Libra-member Bison Trails scores $25 million from Silicon Valley heavy hitters

Libra Association founding member Bison Trails has raised $25.5 million to expand its business of providing the digital infrastructure on which blockchains rely.

Founded by former Etsy executives Joe Lallouz and Aaron Henshaw, the Brooklyn-based, blockchain infrastructure-as-a-service provider builds and manages nodes for companies including Ethereum, Cosmos, Decred, Tezos, Dfinity, Filecoin, and Orchid, as well as the Facebook-founded Libra Association. 

In the eight months since it raised $5.3 million in seed funding, Bison Trails has “become the easiest way to run infrastructure on multiple blockchains,” Lallouz said in a statement. “[We] have helped the world’s leading protocols, companies, and builders launch and manage secure, highly-available, and geographically distributed nodes on blockchain networks.”

Blockchain Capital led the Series A funding round announced on November 19.

The firm decided to invest in Bison Trails because the timing was right, said Brad Stephens, the San Francisco-based venture capital firm’s co-founder and managing partner.

“A lot of the proof of stake networks that were theoretical last year are finally going live,” he said. “We had all these very hyped networks that people have been extremely excited about, but they were all white papers and under development. Now they’re all launching. Now’s the time where we believe Bison Trails can come in and really help manage true distribution with lots of different node owners. It’s not easy, people don’t understand it. Each one is different [and] they all have their own demands. You need a specialized group to come in and be the Amazon Web Services of managing nodes for the launch of all these networks.”

Stephens’ firm tapped an impressive array of backers, including leading Silicon Valley VCs Kleiner Perkins, Initialized Capital, and Ashton Kutcher’s Sound Ventures. A number of high-profile blockchain investors including Coinbase, ConsenSys, and Mike Novogratz’s Galaxy Digital also jumped in.

“Blockchain technology is emerging as a solution for modernizing aging infrastructure that underpins massive industries—spanning from supply chain management and data storage to cross border payments,” said Monica Desai, a Kleiner Perkins investment partner. “Bison Trails realized early that node infrastructure would become a bottleneck to blockchain adoption, which is why they created a decentralized, user-friendly solution that developers and customers love. We’re excited to be part of their next chapter.”

Coinbase COO Emilie Choi said the firm’s investment arm, Coinbase Ventures, believes that cryptocurrency networks will continue moving towards active network participation models like staking, voting, and signaling. That will make blockchain infrastructure-as-a-service solutions increasingly vital, she said in a statement. 

“The team at Bison Trails shares our long-term vision of advancing the crypto ecosystem towards delivering massive utility at a global scale,” Choi said. “Reliable, easy to use blockchain infrastructure is a prerequisite to achieving this end state. The [Bison Trails] team has demonstrated the ability to engage deeply with emerging crypto networks and expand accessibility to network participation with their offerings.”

Other Series A round participants included Silicon Valley VC firms A Capital and Collaborative Fund. Initialized Capital, Accomplice, and Notation Capital were early backers who invested again.

In advance of the announcement, I had a chance to talk in detail with Stephens and the lead investor on his team, Derek Hsue, about how they sourced the deal and why they decided to lead the round. What follows is an edited transcript of our discussion:

MARTINE PARIS: How did this opportunity come to you? 

DEREK HSUE: We’ve been following Bison Trails for awhile now, almost a year. We’ve always known that running a secure node infrastructure is something the market needs right now and will continue to need more and more in the future. Whether it’s proof of work or proof of stake blockchains, node servicing can be a tough task and we’re seeing more and more new blockchains launch under proof of stake mechanisms. Whether you want to run a validation node, develop on top, or engage in behaviors on [a blockchain] in some manner, it involves running secure distributed nodes and not many people can do that all by themselves. We always thought that would be a problem that could be potentially lucrative for a company that could go out and make it easy. We saw Bison Trails launch their first products around the Algorand network launch, and that went really well for them. So we wanted to find a way to work together.

PARIS: Ethereum is one of the protocols that Bison Trails is supporting. Will it be the secret sauce that helps Ethereum scale?

BRAD STEPHENS: Ethereum is planning a transition to proof of stake and sharding, and if that goes well, that should improve scalability for Ethereum. Services that Bison Trails provides for that will be necessary and important for people to safely use Eth 2.0 and make sure they’re not unfairly diluted by the system.

PARIS: It’s a pretty impressive investor group that’s participating in this Series A round. I was surprised to see Kleiner Perkins on the list. What do you think about their involvement?

STEPHENS: We’re extremely excited about the syndicate that we put together and it’s particularly thrilling to have Tier One investors like Kleiner Perkins involved. They are pioneers of the venture capital industry who haven’t participated much in the crypto space. I’ve known many partners there for years but we hadn’t yet come together to do a deal, so this is great. 

PARIS: With all of the scrutiny on Libra from the U.S. Congress and the G7, does this feel like a thumbs up from Silicon Valley’s old guard? 

STEPHENS: You can loosely tie it to a positive association to Libra but there’s far more to the investment thesis as there will be a lot of different services launching that will need node management. Much like the Libra Association which nowhas 21 members and ultimately [plans to] grow to 100 members. All the blockchains are going to need their nodes managed and the majority won’t have the skill set to do it themselves so they’ll want to outsource it to someone that does it to perfection. 

PARIS: Bison Trails allows Libra members like Kiva to participate even if they don’t know how to manage a node, is that right?

STEPHENS: Yes, they’re really becoming a key enabler that offers speed to market. There are these teams launching their networks and they have to educate 50 of their node runners on how to manage the node and vote on it. What no one wants is a network like Libra having to manage the nodes for the participants because we would wind up very centralized again. Bison Trails makes it possible to keep it decentralized with the nodes managed separately.

PARIS: What will the Series A funding enable Bison Trails to do?

STEPHENS: A look at their roadmap shows all the different projects that they’re looking to support, that’s a lot of development. They’ve taken the lead doing Infrastructure-as-a-Service for nodes. To be able to manage as many networks as possible, before other competition catches up is key.

PARIS: There has to be a lot of trust if you’re offering a service where people are outsourcing their nodes to you. What processes does Bison Trails have in place to ensure it’s being done properly?

HSUE: The way the Bison Trails platform works is that while they’re running the node for you on a specific cloud, those clouds can be deployed however the customer wants. It can be on the customer’s hardware or on the customer’s cloud account. Customers have ultimate control over custody of the funds and how those funds are being used. Bison Trails doesn’t have the private keys and can’t run away with the money. They’re just giving them the packaging and framework that allows the user to make the ultimate decision.

PARIS: What makes Bison Trails unique among its competition?

STEPHENS: Joe and Aaron are just world class entrepreneurs. They’ve been working together for a long time. They have a great track record. We did reference checks with as many people in the industry as we could that had looked under the hood and worked with them before, we could not have gotten better feedback, across the board.

Many VCs invest for different reasons. Some invest on the code, some invest on the total addressable market. At Blockchain Capital, we’re people investors. You have to trust who you’re investing in, you need to share their passion and their commitment, their drive. I couldn’t be more excited about being in business with those two. We have a huge amount of confidence in Joe and Aaron to maintain their leadership position in this emerging area of infrastructure-as-a-service for blockchains.