“Growth and scaling are the hardest things to get right” - Chainalysis’ Michael Gronager

This post is part of Accel’s Secrets to Scaling series, where leaders from across our portfolio share their learnings and advice with the next generation of European entrepreneurs building global winners.

Today, Chainalysis announced its $100 million Series E financing, following hot on the heels of the company’s Series D round in March 2021 and bringing its valuation to $4.2 billion. In the time between the Chainalysis’ Series C in November 2020 and its Series D, the company had increased ARR by more than 100% year-over-year, doubled its client base and now supports more than 100 digital assets across 10 native blockchains (around 90% of cryptocurrency economic activity). It’s been quite a journey getting here and there’s still a way to go as cryptocurrencies integrate with our global financial system.

I sat down (virtually) with Chainalysis co-founder and CEO Michael Gronager to discuss his learnings from almost seven years at the helm of a high-growth company. He shared his tips for building a global business, hiring, what he’d do differently and more…

The Chainalysis journey

PB: Let’s go back to the start. What was your career prior to founding first Kraken and then Chainalysis? What attracted you to entrepreneurship?

Before Kraken, I was planning and running public research infrastructure projects across Europe. Essentially, I was just doing politics and talking to research councils to get funding. I got to a point where I thought the purpose of the education and research systems we were creating was for people to build companies and that those who could do, should. After a conversation with a colleague, I decided to build something myself. I started coding iPhone apps and got one off the ground for a US company. This gave me some financial freedom, so I quit my job and was soon bitten by the crypto bug.?

How did Kraken come about?

How did you get from there to Chainalysis?

Mt Gox, the biggest crypto exchange, went bankrupt in early 2014, losing about half a billion dollars following a hack. This caused a big downward spiral of everything crypto. It was associated with criminal activity, hacks, online drug sales, terrorism and more. No one wanted to talk about crypto, so running an exchange was tough. Talking to banks and regulators in Asia, Europe and the US, I kept hearing the same issues: they couldn't monitor transactions, no one understood the return of funds, and - most concerning - crime couldn’t be investigated. I thought about this, read the original Satoshi article and others on how it was possible to trace, execute and build a data layer crypto. I then decided to try and solve the obvious problem of understanding the flow of funds in the most transparent financial ecosystem ever created.

Learnings for the next generation of entrepreneurs

Many European founders wonder where to start their company - move to the US or stay in Europe. Why did you decide on New York and then build Chainalysis’ organisation between there and Copenhagen??

How did you initially think about going global from a sales perspective? With the crypto ecosystem, you’ve got a big buyer in US government agencies, Chainalysis’ European roots, the UK’s GCHQ, and a lot of crypto activity in Asia. It's challenging for a young company to deal with three continents and time zones for sales. How did you do it?

Now you’ve had five or six years of global expansion, is there anything you’d do differently?

I think that setting up and building a team in one office with a strong focus on product and design and so on would have been a slight advantage over hiring people via the internet all over the world, so I’d probably do that now.

Let’s dig into this. Hiring execs is one of the most important things for high growth companies. How do you view the composition of your team and proportion of people who’ve done the job before versus those growing into roles?

I think it was Eric Vishria who said he’d split it so 75% of the team have done the job before and 25% are growing into roles. I think that's right, but the key question is: “what does it mean to have done the job before?”. There are probably only a couple of COOs who’ve successfully built a company from $5m to $5bn revenue over 10 years and they likely don’t need or want to work anymore. I’m looking for people who’ve experienced high growth. There are tons of companies that have built hundreds of millions of revenue over 20 to 30 years, companies growing at 20-30% year-over-year. These companies grow at a pace most people can handle. They don't experience the same issues as high growth companies and it’s the high growth experience I’m interested in.

I like the racing car analogy - it brings me nicely to the role of company culture and values in keeping things together. What values have you created for Chainalysis?

Early on, we got a lot of cultural input from Techstars. We inherited their value “Give first”, a way of interacting with others so everyone wins. The other value to highlight is “radical gradualism”, which means aiming big but understanding there are many subtle, smaller steps that need to be applied along the way. This is very relevant to the early crypto days where everyone would say, “we’re taking over the world this year, governments are gone, everything’s done and this is happening now”. But this isn’t how change happens. Even the internet took 20 years and that’s fast for global change. Understanding all the steps and winning over stakeholders in the right order is the important part. Radical gradualism can be applied to problem-solving all over the company. Have the mindset of getting to the moon, but recognise there are many steps to building the rocket and getting it into orbit and beyond.

This is an important point. Chainalysis has been involved in some high profile cases. What accomplishments are you most proud of?

One that stands out for me is our involvement in the?shutdown of the largest ever child pornography site ?in October 2019. There were more than 300 arrests across 38 countries and at least 23 minors were identified and rescued from abusers as a result of this investigation. I felt that if this was the only thing I ever accomplished it would be good enough for me.

Looking back to when you started Chainalysis, what do you wish you’d known then that you can share with the next generation of founders?

Building a business is always tough especially when growing as fast as Chainalysis. Are there any tips or life hacks you’d share with other entrepreneurs?

Developing routines helps in various ways. I try to exercise every morning, getting up and running so I know it’s done ahead of a day packed with meetings. I try to find joy in the small things. Ensure you have some of that during the day - whether it’s your morning run or cooking, for example. I like to cook as you can mentally get into another zone.

What’s been the hardest thing about building Chainalysis that you didn’t anticipate?

Probably the fact you become another person on this journey. And you want to, but there's stuff you sacrifice. Not spending much time with my kids is tough. But when you're building something and you get into this mindset, it’s like you’ve swallowed a pill. Change just happens. Some of the life changes are tough, but you get to experience things that very few people do. I'm deeply grateful for that and hope I can share some of this with my kids at some point - this is a journey I can bring them on in various ways too.

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This post originally appeared on Accel's website as part of our Secrets to Scaling series. Read our interviews with:

- BlaBlaCar's Nicolas Brusson?here

- Supercell's Ilkka Paananen?here

- Trade Republic’s Christian Hecker?here