Foundation raises $7 million to return ‘sovereignty’ to a chaotic crypto world

Hot on the ledger heels announcing he’s working with iPod creator Tony Fadell to create his newest hardware wallet, a competing hardware wallet startup Basic devices announced that it had raised a $7 million funding round to double down on its “sovereign computing platform”, which it says enables its users to “reclaim their digital sovereignty”.

The company’s main product, Passport, costs $260 and looks like it’s mid-2000s Vertu Luxury Phonebut it is actually a hardware crypto wallet designed with security and mobile in mind.

“The entire cryptocurrency space is built on a foundation of open source. It only works because it’s open. Our belief is that open source software should run on open source hardware. Zach Herbert, CEO, Foundation Devices

The company is taking a new approach to hardware wallets in that it opens up both hardware and software for every device it releases. Yes, that means, if you wish, you can go to GitHub and look at every line of code, every component, every mechanical design and the full BOM — every aspect of the design of each of its products. The company says open source is central to its mission and vision.

The Foundation’s $7 million round was led by Polychain Capital (which seems to be flying the crypto winter banner at the moment, in that, despite reportedly over $600 million under managementthe fund appears to have spent about $9 to the design of its website).

Other participants in the round include new investors green capital and Flash companies, and a number of follow-on investments from existing investors including Third Prime, Warburg Serres, Unpopular Ventures and Bolt. The investment was made on a SAFE rating with a valuation cap of $35 million. (Disclosure: Haje worked in a non-investment role as a portfolio manager at Bolt, an early investor in Foundation Devices. Bolt’s investment in Foundation was made after Haje left the venture capital firm.)

The company claims to have sold “thousands” of the original passport and in March this year launched the second version of its flagship product. TechCrunch caught up with the company’s founder and CEO, Zach Herbert, at the Baukunst Creative Technologist conference earlier this year, where he detailed a refreshing view of the future of crypto. (A recording of the conference “Not your computer, not your keys“, is available on YouTube.)

“[The implosion of FTX] is a wake-up call on the importance of self-care. It is now clear that storing your coins on an exchange is extremely risky. I also think it’s a red flag in terms of corruption and regulators not really protecting you. And then, it is a red flag concerning the media. The mainstream media coverage of FTX has been horrendous,” Herbert said in an interview with Baukunst’s Tyler Mincey, who is also a member of the Foundation’s Board of Directors. “There are accounts on Twitter giving excellent coverage of the clear and premeditated fraud that took place, but The New York Times, The Washington Post, those very respected outlets, I don’t know how you can read their coverage. On Twitter, you can find considerably better and much less biased coverage. And people are waking up. But the unfortunate thing is that many people have lost their savings. »

Foundation was founded in April 2020, focusing on building open-source hardware and software products that provide users with a “seamless, end-to-end sovereignty experience.” The company’s primary focus is on safety, which has included crucial choices, including manufacturing its products in the United States. The company founder has very little patience or confidence in overseas manufacturing.

“There is a geopolitical imperative and a security imperative to be manufactured in the United States. I think we’re heading towards a multipolar world and it’s only going to get crazier. Personally, I would never trust a Chinese-made device to store my bitcoin,” Herbert said. “And I want to be myself in the field at the factory. We manufacture in New England and I live in the Boston area. I am at the factory at least every two weeks.

One thing is certain: the company’s devices are certainly very different from many hardware crypto wallets. It was not by chance.

“We call what we aim for digital deco, inspired by the visual language of art deco. We adopt the color and ornate design. The cryptocurrency industry has focused on dark colors for some reason,” Herbert explained. “I think that’s completely wrong for our industry. I think it should be futuristic optimism. Bitcoin is meant to be a counter to the dystopian future, and our design should reflect that.

And the company is fighting an aggressive battle with crypto exchanges: “We strive to play an important role in empowering users to take their bitcoin off exchanges and achieve digital sovereignty,” Herbert told TechCrunch.

TechCrunch interviewed Herbert to get a deeper insight into the company and its hopes, dreams and ambitions. We talk about the funding cycle, the need for open source, why self-custody is difficult but necessary for crypto and much more. The interview has been edited for length and clarity.

Zach Herbert, CEO of the Foundation. Image credits: Foundation

What makes you the perfect person to lead this business?

I’m a mechanical engineer by training and I’ve been obsessed with computers since I was little. I discovered bitcoin in 2013, and it quickly became an all-consuming passion. At first, I was interested in investment potential, under the thesis that bitcoin represents an ideal form of money – that its limited supply means that as demand increases, the price of bitcoin will also rise. Bitcoin culture has transformed my views. As I consumed endless amounts of bitcoin-related content, I began to understand the importance of sound money, sovereignty, privacy, the need to separate money and state.

In 2017, I dropped out of Harvard Business School’s MBA program to join a Boston-based crypto company, first as COO and later as COO. We have built hardware and software, including ASIC cryptocurrency mining hardware. I couldn’t help but think about the stagnation of self-custody tools, especially hardware wallets. So me and a few teammates launched Foundation Devices in April 2020.

Personally, I feel like I have two conflicting identities. The first is as a tech executive, startup founder, ex-engineer, and almost MBA. It’s my inherited professional identity. But increasingly, my true identity is as a Bitcoiner, a sovereign individual. These conflicting identities are probably why the Foundation has been able to achieve its success so far, why we have been able to raise venture capital funds for ideas that have always been considered fringe and why I am confident that we will continue to grow and bring incredible sovereign computing products to market.

How does this fundraising open the next steps for the company?

Today, self-care is simply too difficult for most people; that’s why so many people have been hurt this year with the collapse of FTX, BlockFi, Celsius and more. Notably, we believe that self-custody alone is insufficient – true sovereignty requires confidentiality. So we differentiate ourselves by building expert-level privacy features into our products and making them accessible to everyday users. For example, Envoy connects to the Tor network by default, ensuring that we cannot see users’ IP addresses or know anything about their balances or identities.

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