Startup Deep Dive : Polygon — the Ethereum scaler that raised $450 million and still had to buy its way into a business model

Two data scientists and a business graduate in Mumbai spent 2017 trying to fix a problem Ethereum itself could not: the network was too slow and too expensive to ever hold a mainstream app. Their sidechain, Matic Network, eventually became Polygon, and in February 2022 Sequoia Capital India led a $450 million round into it, one of the largest raises ever attached to an India-founded start-up.

By September 2026, the picture looks stranger. Polygon’s token trades more than 90% below its all-time high, three of its four co-founders have left day-to-day roles, and the company just spent $250 million buying two unrelated payments firms because its own blockchain was not, on its own, generating enough cash to cover the cost of running it.

Quick facts

What they do

Polygon sells blockchain infrastructure, not a single consumer product. Its Proof-of-Stake chain and its zkEVM rollups let developers run applications that need Ethereum’s security but cannot afford Ethereum’s transaction fees, and its Agglayer layer lets separate Polygon-based chains share liquidity and users instead of operating as islands. Customers range from crypto-native teams building games, NFT marketplaces and decentralised finance protocols, to enterprises such as Starbucks, Stripe and JPMorgan, which have run pilots or live products on Polygon rails. Since January 2026, the customer base has widened again: through its acquisition of Coinme and Sequence, Polygon Labs now also sells regulated fiat on-ramps, off-ramps and wallet infrastructure directly to businesses that want to move stablecoins without touching a crypto exchange.

The origin

The founding insight was narrow and technical: by 2017, Ethereum’s gas fees and low throughput made it unusable for anything resembling mainstream scale. Jaynti Kanani, a data scientist who had worked on early Ethereum scaling research including the Plasma framework, teamed up with Sandeep Nailwal, who came from a software-consultancy and MBA background, and Anurag Arjun, the team’s only non-programmer co-founder, to build a Plasma-based sidechain that could inherit Ethereum’s security while settling transactions faster and cheaper. Mihailo Bjelic joined as the fourth co-founder. The project launched as Matic Network, raising $5 million in an initial exchange offering on Binance Launchpad in April 2019 at $0.00263 per token, and its mainnet went live in stages between late 2019 and May 2020.

The struggle years

Matic’s first real crisis came early. On 9 and 10 December 2019, its token fell more than 73% in under 24 hours, from $0.0427 to $0.0112, after a third-party researcher alleged the Matic Foundation had quietly moved 1.5 billion tokens, worth roughly $67 million, to Binance. The researcher later retracted the claim, admitting a miscalculation — the real transfer was about 3% of supply, not 15% — but the panic had already done its damage and the token only partially recovered.

Two years later, in December 2021, the network suffered a security breach in which 801,601 MATIC tokens were stolen, even as the project was spending heavily to acquire zero-knowledge technology: it bought Hermez Network for roughly $250 million in MATIC in August 2021 and Mir for about $400 million in MATIC that December, the deals that seeded what became Polygon zkEVM. Then came the unwind. Co-founder Anurag Arjun left in March 2023 to build a separate project, Avail. Jaynti Kanani stepped down in October 2023. Through 2023, the US Securities and Exchange Commission named MATIC an unregistered security in enforcement actions against Binance, Coinbase and Kraken, a legal cloud that persisted even after the SEC later dropped that specific framing in the Binance case. Layoffs followed the funding highs: about 20%, or roughly 100 people, in February 2023, and another 19%, about 60 people, in February 2024. Mihailo Bjelic resigned in May 2025, telling colleagues he could “no longer contribute to Polygon to the best of my abilities” over a diverging vision, leaving Sandeep Nailwal as the only founder still in an operating role.

The turning point

The clearest inflection point is recent, not historic. Through 2025, Polygon’s own protocol economics were visibly strained: OAK Research’s Q3 2025 report put gross revenue at about $880,000 against $3.67 million in network fees, with validator rewards of $6.6 million pushing net revenue to -$6.5 million for the quarter, even as usage was reaching its highest level since 2021. On 13 January 2026, Polygon Labs announced it would acquire two unrelated companies, Coinme, a licensed US digital-currency exchange operating in 48 states, and Sequence, a smart-wallet infrastructure provider, for a combined $250 million or more, to build what it called an “Open Money Stack” for regulated stablecoin payments. CEO Marc Boiron framed it as completing Polygon Labs’ shift “from a blockchain foundation into a blockchain-enabled payments company,” with an explicit target of more than $100 million in annual revenue from transaction fees and a goal of profitability by 2027. The deal closed alongside a second round of layoffs in 2026, even as the company said its total headcount, near 200 people, held roughly steady once the acquired teams were folded in.

The money behind it

Polygon’s marquee raise remains the $450 million (about ₹4,320 crore at $1 ≈ ₹96.0 as of 18 September 2026) round of February 2022, led by Sequoia Capital India, with SoftBank Vision Fund 2, Tiger Global, Galaxy Digital and more than 40 other investors participating in a private sale of MATIC tokens; the deal’s valuation was not disclosed. It followed the $5 million Binance Launchpad token sale of April 2019, the project’s first outside capital. Sequoia’s India franchise lent the round credibility with mainstream investors at a moment crypto was still fringe in India, while SoftBank and Galaxy brought global enterprise and institutional relationships that fed directly into the Starbucks and Reddit partnerships that followed later that year. Beyond conventional fundraising, Polygon used its own treasury tokens as acquisition currency, paying roughly $250 million in MATIC for Hermez Network in August 2021 and about $400 million in MATIC for Mir in December 2021 to acquire zero-knowledge proof technology, and its community voted in January 2024 to earmark $640 million from the treasury for ecosystem grants. The January 2026 purchase of Coinme and Sequence, at $250 million or more, was structured as a corporate acquisition by Polygon Labs rather than a token-funded deal, marking a shift toward conventional M&A financing.

How it makes money

Money comes in mainly as transaction fees, paid in POL by anyone using the Polygon PoS chain, plus a cut of activity that flows through the Agglayer via its “Breakout Program,” and, from 2026, payment-processing fees from the Coinme and Sequence infrastructure. Money goes out largely as validator rewards: POL is still emitted to the roughly 105 validators who secure the network, and those emissions have to be funded regardless of how much fee revenue actually comes in. That is the part outsiders consistently get wrong. Headlines about Polygon “revenue” usually mean gross fees collected, not profit, and for much of 2024 and 2025 the network’s own validator costs exceeded those fees — OAK Research’s -$6.5 million net revenue figure for Q3 2025 is a direct illustration of a protocol paying more to stay secure than it earned from users that quarter. Since the MATIC-to-POL migration completed on 4 September 2024, a portion of every base transaction fee is also burned rather than paid out, which ties token scarcity to network usage but is a supply mechanism, not a source of company cash. The 2026 pivot toward Coinme and Sequence is explicitly an attempt to add a second, more conventional revenue line — processing fees on regulated stablecoin transactions — that does not depend on subsidising validators through token emissions.

The numbers

Polygon is a protocol run by a foundation and a separate labs entity, not a single company with audited profit-and-loss statements, so there is no traditional multi-year revenue and profit history to report. The closest available figures are network-level fee and revenue metrics, reported in US dollars since Polygon does not operate a rupee-denominated business, drawn from Token Terminal, DefiLlama and third-party research:

Where the money comes from

Polygon does not publish a country-by-country revenue split, since usage is global and permissionless by design, but its activity mix is well documented and it has shifted a long way from its origins. In Q2 2026, the network processed 743 million transactions, an all-time quarterly high and up 160% year-on-year, with roughly 554,000 daily active addresses. The Agglayer alone was handling an estimated 53% of global USDC transactions by mid-2026, and stablecoin transfer volume hit $79.25 billion in May 2026 across 198 million transfers, taking cumulative lifetime stablecoin volume on the network past $2.4 trillion. The surprise is what is not driving that growth: the partnerships that made Polygon famous — Reddit’s collectible avatars, which more than 5 million users minted for over $10 million in revenue in 2022, Starbucks Odyssey’s loyalty NFTs from September 2022, and Donald Trump’s $99 NFT drop in December 2022 — were gaming and collectibles stories. By 2026, the dominant real use case is plain stablecoin payment settlement, not games or collectibles, which is precisely the shift the Coinme and Sequence acquisitions are built to monetise directly.

The risks

Three risks stand out because Polygon itself, or credible third-party researchers tracking it, has effectively disclosed them. First, regulatory ambiguity: the SEC named MATIC an unregistered security in three separate 2023 enforcement actions against Binance, Coinbase and Kraken, and while the SEC later stepped back from that specific claim in the Binance matter, the underlying legal question of how a global, US-accessible token should be classified has not been definitively resolved. Second, the economics of network security: OAK Research’s own numbers show validator rewards have exceeded network fee revenue in recent quarters, meaning the cost of keeping the chain secure is not yet fully funded by usage, a gap that has to be closed either by rising transaction volume or by continued token issuance that dilutes holders. Third, key-person and execution risk: with three of four founders gone — Arjun in March 2023, Kanani in October 2023 and Bjelic in May 2025 — and four rounds of layoffs since February 2023, Polygon Labs is trying to execute a genuinely new business, regulated stablecoin payments, with a leaner and more reconstituted team than the one that built its original reputation.

The takeaway

The transferable lesson is not about crypto specifically: raising a large round and signing marquee logos is not the same thing as having a business model. Polygon raised $450 million in 2022, landed Starbucks, Stripe, Reddit and JPMorgan, and became one of the most recognised blockchain brands to come out of India, yet four years later its own protocol was still not reliably covering the cost of running itself, forcing it to buy two outside companies to build a conventional revenue line. Adoption, partnerships and transaction volume are proof of relevance; they are not proof of a functioning income statement, and the gap between the two is exactly where a well-funded, technically respected project can still spend years searching for the thing that actually pays the bills.

Frequently asked questions

Is Polygon the same thing as MATIC?

Yes, historically. Polygon began as Matic Network in 2017 and rebranded to Polygon in February 2021, keeping the MATIC token as its native asset until a migration to a new token, POL, completed on 4 September 2024; as of September 2025, that migration was about 99% complete across exchanges and bridges.

Who founded Polygon, and are they still involved?

Polygon was founded in 2017 by Jaynti Kanani, Sandeep Nailwal, Anurag Arjun and Mihailo Bjelic. Arjun left in March 2023, Kanani stepped down in October 2023, and Bjelic resigned in May 2025, leaving Nailwal as the only founder still in an active leadership role, as CEO of the Polygon Foundation.

How much money has Polygon raised?

Its largest disclosed round was $450 million in February 2022, led by Sequoia Capital India with SoftBank Vision Fund 2, Tiger Global and Galaxy Digital, following a $5 million Binance Launchpad token sale in April 2019. As a protocol rather than a conventional company, it has also used treasury tokens to fund acquisitions, including roughly $250 million in MATIC for Hermez Network in 2021.

Does Polygon make a profit?

Not in a way comparable to a traditional company. Polygon does not publish audited profit-and-loss statements; independent research from OAK Research put its net revenue at -$6.5 million for the third quarter of 2025, after validator rewards exceeded the fees the network collected, though revenue has since risen to roughly $24.5 million for 2026 year-to-date through early September, according to Polygon Foundation CEO Sandeep Nailwal.

What is the Agglayer, and why does it matter?

The Agglayer is Polygon’s cross-chain interoperability layer, designed to let assets and liquidity move between different Polygon-based chains without traditional bridging. By mid-2026 it was connected to more than 190 Polygon CDK appchains and was estimated to be handling around 53% of global USDC transaction volume, making it central to Polygon’s 2026 pivot toward stablecoin payments infrastructure.

Sources

Figures are as of September 2026. Currency converted at $1 ≈ ₹96.0 as of 18 September 2026 (Trading Economics).

• BusinessToday, “Polygon raises $450 million in funding round led by Sequoia Capital India”, February 2022
• CNBC, “Sequoia makes a big bet on Web3, leading $450 million investment in Polygon blockchain”, February 2022
• Polygon Technology official blog, “Polygon Raises $450,000,000 From Sequoia Capital India, SoftBank, Galaxy, Tiger, Republic Capital”, February 2022
• CoinDesk, “Polygon Co-Founder Jaynti Kanani Steps Down”, October 2023
• CoinDesk, “Sandeep Nailwal Becomes Last Remaining Member of Polygon’s Founding Team as Bjelic Exits”, May 2025
• The Block, “Polygon co-founder Mihailo Bjelic steps down, marking third founder exit”, May 2025
• Cryptobriefing, “The Rise and Fall of Matic Network”, on the December 2019 token-transfer controversy
• Wikipedia, “Polygon (blockchain)”, for the Hermez Network and Mir acquisitions, the December 2021 security breach, the JPMorgan trade and the Community Treasury vote
• The Cryptobasic, “SEC Labels Cardano, Solana, and Polygon As Securities in Three Lawsuits Against Crypto Exchanges”, November 2023
• Cointelegraph, “SEC backs down on claiming SOL, ADA, MATIC, other tokens are securities in Binance suit”
• Decrypt, “Polygon’s ‘Secret Sauce’: Why Starbucks, Meta, and Reddit Chose the Ethereum Scaler”
• Decrypt, “Polygon Is Migrating From MATIC to POL: Here’s Everything You Need to Know”, September 2024
• AMBCrypto, “Coinbase finalizes MATIC to POL swap as Polygon migration hits 99% completion”, September 2025
• The Block, “Polygon aims to launch ‘AggLayer’ focused on blockchain interoperability in February”
• CoinLaw, “Polygon Statistics 2026: 5,000 TPS After Rio and $79B in Stablecoin Volume”
• CoinDesk, “Polygon Labs to acquire Coinme and Sequence in $250 million push into stablecoin payments”, January 2026
• The Block, “Polygon Labs announces second round of layoffs in 2026 as firm looks to finalize Coinme acquisition”, 2026
• CoinDesk, “Polygon laid off 60 staff following new $250 million acquisition”, January 2026
• AMBCrypto, “Polygon to burn 100M POL as revenue hits $24.5M, but will this help the token?”, 2026
• OAK Research, “Polygon (POL): Q3 2025 Activity and Financial Report”
• CoinGecko, “POL (ex-MATIC) Price”, accessed September 2026, for market capitalisation and all-time-high data

Found an error? Write to us and we’ll correct it in the open, dated, on the piece.