Why we invested in CopperDawn

It was a dark February afternoon when we hopped onto our first zoom call with Copper’s CEO, Dmitry Tokarev, but it wasn’t long before the atmosphere was alive and brimming with excitement. Though originally hailing from icy Siberia, Dmitry clearly had a fire in his belly, and we were immediately struck by both his passion and sheer breadth of ambition for Copper.

Simply put, Dmitry and Copper are setting out to build the infrastructure layer desperately needed by institutions to securely hold and trade digital assets. The platform combines a suite of technology and prime brokerage solutions, from flexible custody to margin lending and over-the-counter (OTC) execution, along with instant offline transfer and settlement across a proprietary integrated network of crypto exchanges, Clearloop. It is a revolutionary proposition enabling a rapidly expanding digital assets market.

The demand for Copper’s proposition has been relentless, driving a 40x growth in assets under custody since Q3 2020, across more than 200 institutional clients. With Dawn’s experience supporting technology platforms scaling up in the traditional finance markets and Copper’s expertise in digital assets, it was a natural fit and today we’re announcing our lead investment in their $50m Series B.

It is a fascinating moment in the evolution of the digital assets market. The past year has, of course, seen record-breaking rises in valuations and the emergence of a new trillion-dollar asset class. But this remarkable growth has also been accompanied by a maturing market of technology providers, protocols, tokens and stablecoins and an increasingly rich, if nascent, decentralised finance (DeFi) landscape.

As a result, we’ve arrived at a time when this flourishing ecosystem has become impossible for the largest financial institutions to ignore. It is simply too potentially transformative and, with each passing week and dollar invested, its promise is becoming more a reality. No surprise, then, that with markets surging, traditional institutions are flooding into the space. In just the last month — as Coinbase went public with a valuation higher than that of both Nasdaq and ICE — Goldman and Citi both announced their intention to increase their footprint in the space, driven by client demand and following similar announcements from PayPal, Visa, Morgan Stanley and BNYM earlier this year.

What’s remarkable is that we’re still at the very beginning of this market evolution. To put it in perspective: 90% of all digital assets are still held by retail customers compared to just 30% of equities. Institutional involvement in crypto has only just begun.

At Dawn, we’ve been keenly following the evolution of this market, with a particular eye on developments in the infrastructure space. Over the years, and across a range of financial subsegments, we’ve consistently sought to invest in foundational platforms that can support efficient and functioning financial services products — from payments processing in iZettle, to data-driven open banking in Tink and post-trade settlement at Access Fintech. So with institutions moving at pace, we were looking out for that key enabler in this rapidly-expanding digital assets market.

A range of market makers, hybrid OTC broker desks and credit platforms has emerged in recent years and the market for prime services serving institutional clients is certainly heating up. But today, the ecosystem’s eight-hundred pound gorillas remain the centralised exchanges. Though largely built with retail-led growth strategies in mind, they are also the largest core liquidity pools for institutional investors. Yet institutions face significant challenges when it comes to interacting and trading across these exchanges — not least significant operational and counterparty risks.

So enter Copper. Its infrastructure platform provides a gateway for institutions to access the digital assets markets. At its heart sits Copper’s custody proposition, where flexible wallet architecture and multi-party computation (MPC) technology provides the control clients need to hold digital assets securely. The platform already supports more than 150 tokens and protocols, a far broader range of assets than are offered by competitors.

But Copper is more than a custody provider. What customers love — and what is truly revolutionary — is that Copper is actually building out a full digital asset settlement network that enables it to move funds and trade across the largest exchanges and liquidity pools, securely and direct from custody. Across integrated exchanges, Copper provides instant offline settlement via its Clearloop network. In plain English, this enables customers to trade via exchanges without their moving assets to those exchanges, thus eliminating the risk of those assets being hacked, frozen or misappropriated in transit. Alongside this, Copper then provides customers with a range of other prime brokerage services including OTC execution, margin funding and staking.

The strength of the proposition is reflected in the company’s remarkable revenue growth and 200-strong customer list, which includes trading funds, leading market-makers, protocols and fintechs. Copper is quickly gaining recognition as the leading technology platform in the market, combining crypto-native understanding with capital markets expertise. Dmitry, a quant by background and later CTO for Dolfin in London, really understands the needs of his customers and what it takes to build institutional-grade infrastructure for the asset management industry. He’s gathered around him an ambitious team with significant expertise across cybersecurity, crypto-native and traditional capital markets.

Now integrated with more than 30 global exchanges, Copper is fast becoming a vital piece of infrastructure for pioneering institutions looking to enter the digital assets market, and is elevating the standards of digital asset security, trading and clearing.

Josh Bell and I are looking forward to joining Copper’s board and working with the team to push further into the largest financial institutions, to accelerate their existing traction and expand their footprint in the US and APAC. Supporting and investing alongside us, we’re delighted to be joined by existing investors TargetLatitude and MMC Ventures as well as capital markets specialist Illuminate (previously investors in Curv which was recently acquired by PayPal).

In a rapidly-expanding market and in an industry at the tipping point of critical change and with a vast market to capture, we believe Copper is ready to seize its moment.

Follow Dan on LinkedIn and Twitter

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