Aside from libertarian-minded Silicon Valley venture capitalists, Ukraine war fanatics and crypto enthusiasts, Telegram wasn’t on most Americans’ radar before this weekend. That changed Saturday when French authorities arrested Russian-born founder Pavel Durov, sparking debates online about content moderation and superpower meddling.
Even if you weren’t following Telegram before Durov was arrested as he disembarked from his private plane in Paris, the messaging app company is one of the most fascinating tech stories of the past decade. For one thing, the company managed to attract more than 900 million users and — at least according to Durov — break even without selling any stake in the company to venture capitalists. Instead, Telegram has relied on billions of dollars in debt financing from players like Abu Dhabi’s sovereign wealth fund Mubadala and Russia’s state-owned investment fund.
Durov is an ideologue committed to the principles of free speech and privacy. He was forced by Russian authorities to sell his previous company, VKontakte, Russia’s largest social network, and continues to have a strained relationship with the Russian government. He founded Telegram outside his home country to serve as what he called a “neutral platform” and one where he would determine the company’s future. A former employee told me that Durov avoided raising money through equity because of his experience with VK and the “need for control.”
This brings us to the second oddity surrounding Telegram. According to some estimates, it was the first mainstream crypto app. Of course, this comes with some caveats and a brief history lesson. In 2018, amid the hype cycle surrounding ICOs, Telegram raised $1.7 billion with the promise of launching a blockchain and token – a strategy for raising capital without issuing equity. The SEC forced the company to abandon its plans and return the unspent funds (one of the reasons why Telegram later had to take on debt), but a close-knit group of software developers continued the plans.
The result was TON, a layer-1 blockchain with a crypto token of the same name that is technically independent of Telegram but inextricably linked to the messaging app (so much so that many crypto advocates complain about centralization). Unlike rival blockchains like Ethereum or Solana, TON has a captive audience of real people in the form of Telegram users, and Telegram has begun integrating TON into the app, including as a means of payment in an advertising network as well as in hugely popular point-and-click games like Hamster Kombat. In response, TON’s market cap surpassed $25 billion.
Buying TON tokens has become a popular play among crypto VCs confident in the ecosystem’s growth; the fact that it allows one to participate in Telegram’s upside potential without the need for traditional equity certainly doesn’t hurt.
Before his arrest, Durov talked about his desire to take Telegram public, but many investors I spoke to argued that TON could provide an alternative revenue stream that would obviate the need for an IPO. “We’ve talked about it a lot internally,” Matthew Graham, the founder and CEO of VC firm Ryze Labs, told me. “How realistic is it that they’ll actually do an IPO, and to what extent might they consider (TON) as a way to monetize?”
But what happens now? While Durov awaits formal charges, his future – and that of Telegram – remains uncertain. With the core workforce only around 60 employees, according to the former employee, Durov’s influence on the company is undeniable, and he may be forced to finally implement moderation and know-your-customer policies that fundamentally change the platform’s main attraction (and its profit margins).
And while TON’s supporters like to argue that it is independent of Telegram, the success of the two ecosystems is closely linked. At least for now, the blockchain is dependent on Telegram – as evidenced by the token’s 25% drop over the weekend.
If you want to read more, you can check out my post with Jessica Mathews about the uncertain financial outlook of the world’s renegade social media platform.
Leo Schwartz
Twitter: @leomschwartz
E-mail: [email protected]
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Nina Ajemian curated the “Offers” section of today’s newsletter.
VENTURE OFFERS
– Kribla San Francisco, California-based IT and security data engine, has raised $319 million in Series E funding. Google Ventures led the round and was accompanied by General terms and conditions of business, Capital G, IVPAnd CRV.
– OpusClipa Sunnyvale, California-based AI tool for editing video clips, has raised $30 million in funding. Millennium – New Horizons led the round and was accompanied by Samsung Next, GTMfund, DCM VenturesAnd Jason Lemkin.
– Supioa Seattle, Washington-based AI platform for law firms, has raised $25 million in Series A funding round. Sapphire Ventures led the round and was supported by existing investors Bonfire Ventures And Foothills Ventures.
– Planeraa San Jose, California-based CPM-based scheduling and planning platform for the construction industry, has raised $13.5 million in Series A funding round. Sierra Ventures led the round and was supported by Sorenson Capital, Brick and mortar company, Prudence VCAnd Firebolt Ventures.
– ZBioticsa San Francisco, California-based probiotic beverage maker, has raised $12 million in Series A funding round. Capital of the Spring Tide led the round and was accompanied by Access capital, Seamless Capital, Capital of the Goat RodeoAnd Coastal activities.
– MOXYa Las Vegas, Nevada-based wood and plant fiber mineralization technology company, has raised $11 million in funding. At One Ventures led the round and others joined him.
– Rep AI Technologiesa New York City-based AI concierge platform, has raised $8.2 million in funding. Osage Venture Partner led the round and was accompanied by Flashpoint Venture Capital And Oryzn Capital.
– Aerofloa portable carbonator based in Brooklyn, New York, has raised $5.3 million in funding. Lerer Hippeau And Torch capital led the round and was accompanied by Closed Loop Ventures Group, Good friends, SWAT Equity Partnersand other.
– Inventive AIa Mountain View, California-based AI platform for RFP workflows, has raised $4 million in seed funding. Sierra Ventures led the round and was accompanied by YCombinator, SOMA CapitalAnd General catalyst.
– Moveo.AIa New Milford, NJ-based conversational AI platform, has raised $2.6 million in seed funding. Eleven ventures led the round and was accompanied by Uni.Funds And Charge.vc.
– Kataraa Dover, Delaware-based platform for automating workflows with AI agents, has raised $2.2 million in seed funding. Ventures Diagram And Sparkle Ventures led the round and was accompanied by StreamingFast and angel investors.
Private equity
– Citation capital acquired a majority stake in Aptive Environmenta pest control company based in Provo, Utah. Financial details were not disclosed.
– PrecisionXa portfolio company of CORE Industry Partneracquired MSK Precision Productsa Tamarac, Florida-based PR
OUTPUTS
– GHK Capital Partner acquired Horizon Airfreighta New York City-based provider of shipping logistics, ICV Partners.
IPOs
– Ceribella Sunnyvale, California-based medical device company for neurological diseases, has filed for its initial public offering on the Nasdaq. The company reported revenue of $54 million for the fiscal year ending June 30, 2024. The Rise Fund Clearthought, Global Value Investment Portfolio Management, Longitude Venture Partners IV, ABG WTT-Ceribell, Red Tree Venture FundAnd Optimas Capital Partners Fund support the company.
FUNDS + FUNDS OF UMBRELLAS
– LS Power Groupa New York City-based investment firm, has raised $2.7 billion for its fifth fund focused on the power and energy infrastructure sector.
PEOPLE
– Geodetic capitala growth capital firm based in Foster City, California, commissioned Neb Mela as a partner. Previously he worked at Tishman Speyer.
