Hot on the heels of Ledger announcing it’s working with iPod creator Tony Fadell to create its newest hardware wallet, competing hardware wallet startup Foundation Devices announced it has raised a $7 million seed round to double down on its “sovereign computing platform,” which it says is empowering its users to “reclaim their digital sovereignty.”
The company’s main product, Passport, costs $260 and looks like a mid-2000s Vertu luxury phone, but is, in fact, a hardware crypto wallet built with security and a mobile-first approach in mind.
“The entire cryptocurrency space is built on a foundation of open source. It only works because it’s open. Our strong belief is that open source software must run on open source hardware.” Zach Herbert, CEO, Foundation Devices
The company is taking a novel approach to hardware wallets in that it open sources both the hardware and software for every device it releases. Yes, that means that, should you be so inclined, you can go on GitHub and look at every line of code, every component, every mechanical design and the full bill of materials — every aspect of the design of every one of its products. The company says open source is a core part of its mission and vision.
Foundation’s $7 million seed round was led by Polychain Capital (which appears to be flying the banner of crypto winter at the moment, in that, despite reportedly having more than $600 million under management, the fund seems to have spent approximately $9 on its website design).
Others participating in the round include new investors Greenfield Capital and Lightning Ventures, 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 note with a $35 million valuation cap. (Disclosure: Haje worked in a non-investment role as the director of portfolio at Bolt, an early investor in Foundation Devices. Bolt’s investment into Foundation was made after Haje left the VC firm.)
The company claims it has 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 take on the future of crypto. (A recording of the talk “Not Your Computer, Not Your Keys,” is available on YouTube.)
“[The implosion of FTX] is a wake-up call around the importance of self-custody. It’s now beyond clear that storing your coins on an exchange is extremely risky. I also think it’s a wake-up call in terms of corruption and the fact that regulators are not actually protecting you. And then, it’s a wake-up call regarding the media. The mainstream media coverage of FTX has been horrible,” Herbert said in an interview with Baukunst’s Tyler Mincey, who is also a board member at Foundation. “There are accounts on Twitter giving excellent coverage of the clear, premeditated fraud that took place, but The New York Times, The Washington Post, these very respected media outlets, I don’t know how you can read their coverage. On Twitter, you can find drastically better, much less biased coverage. And people are waking up to that. But the unfortunate thing is a lot of people have lost their life 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 focus is security-above-all, which has included some crucial choices, including manufacturing its products in the U.S. The company’s founder has very little patience or trust in overseas manufacturing.
“There’s a geopolitical imperative, and a security imperative, to manufacture in the United States. I think we’re moving toward a multipolar world and it’s only going to get crazier. I personally would never trust a device to store my bitcoin that was made in China,” Herbert said. “And I want to be on the ground at the factory myself. We manufacture in New England, and I live in the Boston area. I’m at the factory at least every couple of weeks.”
One thing is for sure: The company’s devices certainly look very different than many hardware crypto wallets out there. That was not by accident.
“We call what we’re aiming for digital deco, inspired by the visual language of art deco. We’re embracing 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 about futuristic optimism. Bitcoin is supposed to be a counter to the dystopian future, and our design should reflect that.”
And the company is picking an aggressive fight with crypto exchanges: “We strive to play a large part in empowering users to pull their bitcoin off of exchanges and achieve digital sovereignty,” Herbert told TechCrunch.
TechCrunch interviewed Herbert to get a deeper look at the company and its hopes, dreams and ambitions. We talk about the funding round, the need for open source, why self-custody is hard but necessary for crypto and much more. The interview has been edited for length and clarity.
What makes you the perfect person to run this company?
I’m a mechanical engineer by training and I’ve been obsessed with computers since I was little. I learned about bitcoin in 2013, and it quickly grew into an all-consuming passion. At first, I was interested in the investment potential, under the thesis that bitcoin represents an ideal form of money — that its limited supply means that, as demand increases, so will bitcoin’s price. Bitcoin’s culture morphed my views. As I consumed unending amounts of bitcoin-related content, I began to understand the importance of sound money, of sovereignty, of privacy, of 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 head of operations and ultimately as COO. We built hardware and software, including cryptocurrency ASIC mining hardware. I couldn’t stop thinking about the stagnation in self-custody tools, especially hardware wallets. So I and some fellow teammates launched Foundation Devices in April 2020.
Personally, I feel like I have two conflicting identities. The first is as a technology executive, startup founder, engineering alum and almost-MBA. That’s my legacy professional identity. But more and more, my real identity is as a Bitcoiner, a sovereign individual. These conflicting identities are probably why Foundation has been able to achieve its success thus far, why we’ve been able to raise venture money for ideas that have historically been considered fringe and why I’m confident we’ll continue to grow and bring amazing sovereign computing products to market.
How does this fundraise unlock the next steps for the company?
Self-custody today is simply too hard for most people; it’s why so many people were hurt this year with the collapse of FTX, BlockFi, Celsius and more. Notably, we think self-custody alone is insufficient — true sovereignty requires privacy. So we’re differentiating 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 can’t see users’ IP addresses or know anything about their balances or identities.