Fireblocks: A Case Study on Finding PMF with Institutions

Fireblocks, the leading digital assets infrastructure provider for institutions, was catapulted to market dominance within just a few years of their public launch in 2019. The company — most recently valued at $8 billion — built a product that solved market pain points while leveraging new technology to redefine institutional custody. The source of their success can be traced back to their approach to product development, which put them miles ahead of competitors in capturing product market fit.

As head of operations at Fireblocks’s early customer, Genesis Trading, I worked closely with their team to iterate on product and had the privilege of witnessing first-hand what steps they took to win the crypto custody market.

In this post, we’ll explore Fireblocks as a case study on finding product market fit as a software and services company targeting institutional crypto customers. We think many of the strategies Fireblocks used can be used to win in your own product category.

Background

In the early days of institutional adoption (circa 2015), storing and transferring digital assets wasn’t easy. Wallets catering to institutions were either cold storage safes (literally) or clunky multi-sig solutions. While cold storage wallets were intentionally slow by design, multi-sig wallets were costly and inefficient due to technical limitations.

Providers were charging an arm and a leg for products that weren’t meeting the needs of their customers. Key storage was a constant burden and risk, scaling operational and wallet management workflows was complicated, and support for multiple networks was limited. It wasn’t unusual for companies to use single-signer hardware wallets to make up for assets not supported by their wallet provider.

In short, the crux of the problem was wallets were too slow and insecure for institutional customers. Something had to change.

Originally developed in the 1980s, multi-party computation (“MPC”) was brought to life by crypto researchers in the late 2010s to build more efficient and secure private key signing mechanisms. In a nutshell, MPC breaks a private key up into little pieces called “shares,” and then stores those little pieces securely. Users can then sign transactions with their key shares through the MPC protocol without ever disclosing the full private key.

This was a huge improvement on the status quo — previously, if your private key was compromised, you’d have lost all your crypto. But with MPC, compromising individual shares is not a risk to the wallet. Moreover, with multi-sig solutions from that time, updating keys wasn’t possible, requiring users to create a whole new wallet. MPC let users rotate their key shares to add and remove signers on the wallet.

MPC was such an improvement that almost immediately, dozens of companies were formed to bring their MPC solution to institutional customers. But the technology by itself wasn’t enough to win in the market: you needed a top-notch product to bring the technology to market. Many companies fought for the crown, but only one ended up as the clear institutional MPC winner — Fireblocks.

How was Fireblocks able to win in such a big way and in such a crowded market? Below, we’ll answer that question, and more importantly, walk through the steps you can take to dominate in your product category.

Identify Market Gaps

A gap in the market exists when there’s customer demand that isn’t being met by current providers. In the case of Fireblocks, eyeing a market made up of institutional trading firms and crypto exchanges, they noticed existing wallet providers were not meeting demand for efficient crypto custody and transfer. At the time, the main market gaps were:

1. Transaction processing was slow and inflexible
2. Policy management was rigid
3. Scaling crypto operations was complicated
4. Counterparty verification and compliance processes were a nuisance

Fireblocks was quick to address these pain points with a product that made frequent transactions easy and secure for institutions. Fireblocks’s offering allowed companies to easily spin up new wallets, move funds quickly (within predefined thresholds), and manage their users safely with key share rotations. Scaling wallet operations was suddenly a breeze.

While Fireblocks leveraged a new technology that was a significant improvement over existing solutions, it doesn’t explain why they outperformed their MPC competitors. The key to their success was finding early build partners and working closely with them to define the product.

This next part is critical — if you want to succeed in the institutional market, you'll need to develop an intuitive sense of the pain-points and workflows customers go through on a day-to-day basis. And to get to that, you’ll need a close build partner.

Find an Early Build Partner

Fireblocks didn’t come out swinging day one with a perfect product. In our first meeting with Michael, Fireblocks’s co-founder, he presented an address-sharing application that solved user errors and man-in-the-middle attacks (where a malicious actor intercepts communications). While it was a neat application, it solved a relatively minor pain-point for customers.

Though the original product was incomplete, the Fireblocks team was persistent in learning our day-to-day workflows and used that intuition to then iterate on the product. Their process was simple but not simplistic: they learned our workflows, used that to build a product, let us test the product, and then used our feedback to further iterate on the product. 

When all was said and done, Fireblocks’ final product increased our transaction speed tenfold (at least), redefined our user management processes, and improved our transaction policy practices. By partnering with early build partners like Genesis, Fireblocks was the first company in the market to figure out customer workflows and pain-points. And after months of iteration with Genesis and Galaxy Digital (another early build partner), Fireblocks launched their MPC wallet with two of the bigger institutional names in crypto as customers.

We share this brief story to illustrate that in the market for institutional products and services, a close build partner is one of the greatest competitive advantages you can get, and it’s exactly what gave Fireblocks a leg up over competing MPC wallets. Good luck figuring out customer workflows without a close build partner!

Now we know what you’re thinking — how did Fireblocks bring on Genesis and Galaxy Digital as early build partners?

Finding an early partner to iterate with is one of the hardest things for startups to do, requiring incredible amounts of finesse. That’s because institutional customers are busy, employee time is precious, and switching costs are expensive. In short, spending time with you needs to be worth their time.

Fireblocks landed Genesis and Galaxy through a few steps that you can replicate:

1. Use your network to identify potential build partners. The stronger your network, the easier this is. Keep in mind that a partner doesn’t have to be the market leader. Companies a little further down the leaderboard are typically more motivated to try new solutions that could provide an edge over their larger competitors. If you don’t have a network, go out there and start meeting people (we wish it weren’t the case, but there are no shortcuts to this step).

2. Meet with relevant team leads (read: not the sales team). Institutions will often shield their core operators through biz-dev/sales teams. Unless you’re selling a product into the biz-dev/sales org, these teams are unlikely to truly understand why your product can help their org. You need to find a way to speak with the relevant team lead (e.g., head of operations, CTO, CSO) and pitch your solution to them.

3. Offer the product at little to no cost in exchange for feedback. At the very least, look to undercut their existing provider. If things work out, there will come a time to reprice in the future, and customers will be happy to pay up.

4. Sell them on the future rather than current product. The goal of a partnership is to build a product that will solve their problems and the existing product probably doesn’t do that from the get-go. Instead, sell them on the future product vision — that’s what’ll get them excited to spend time with you before you actually have what they need. Don’t pitch them on the current product, as they’ll find the flaws and write it off.

5. Advisory shares can strengthen incentives. It can be a good move to further align incentives through advisory shares, which make the partner financially incentivized to help you out.

To win Genesis over as an early build partner, Fireblocks went to Uri Stav, who at the time was Chief Security and Development Officer. Here’s what Uri had to say about why Genesis chose to work with Fireblocks. 

Cryptosystems can easily explode in the face of those using and building them. Building a good product requires an endless loop of testing and certification. Fireblocks were receptive to this approach of mine: they worked with multiple providers to test, certify, and pentest their product. Their willingness to understand and adopt my approach to cryptography and security gave me the confidence to onboard the product. Fireblocks had the right attitude to build an enterprise-grade system — Uri Stav, former CSDO of Genesis Trading

Entrench Yourself with Customers 

Unless you get really lucky (and we mean really lucky), it takes a lot of iteration to really nail down the product. That’s what early partners are for: they help you iterate quickly and tell you exactly what they need from your product. Do that for long enough, and you’ll understand customer workflows better than they do. 

But let’s say you’ve done all that. You found an early build partner, got to know their workflows, iterated on a product they’re now paying for, and even started selling the product to other customers. What do you do next?

With customers and a product in place, you now want to entrench yourself with the customer by adding features to your product that a competitor cannot easily copy. 

Fireblocks did this by building the Fireblocks Network, a settlement layer all Fireblocks customers have access to that lets them quickly and easily transact with each other. To steal a line from a very sharp investor, institutional customers came for the tool (Fireblocks MPC wallet) and stayed for the network (the Fireblocks Network). 

In doing so, Fireblocks built a network of institutions that could easily transact with one another  using their Fireblocks MPC wallet — a feature no other MPC provider in the market could offer.

This step will need to be tailored to your product market and customer base. You’ll need to study the way customers are using the product to find common workflows/pain-points that can be productized. You can figure out these common workflows/pain-points by asking yourself the following questions: 

• What’s something all my customers are doing that isn’t part of my product today?
• What from my customer’s workflow can I productize?
• If I add this feature, can competitors quickly replicate it?

As mentioned earlier, Fireblocks was able to entrench itself by creating a network that customers could use to transact with other Fireblocks customers. Prior to that, we would spend hours verifying and triple checking addresses, sending them over email/telegram/slack/text and even calling each other just to make sure we had the right one. Fireblocks made that redundant with the Fireblocks Network. The beauty of Fireblocks’s network is it simultaneously solved a customer pain-point while increasing the switching-costs for Fireblocks’s product.

Recently, I caught up with Fireblock’s founder and CEO, Michael Shaulov, about this step and here’s what he had to say about it. 

Having a strategic roadmap outlining how to continuously invest in your core moat and enhance value for customers is an area where we, as founders, devote a significant amount of our focus. While the roadmap is crucial, some of the best ideas come from your early clients who understand how your product can be utilized in ways you could never have imagined — Michael Shaulov, founder and CEO of Fireblocks

In Short

Gaining product market fit in a competitive landscape is tricky. By identifying high quality partners and iterating on product with them, you can figure out customer pain points and workflows faster than the competition.

Leverage this partnership as a product development hack and keep iterating to build their dream product. With the right partner, the dream product you build for them can be everyone else’s dream product.

A quick shout-out to Michael Shaulov and Uri Stav for reviewing drafts and providing valuable feedback for this piece.