla.-based space infrastructure company. Financial terms were not disclosed.
EXITS
– Carlyle acquired a majority stake in MAI Capital Management, a Cleveland, Ohio-based registered investment advisor, from Galway Holdings, Harvest Partners, and Oak Hill Capital. The transaction values MAI Capital at $2.8 billion.
IPOS
– Bending Spoons, a Milan, Italy-based company that acquires software products and digital brands and seeks to improve and operate them long term, filed to go public on the Nasdaq. The company posted $1.6 billion in sales for the year ended March 31. Galileo Quattordici, Baillie Gifford, and Luca Querella back the company.
