In a parched fundraising landscape, the team behind Wormhole, the messaging protocol that lets developers communicate across different blockchains, has secured a mammoth raise.
On Wednesday, the project announced that it had drummed up $225 million at a $2.5 billion valuation, which makes it the largest funding round for a crypto project in 2023, according to Crunchbase’s Web3 tracker. The raise was technically its first, Saeed Badreg, CEO of Wormhole Labs, told Fortune; however, Jump Crypto, the crypto offshoot of the high-frequency trading firm Jump Trading, incubated the project for years.
No investor led the funding round. “Everyone was pretty much the same,” Badreg said. Participants include Brevan Howard, Coinbase Ventures, Multicoin Capital, ParaFi, Dialectic, Borderless Capital, Arrington Capital, and, of course, Jump Trading.
The investors’ stake will consist entirely of token warrants, rather than equity in the company, he added. A common fundraising mechanism for crypto companies, these warrants entitle investors to a portion of the total supply of a yet-to-be-launched cryptocurrency. Dan Reecer, COO of Wormhole Foundation, declined to comment on the name of Wormhole’s token—plans for which have not been previously reported—or when it will go live.
In addition to the $225 million raise, the team behind Wormhole announced the formation of the new company Wormhole Labs, which will help develop the protocol. Badreg declined to disclose how much of the $225 million will be split between Wormhole Labs and Wormhole Foundation, another entity created in 2021 to encourage developers to use the protocol.
The capital injection and the unveiling of Wormhole Labs finalizes the split between Wormhole and Jump Crypto, as first reported by Bloomberg. “Wormhole itself is now completely separated from Jump,” said Wormhole Foundation COO Dan Reecer.
The separation also continues the downsizing of Jump Crypto amid heightened regulatory scrutiny of Jump Trading’s crypto offshoot as well as a tough year for it and the entire industry.
A ‘stale’ narrative and new beginning
Almost three years old, Wormhole has had a rocky history.
Built by developers within Jump Crypto, Wormhole launched in August 2021, and less than a year later, in February 2022, hackers exploited the protocol for cryptocurrency totaling approximately $320 million at the time—one of the largest such hacks on record. Jump Crypto, one of the biggest names in crypto venture capital and market making, immediately stepped in to backfill the lost funds.
As the crypto market crashed in 2022 and regulators began sorting through the wreckage, Jump Crypto faced further scrutiny. In February 2023, the Securities and Exchange Commission sued Terraform Labs, the company behind the so-called stablecoin TerraUSD that suddenly crashed in May 2022.
As part of the lawsuit, the SEC referenced a “third party” that helped prop up the stablecoin in an earlier episode, in May 2021, before the coin’s ultimate downfall. That third party was eventually revealed to be Jump Crypto.
Since then, the firm reportedly has stepped back from crypto trading in the U.S. as well as ended its relationship with Robinhood, the online stock brokerage that also lets users buy and sell crypto.
After securing this year’s largest raise for a crypto company, Badreg, the CEO of Wormhole Labs, hopes that the above “stale” narrative surrounding Wormhole changes. “I think that this raise is an eye-popping number for people, so it forces people to reassess,” he said.
The team officially formed the Wormhole Labs entity in May, and his team of 15, most from Jump Crypto, left the firm in August to focus solely on the protocol. Another group of Jump employees announced that they had left the firm at the same time to focus on a financial data provider built on blockchain technology.
Badreg says the departures aren’t due to regulatory scrutiny or Jump Crypto’s pullback from the U.S. “I just never believed in a world in which all of these projects or companies would live within Jump or be associated with Jump indefinitely,” he said.
The Wormhole team—the Wormhole Foundation has another 10 employees—hopes to use the influx of capital to hire more employees, build out and develop the protocol, and encourage developers to build on top of the protocol’s messaging technology. “This is very positive,” said Robinson Burkey, chief commercial officer at Wormhole Foundation, “and almost like a new beginning for Wormhole.”