ConsenSys Seeks $200 Million From Investors After Bumpy Year

If successful, the fundraising could fuel ConsenSys’ ambitions in consulting with companies about how to use blockchain technology, an area currently dominated by established firms like Accenture and IBM. According to the documents, ConsenSys is projecting more than $50 million in revenue this year, with about $40 million coming from its services business, which relies on contracts with enterprise and government clients. The remainder mostly comes from its software products.

ConsenSys didn’t comment for this article.

The fundraising effort marks a shift for the New York–based company, which until now has been owned and funded primarily by its founder, Joseph Lubin, one of the creators and largest holders of the cryptocurrency ether. It also reflects the new pressure the company is under, as the once high-flying startup faces increased investor skepticism of blockchain companies and as cryptocurrency prices remain sharply lower than they were at their peak in early 2018.

ConsenSys’ executives recently pitched investors in Hong Kong and South Korea, a person familiar with the matter said. Chinese venture capitalists have sought ways to diversify their assets amid China’s strict capital controls, raising the possibility that they would be more interested in the company’s pitch than U.S. investors.

ConsenSys, whose employee count is down from around 1,200 last year, is composed in part of dozens of portfolio companies building on the Ethereum blockchain network. It also operates a venture capital wing as well as a consulting business for corporations looking to use blockchain technology.

Many of ConsenSys’ subsidiaries don’t generate revenue, and some resemble nonprofits in their purpose to provide services for the Ethereum blockchain network.

In addition to revenue from its consulting business, ConsenSys has substantial stakes in blockchain companies that it has incubated, such as Gnosis, a prediction market platform in which ConsenSys had a stake worth around $1.9 billion in January 2018, the documents show. Altogether, ConsenSys investments were worth around $2.5 billion at the time, although they are likely worth a small fraction of that amount now that crypto prices have fallen sharply from their early 2018 peak. Gnosis’ token, for example, has fallen 96%, according to Messari, a data provider.

Several companies ConsenSys has incubated, including Civil, the blockchain-based media company, have attracted widespread notice in the crypto industry. And it has been active in funding research into blockchain at other startups.

Despite its limited revenue, ConsenSys expanded its employee count from 100 to around 1,200 over the last two years, as the price of ether skyrocketed before tumbling more than 90%. In interviews with The Information, four former employees described disorganization and lavish spending at the company, with staff members often unsure of what their roles were or to whom they were reporting.

In December, Mr. Lubin announced that ConsenSys was cutting staff as part of a sweeping reorganization of its business. Mr. Lubin also said publicly that ConsenSys would impose stricter performance standards on its portfolio companies, which it calls “spokes.” Some of those companies have since been trying to raise outside capital, and at least one has shut down.

Around the same time as the layoffs, ConsenSys said that it was open to the possibility of raising outside investment. As of early April, the company hadn’t yet found a lead investor, according to one person familiar with the situation.

Mr. Lubin is believed to control the vast majority of ConsenSys shares, which could complicate his efforts to bring in outside investors. It is unclear how much influence over the company he is willing to cede to venture capitalists.

—Shai Oster contributed to this article.