S02E37: Michael Gronager, Chainalysis

Russ: [00:00:01] Thanks for downloading the 30th in our series of episodes of the Csuite podcast that we’re recording in partnership with the European PR Agency, Tyto and their own Without Borders podcast, where we are interviewing leaders of unicorn companies to find out about the key issues, pain points and challenges that start-ups face and how they can address them with a strategic approach to marketing and communications. My name is Russell Goldsmith. My co-host for this episode is Tyto Senior Partner, Holly Justice. And today we are thrilled to be joined online from New York by Michael Gronager, CEO and co-founder of Blockchain Data Platform Chainalysis. Founded in 2014, the company reached unicorn status in 2021 and is now valued at $8.6 billion. Welcome to the show, Michael. Can we start by you giving us a bit of background to the company, but also if you want to talk through the area of business that you’re seeking to disrupt as well? 

Michael: [00:00:52] So I think the best way to look at Chainalysis is like what is actually crypto in general? The crypto space is disrupting the world of finance, how we think about value and how value is being moved around. And the best way to think about how Chainalysis disrupts anything is actually looking at that entire industry is disrupting finance. I think it’s easy to look at this as the same way as we looked at the Internet in the early days, the Internet and the companies on the Internet, the companies and Internet were not disrupting anything. They just believed that the entire concept of the Internet would disrupt how we think about communication, how we think about information in general. And then they blindly believe that if they built a company on top of that, they were going to be some of the biggest companies in the world simply because they had seen the future and were able to follow that in that direction. We are doing the same in crypto. We believe that every company in the world will become a crypto company, and for us to own all the data and how to best analyse the data, it will be like how you can guide everyone in the crypto space to first of all, be able to safely transact in the crypto space, like do the right compliance and so on. If you are the public sector to the right investigations safe, keep your countries and the citizens there. And finally, it’s also about understanding the business intelligence. How do people react in the crypto space? What are they focused on? What do they want to do? And all of these things help companies. And as crypto grows, so does Chainalysis. And the nice thing about it is that when Chainalysis grows and offers new products, it also helps the ecosystem grow. So, I think it was very much hand in hand and what we are doing is basically providing clarity and trust in the blockchain.  

Holly: [00:02:33] And Michael, tell us a little bit about your personal entrepreneurial journey. I think as I understand it, before co-founding Chainalysis, you were the co-founder of Kraken, a digital asset platform, but you’ve also had a decade of experience in data in managing big data projects. Tell me a little bit about your career history. 

Michael: [00:02:51] Yeah, I think like since I was a kid, I always saw myself as an innovator. And I think that was the easiest way to understand, like what an entrepreneur meant, that many years ago. And then like coming out of university, the first thing I actually looked at was virtual reality and building distributed computing platforms to do virtual reality, many years ago before VR was cool. I would put it that way, not sure it is cool today, but actually it actually was. At least there was a time where it was. So then after that I got into to other parts of distributed computing and data ended up being probably the passion of what I’m doing, because at the end of the day, data is growing way faster than anything else. The amount of data that we need to analyse and look at and so on is growing and growing. But also, the opportunity of analysing that is huge. So, the ability to look at data and gain insights, looking at it has always been really big. 

So, some of the stuff I spent a long time on back in my days before crypto was like analysing data for high energy physics projects or physics in general. There was a lot of big science projects worldwide. I was in Europe at that time and was, for example, part of the Large Hadron Collider project at CERN, analysing data there. And again, what we did there was basically moving around petabytes of data to different compute centres, enabling researchers to analyse them. I ran a company about that. So, it’s like, again, big data was a big part of that. And then when I stopped working in the semi-public space, public sector space, I really wanted to do something else because again, I was bitten by this bug around like innovating, building something yourself and to see that the best way to do what built a private company and I at the same time stumbled over crypto. There was Bitcoin back then, it was like 2011 and I was intrigued by this new technology. It was clearly a paradigm shift in computing, and it was also something that could become a megatrend at the size of the Internet. So, I was very intrigued by it. So, I like dabbled around in doing crypto coded. Some of it was part of like building the early things in Bitcoin, doing other things there. So, did a lot of stuff on the core crypto side and then figured out how do you build a business around this? And Jesse [Powell] asked me if I wanted to join the early team at Kraken on that front and I was like, this sounds fun. I don’t know anything about finance, but let’s do it anyway. And I did so, and it was a really fun journey in the early days there. But I also think that the industry was transforming and growing a lot. So, it became clear to me that there was actually a path from what I did in the past and what I really have my expertise in big data and a company that didn’t exist at that time, which was basically indexing and understanding all the data that is in the crypto space as it was growing. So that became my passion and I simply have to leave Kraken to build Chainalysis for that purpose.  

Russ: [00:05:49] And I mean, bringing us up to date, I mentioned in the intro, the company is now valued at 8.6 billion, which was the so if I’ve got this right, that was the latest funding round, a series F funding of $170 million in May. So that’s doubled your post-money valuation. Obviously, it’s got a lot of merit. It demonstrates the market’s confidence in what you do. What would be great is just to understand what the focus is for you for the next 12 months. What’s next for Chainalysis? Where’s some of that money going to be used in terms of investment back into the business?  

Michael: [00:06:19] It’s a great question. So, I think there’s two things about crypto that’s really important and really drives how we are spending our funds. Number one is that like everything changes all the time. There’s a lot of innovation happening in the crypto space, so it means that we need to be deep in the product side and innovate there all the time. So, we build products like Storyline and Playbook that’s being released over these two quarters, like that other half of this year, enabling investigations into smart contracts into like how DeFi actually works. So, spending a lot of time and effort and really building the right tools and products around the DeFi space. The other piece is on the business intelligence side playbook, which is another product that we are really focused on building and getting to the market there. So, these are like some of the big things there. The other thing that’s permeating the crypto space is that it’s global. Crypto is everywhere and it’s like born as being global. And it also means for a company like ours, we need to focus not just on one jurisdiction, on one country, but globally. So, we’ve been growing our footprint in terms of sales and marketing all over the globe. We are in, I think, around 70 countries today in terms of sales. So really starting to grow there. And some of the countries where we see sales start to grow and so on, we need to be there with not just one or two people, but oftentimes with a team. So, a lot of growth is part of that and that’s basically the investment for Chainalysis. 

Holly: [00:07:45] And just coming back to the topic of leadership for a minute, Michael, are there any individuals that have had a really great impact on your development as a leader? And if so, who are they and why?  

Michael: [00:07:58] Well, yes, I would say there are many individuals that had an impact on me as a leader, and I think that I learned the most about leadership from discussing with other leaders and trying to understand like how they are doing things and what they have tried and so on. I could mention many different leaders on this front here. I would say it would be anyone from like Todd [Olson] at Pendo, Manny [Medina] at Outreach, which are like people that I talk to quite often. So that’s some of them. But there are a lot of other leaders out there also from earlier companies, people who exited before, that I keep in my network because they usually believe that we see some of the same things. We see them at the same time, and as companies grow, we learn a lot from doing so and what to do and what not to do. So, I would say many leaders have influenced how my leadership style is and what I think is important.  

Holly: [00:18:47] A nice diplomatic answer there, Michael. I like that. I imagine leading a hugely successful company like you’ve done requires some quite exceptional leadership skills for both you and also the team that you’ve got around you. What would you say is your greatest strength? And then what are some of the main strengths that the management team at Chainalysis have?  

Michael: [00:09:10] So I think if I start with myself first in this frontier, I would say it’s really about empathy and trying to understand the problems in a business and the problems of the individuals that they’re trying to solve. And getting deep into that and I think at the same time, what I’m kind of the only person who has the remit of doing in a company is like, I have the responsibility of everything in the end. So, I need to ensure that the priorities are right, that we look at it the right way and bring that into like the different departments and bring that prioritization into the different minds of the different people there. So, I think my skill set is a lot about communication. It’s not about trying to understand the different areas. I’m no expert in sales. I’m no expert in how to run a product function at that scale that we have today. But I can talk to the people there and build the connections there. And then I would say I have a skill set in going from helicopter view and all the way down to the microscopic view and be like, let’s look at the actual problem, that’s a problem there. So, I usually like when people present a problem to me is like, but that’s the actual problem. I don’t want all the big speech, let’s talk about the minor thing, even though it’s a technical sales thing. So, it’s something on the Compute Platform, whatever it is, I’m usually like all game for that challenge and trying to understand it there.  

In our management team, I hired a series of very, very strong leaders on our management team, over the last 18 months, and they all come from backgrounds from other companies that got unicorn status, some of like $100 billion companies today. Some of them have probably been behind building some of the biggest successes in SaaS software. And what I learned from them is, first of all, from all of the experience, from understanding what are the problems that are not really problems, but something that will solve themselves over time that you shouldn’t obsess about. And what are the things that actually worth focusing on? What is the time it takes to build things? What is the timescales involved? Because I think it’s easy to be naïve at like seeing at scale at the first time, it’s like, well, we can do it tomorrow, but we can’t, but it also doesn’t matter that it’s not done tomorrow. Sometimes it’s fine that it takes time because it takes time for everyone. So, I think that a lot of these things, stuff that I’ve learned from my leadership team. 

Russ: [00:11:23] How difficult was it to convince those people to come from, like if they’ve built successful or being part of a successful building of a company already and you’re now getting them to come back to almost start that journey again, how easy was it to convince them to come over? 

Michael: [00:11:37] I think it was a very interesting process because a lot of this was quite humbling. I remember jumping on the first call with some of them and being like, wow, no chance am I ever going to hire them. And then after thinking about it for a while, I’m like, I actually really want to hire them because that would be transformative for the company. And then going all in and basically telling them why I think that this is a very unique company that we are building. It’s not one of many, it’s the only one in the space. And what we are doing is truly like an iconic company, that’s something unique. And I think that bringing them on to that story, winning kind of their hearts and minds on the idea of what we’re doing at Chainalysis has really been a core part of it. But it was not easy. It was like a lot of conversations, a lot of discussions, and also building the trust with them that what I that I’m doing in Chainalysis is a big thing that I have to ambition to get us there and all of that, and yeah, that was definitely a good challenge. 

Russ: [00:12:33] Excellent. Michael a key focus of the discussions that we’re having is around communication and culture. So, one of the first things I wanted to ask you actually, and it’s interesting you’re talking about bringing people on who were at previous companies that had already reached unicorn status. Because one of the questions we’ve asked all our leaders is how the perception of your business changed when you reached unicorn status yourselves.  

Michael: [00:12:58] I think that the perception does change. I think one of the things that happens internally in the company is like, wow, this is real. Kind of just like, wow, this is real. It’s kind of on a journey where, you know that this is actually something that will become something big and is already at that time, so I think that’s a big part of it. I think in the perception of others, it’s probably somewhat the same, right? Basically, they would look at the company and say, this is one of the companies I can join, it’s on a growing trajectory, it’s very promising, it’s being talked about in a certain way. And I think that it also enables you to, first of all, as I mentioned before, make certain high-profile hires that would be hard to make otherwise.  

I think another piece of this is the perception from your customers where it’s like, okay, they are actually going to stick around for a while. We trust them as a company and can see that they have the size where it makes sense to really work with them and dive deep here. And I think that’s another perception that changes in that capacity. And finally, it goes for all the hires, when you hire people, it also means that everyone that joins the company looks at the size, the valuation, the scale, the future of the company and will be like this is probably less scrappy now than it’s been in the early days, and it means that now I’ll have a career path, you understand, like how to talk about benefits and other things. So, it’s like a real company in many ways, and I think that that has opened the door for talent that would otherwise be hard to access. 

Russ: [00:14:26] And sticking with the communications theme then, in terms of, now that you are established, how are you going to differentiate yourself within the marketplace? Because, certainly within the tech industry, it’s a quite crowded obviously space and so how are you going to differentiate yourself in that respect?  

Michael: [00:14:45] So I think there’s a couple of unique things about Chainalysis that’s actually helped us differentiate over the years. And I think that one of them is that what we are building is unique. So, we’re not one of many. We’re not operating in a red ocean. We’re basically building the market for ourselves and growing the TAM by every day and working with new customers. So, I think that’s always intriguing to be part of because that’s not that many companies that does that, usually, you have a better version of something and then you disrupt the market, and it’s very simple to understand what you’re better at and selling that way. So, I think that’s one piece. The other piece is that what we are doing is very mission driven. So, if you look at some of our customers, we have like around 150 public sector customers in 35 countries in the world. And all of those, they are there to keep society safe, to keep the nation state safe, to protect them, anything from like terrorists through to nation state actors and other things. So, it’s largely mission driven and ensuring that you can gain the trust of that kind of institutions. And that is a lot of serious work that’s involved there. And that’s a huge part of our culture to really deliver high quality data and be humble about what we’re doing and building trust in our relationships all the time. I think that’s been a core part of the cultural drive and how we are working with the customers and internally as well.  

Holly: [00:16:11] And you’ve touched on culture there, just very briefly. How would you describe the culture at Chainalysis and what have you done to foster and nurture that? 

Michael: [00:16:20] I think it’s again, its mission driven. People are there with a purpose. I think everyone has a purpose because they see that getting better understanding of crypto, indexing it, understanding what’s going on in the crypto space, but actually grow the space and make this world a better place. I think that’s one of the things that people clearly believe in the company, and that’s an important piece. I also think that cultural wise, there’s a little bit of like an academic side to things where understanding and knowing things about the blockchain drives this curiosity. So, there’s definitely a curious side to the company as well. And then people who know me, they usually say, you always say that it has to be fun, and it has to be fun. It needs to be fun to work and it needs to be part of that, and I think that I always promised everyone that I hired that this is going to be a fun journey. So, I think that’s another part of it. It’s like it has to be inspiring, you need to get to know a lot of very interesting people and what you’re doing is fun. So, I think these are like the three main things. 

Holly: [00:17:16] Nice and going from the topic of fun to the topic of the economic outlook at the moment, Michael, which is pretty uncertain, to put it one way. Are you looking at adjusting your communications approach at the moment in order to maintain that level of confidence in the company? 

Michael: [00:17:34] Yes, so I think what happened in the markets, if you look at like 2021 to 2022 or 2023. Is that in 2021, a great company where a company that was basically growing like crazy and nothing else, nothing else really mattered but growth because access to capital was very, very easy. Raising money was super easy and it was cheap, it hardly cost any dilution. So, it’s like the main focus last year was growth. If you now look going forward, we are back to maybe something that was five, ten years ago where it was more like you need to have a path to profitability. You need to understand like how you build efficiencies into the company. You need to do that. And I think that’s very much like how Chainalysis was born. Like you’re born out of a crypto window. The space was really hard that time. It was almost impossible to raise our seed round. So, I’m just saying that like we’ve been used to that kind of rapid growth, so you put it that way, but still growing. So, I think what we have changed in terms of communication is clearly that we focus right now much more on efficiency, cautious, sustainable growth of the business and ensuring that we do that with the mindset of becoming profitable at some point. So, I would say that’s a change in communication, but I think it’s basically from the change that’s happened in how you value companies today. This is just like how it is to be a great company of today and tomorrow. 

Holly: [00:18:54] And can you share any approaches to internal communications at Chainalysis that have worked particularly well for you guys? 

Michael: [00:19:02] Yeah, I think what we like to do internally is to share as much as we can, so we keep a very open culture. We like people to know what’s going on. And it’s on the mind of the leadership team where the company is headed and sharing those things, so that’s a core part of it. I think also access to the to the C-suite, access to me is another important part where I’m always happy to do a coffee walk with people and say, hey, I want to chat this thing through. I think there’s a thing about communication that is that one thing you can say publicly in a big room. And it’s very simple, but also everything is very easy to misunderstand. So, there’s many nuances. You can’t really get out that way. And that’s why it’s like communication through leaders, through managers is an extremely important thing. And also, the access to me, to the C-suite is important where employees will have that access and ability to raise questions, have a conversation where it’s not like 200 people in a room, but basically just a one on one. So, I think these are key pieces of communication to keep the different layers going all the time and understand the different parts where they matter. 

Russ: [00:20:13] How are you managing to achieve that as you like you mentioned before about growing into, I think you said, 70 different countries now, whatever it might be. So, yeah, are you doing regular online calls with the team? Are you using collaboration tools? Does every new employee get to engage with you in some way, shape or form?  

Michael: [00:20:33] Yeah. So actually, I still do onboarding for everyone. So once a month I do on board the latest cohort of Chainalysis people and then that’s going on, I like to do that in person. It means that I present something about the company, it always changes slightly from month to month and people have the opportunity to ask questions or chat to me. I have office hours once a week where people can jump on a call with me, or usually what I prefer is if I meet them in person, I would go for a coffee with them or something like that. So that’s typically the interaction. At scale, we are more than 700 people today, so it’s a lot of people and it’s a lot of people who got hired the last year. We did an All-Hands event in DC a couple of months ago where we were at that time, like 650 people or so in one room. It was great to meet everyone, and I think that was a core part of building for the next coming years to have the ability to see everyone in person. I love that part and we’ll probably do it again at some point. It’s not happening yearly. It’s probably happening like less than that. But it’s still important to have the opportunity to see everyone, I think. 

Russ: [00:21:35] Yeah, that’s great, and what about in terms of your role as the external spokesperson, face of the business, how do you view that? Is there anything that you’ve learned along the way in terms of being that face of the company? 

Michael: [00:21:48] I would say so, yes. I think there’s a couple of things that I learned from that side, I would say. First of all, and it goes in all communication. If you want to state something, you need to tell the story differently because you can’t just say whatever, if you are a crypto exchange or an exchange or bank, you would say your money is safe. As soon as you say your money is safe, everyone is like, were they not safe for a minute? What happened? So as soon as you point people in a certain direction, they go nervous around the topic that you are talking about. So, I’m always focused on, how do you build trust? How do you say the bigger picture? What is the bigger picture of things? And then people will form your own conclusions. You cannot tell them whether it’s A or B or whether it’s blue or red. You have to tell them, include them in the journey and do that all the time. So, I’m doing that also in external communication, doing that internal communication. Being the spokesperson is a big responsibility. And I think that’s just part of, of my job. So, I enjoy it. I have to say that. 

 

Russ: [00:22:47] Before we started recording, I should mention that for our listeners and viewers, you mentioned that you moved over from Denmark ten years ago to New York. Is there a difference in the way that you or businesses communicate externally from there to where you are now? 

 

Michael: [00:23:05] Yeah, I think so. I think first of all, like everything is faster and bigger in the US compared to Denmark. Denmark is like a country of five, six million people, I think, and is a part of Europe and is again, I think from that point of view, everything is smaller, and it is moving slower of course, because that’s just how it is in a smaller country. And I think what’s also there is that the audience for podcasts like this or for people talking tech and so on, it’s definitely smaller there, but also hasn’t really the same critical mass as it does in the US. So, I think that that changes because there’s so many people focused on, what are the companies that you are building? What are the number of people that you have hired? How did you hire them? What are the problems around that? And I think you don’t get the same focus when you have smaller ecosystems like Denmark. So that’s clearly like something that I that’s been a changed and I enjoy that change, I like the pace. 

 

Russ: [00:24:04] I was going to say, you’re clearly comfortable in this kind of environment. Have you always been a natural communicator or have you had to practice at it, formulate a plan? 

 

Michael: [00:24:15] So I think that I would say I always enjoyed communicating and I probably have my own style all the time. I’m much better at improvising than at preparing. And I would say in the journey of becoming a better and better communicator, I had a couple of times where I got advised to, let’s try to practice this first. Let’s do this for real, and it just doesn’t work. I simply need to be like, I tell a story in my way and then people can work something around that, and we can hone in on what the pieces of the story that does the work, but trying to present more like being very, very overprepared on a story, just doesn’t work for me. And I learned that over the years that I need to somewhat improvise. And that’s how I like to have these communications. I think that’s part of making them fun. 

 

Holly: [00:25:01] It’s interesting you say that, that idea of it is better if you improvise in those situations. I wonder if there’s been another communications challenge that you faced personally along the journey, and if so, what was it and how did you overcome it? 

 

Michael: [00:25:17] I think there’s a couple of times where for one reason, I think the first time I worked at an accelerator early on in Chainalysis and I was doing an opening pitch the first day of the accelerator opening, Techstars accelerator. And I think we had 90 seconds and or maybe 3 minutes, something like that. And one of the challenges around 90 seconds and 3 minutes is like, it’s too short to improvise. You basically don’t have enough time to go on a tangent, do other things that’s there. So, you actually need to just say something and it’s also long enough, so, it’s not just like a one liner that you can go up on the stage and basically just repeat. So, you need to rehearse that. I find that hard. That was really hard to build a story and a narrative that you just start saying and continue to do that. And I jump back to that a couple of times where we try to say, let’s do, as I mentioned before, a full story that I’m going to speak. And it’s scripted. I’m not good at that. I’m not good at super scripted stuff. I just have to have the space to say, let me tell the story in my way. And today the way might be different than yesterday. And some of the things that the former speaker said, or the audience is reacting to, need to be included. And I can only do that like partly improvising. So, I would say the hard parts have been when I when I try to go scripted. That’s not that’s not me. 

Russ: [00:26:41] Michael, this has a been really interesting and fascinating conversation. Thank you again for giving up some time to chat to us. We’ve got one final question for you, which we’ve asked all of our unicorn CEOs, and that is, if you were to go back in time and speak to your old self, what guidance would you give yourself about communications? 

Michael: [00:27:00] It’s probably not that different from the same advice that I keep forgetting today. When you communicate, you need to overcommunicate. When you said it three times, you probably need to save three times more than that. It’s like really a huge part of communication is that the receiver is like from another part, looking at it from another viewpoint. And for them it’s really, really hard to understand what you are saying and actually remembering that all the time, and over communicating is probably my biggest advice there. 

Russ: [00:27:27] Excellent. Michael Gronager, thank you so much for taking the time to join us and chat with us. Really enjoyed it. 

Michael: [00:27:33] Likewise. Thanks. 

Russ: [00:27:34] Holly thoughts on what Michael had to say. 

Holly: [00:27:36] What an interesting chat. One of the things that I particularly liked about chatting with Michael just then is just how well aware he was of himself and his leadership strengths and weaknesses. That’s vitally important, I think, as you build a leadership team around you and a company, and I loved how he was able to articulate what he’s learned on the journey around having to lead with empathy, knowing that his comms style is best suited to improvisation rather than practice. But for me, one of the things that I’ll definitely take away from that is their approach to internal communications at Chainalysis and how, yes, it’s important to do those big town hall meetings, but actually they’re still finding ways to make sure there’s those one on one management, leadership conversations happening with people across the business, even as they grow and expand internationally to so many countries, because there are those important nuances, aren’t there when it comes to communicating messages that you need to consider and quite easily we all just fall back on, let’s tell everybody the same thing at the same time. But actually those 1 to 1. Communications are just so vital to the successful growth of a company.  

Russ: [00:28:49] Yeah. Once again, almost consistent with most of the if not all of the people we’ve chatted to, you’ve got an $8.6 billion business led by a guy that seems really grounded, very easy to get on with, very chilled, really nice guy. That was very enjoyable conversation. That’s it for this latest episode in our special series with Tyto. So, if you do want to find out more about Chainalysis, their website is very simply Chainalysis.com. We’d love to hear your comments on today’s chat. You can do that by sharing them on our Facebook, LinkedIn, Instagram, or Twitter feeds, or you can obviously comment in the comment section of the YouTube version of this podcast. Those are all linked from the top of our website at csuitepodcast.com, where you will also find all our previous shows and supporting show notes, plus links to where you can follow us for automatic downloads of each episode via the likes of Spotify and Apple. And if you’ve liked what you heard, please do give us a positive rating and review. We’re, of course, available on all podcast apps. Just search for the csuite podcast, hit follow or subscribe. You can also subscribe to the Without Borders podcast from our partners at Tyto. All the details for that are on their website. Just head to Tytopr.com and click on the podcast link in the top nav bar. Whilst you’re there, you can also download a copy of Growing Without Borders, the Unicorn CEO Guide to Communication and Culture. It’s an overview of the first 15 of our unicorn interviews. About time you did another one now Holly. Now this was number 30, so yeah, maybe there’ll be a second edition of that to come. But yeah, you can download it from the website. As I said, it’s an overview of those first 15 unicorn interviews. If you are a unicorn leader yourself and you’d like to be part of the series, please do get in touch via the contact form on the website at csuitepodcast.com. Plus, course, anyone can get in touch with any feedback you may have. And finally, you can also reach me via Twitter using @RussGoldsmith or you can find me on LinkedIn. But for now, thanks for listening and goodbye.