Polygon raises $450M from Sequoia Capital India, SoftBank and Tiger

Polygon has raised $450 million in a new venture financing round as the firm, with a market cap of about $13 billion, aggressively expands its portfolio of Ethereum scaling solutions and works to attract the larger developer ecosystem.

Sequoia Capital India led Polygon’s first major financing round. Tiger Global and SoftBank as well as Galaxy Digital, Republic Capital, Makers Fund, Alameda Research, Alan Howard, Dune Ventures, Alexis Ohanian, Steadview Capital, Unacademy, Elevation Capital, Animoca Brands, Spartan Fund, Dragonfly Capital, Variant Fund, Sino Global Capital and Kevin O’leary also participated in the token purchase.

This is the first time many of these investors are making a bet on an Ethereum scaling solution, or broadly on the blockchain infrastructure play, according to Web3 Signals, a website that tracks venture investments in the crypto space.

Monday’s announcement confirms an early December TechCrunch report that outlined some of the early details of the deal.

Ethereum has attracted the largest developer ecosystem for any blockchain, but it’s plagued by slow speeds and high transaction costs (also known as gas fees).

Polygon is among a handful of so-called Layer-2 or side-chain firms that are attempting to help Ethereum’s network solve its growing pains by employing techniques to move a wide-range of transaction information off the blockchain.

Moving a lot of details off the Ethereum blockchain allows Polygon to pack more transaction details on an Ethereum block and significantly scale the number of transactions it can process.

For the first few years, Polygon focused on a technique called Plasma to move information off the Ethereum blockchain, but the firm has in recent years expanded its focus on multiple technologies including zero knowledge rollups, optimistic rollups and validium to tackle this challenge.

Polygon has spent nearly $1 billion in recent quarters to acquire firms to broaden its offerings, said Sandeep Nailwal, co-founder of Polygon, in an interview with TechCrunch.

“Previously at MATIC Network [the former name of Polygon], we were building Plasma solutions,” he said. “Although 10 to 15 teams raised money on the Plasma hype, we were the only team that shipped a proper product with Plasma capabilities.”

“Then the overall community reached the consensus that there are certain limitations to this approach. So they moved to the optimistic rollup. Then they moved to zk rollup. Then validium. We have realized that we don’t want to play these hype cycles. We want to build a platform that stays there for decades to come.”

In the past two years, there has been a gold rush in the emergence of layer 1 and Ethereum scaling solutions and venture investors and hedge funds making early bold bets on what they think will become the mainstream blockchain and their companion in the coming years.

Nailwal drew parallels with this race to the desktop operating system wars we saw for more than a…