Tagomi, a New Jersey startup whose software helps investors trade cryptocurrencies, has cut its fees nearly in half, now charging 0.1% or less per trade. Its new rates are about 70% lower than what you’d pay on digital asset exchanges Coinbase and Gemini if you wanted to buy $10,000 worth of bitcoin. On a trade that size, you’d save $25 using Tagomi.
The company doesn’t have its own crypto exchange—it links to 10 different exchanges, including Coinbase, Gemini and Binance U.S. It pools buy and sell orders from those venues, aiming to route its clients’ transactions to the exchanges offering the best prices. Since it has 275 clients and handles large trading volumes, it has negotiated discounts with the exchanges to offer lower fees.
Those lower fees are a tempting offer for the average crypto trader, but Tagomi doesn’t want mom and pop investors. “We’re not very interested in the client who wants to buy $500 of bitcoin,” Tagomi cofounder and president Marc Bhargava says. They cater to traders who are making transactions between $250,000 and $2 million and are looking for more advanced trading tools. Among their clients are Peter Thiel’s Founders Fund and crypto funds Multicoin Capital, Pantera and Paradigm. Bhargava’s cofounders are Forbes 30 Under 30 member Jennifer Campbell and Goldman Sachs’ former head of electronic trading Greg Tusar.
Tagomi’s goal is to attract customers with low trading fees and then upsell them on “prime brokerage” features, including letting users borrow cash, borrow crypto assets and sell assets short (betting that they’ll go down in value). Tagomi is testing some of these advanced features with 10 of its clients.
The 22-person, two-year-old startup needs these other revenue streams to build a sustainable business. As of October, it was facilitating $17 million in crypto trades a week on average, or about $1 billion a year annualized. If they’re charging 0.1% on each trade, that’s only $1 million in revenue. Bhargava says that’s an “unfair” depiction of the company’s financial position because it’s a historical number, and he expects the crypto market to grow substantially. It also doesn’t reflect revenue from the other business lines, he adds, although trading fees currently provide the lion’s share of Tagomi’s revenue.
Bhargava says Tagomi is more focused on building strong “network effects”—the concept that, as more people use the product, it becomes more valuable for each user, in a similar way that a marketplace like Airbnb becomes more attractive when more buyers and sellers join the platform.
In November, Tagomi was reportedly in talks to be acquired by Coinbase, and a later article even said a $150 million deal had been reached. Tagomi says the rumors weren’t true.
The startup last raised $12 million in funding in March, and it’s not currently raising new funding, Bhargava says. “We still have a little over 18 months of runway.”