Stanford Prof’s Bitcoin Startup Raises $15M From a16z Crypto

Jan 7, 2026 9:36 AM ESTby Priya Kapoor • 3 min read

According to Fortune, Stanford professor David Tse has raised $15 million for his startup, Babylon, from a16z crypto, the crypto arm of venture firm Andreessen Horowitz. The company, co-founded by Tse and Fisher Yu in 2021, is building a decentralized protocol called BTCVaults that lets Bitcoin owners use their holdings as collateral without handing over their private keys. Tse, who serves as research scientist while Yu is CTO, views centralized services like Coinbase and Kraken as his main competition. Babylon currently has over 40 employees and plans to integrate its technology with the lending protocol Aave in the second quarter of 2026. The company does not yet generate revenue but hopes to after that launch. Tse did not disclose the startup’s valuation.

The Trustless Collateral Play

Here’s the thing about using Bitcoin in decentralized finance (DeFi) right now: it’s a hassle. You basically have to send your BTC to a custodian, who wraps it into a version that works on another blockchain, like Ethereum. You’re trusting that middleman not to mess up or, worse, run off with your coins. Babylon’s whole pitch is cutting that out. Their protocol aims to let you prove you own Bitcoin and pledge it as collateral directly, all while keeping it in your own wallet. That’s a powerful idea if they can pull it off technically and get enough people to trust the code over a company.

The Long Road To Revenue

Now, let’s talk about that 2026 timeline for the Aave integration. That’s… far out. We’re talking over two years from now. It tells you this is still deep in the R&D phase, which makes sense given the academic roots. Tse even said he started the company to turn research papers into usable products. But it also highlights a huge challenge: surviving the crypto winter’s long haul without revenue. A $15 million war chest from a top-tier VC like a16z buys a lot of runway, for sure. But the pressure will be on to show this isn’t just an elegant academic solution in search of a real-world problem.

Who’s This For, Really?

So who benefits if Babylon works? Primarily, Bitcoin “maximalists” or long-term holders who are sitting on stacks of BTC but don’t want to sell. This protocol could let them unlock liquidity—borrow stablecoins or other assets—against their Bitcoin without ever selling it or trusting a centralized exchange. That’s the dream. On the flip side, it could bring a massive new source of collateral into the broader DeFi ecosystem on other chains, which is why a partnership with a giant like Aave is so logical. But it also introduces new risks. What happens if Bitcoin’s price crashes and this collateral gets liquidated in a decentralized way? The mechanics of that will be everything. It’s a fascinating experiment, one that mixes high-stakes crypto economics with some serious, Stanford-level cryptography. I’ll be watching, but with a healthy dose of skepticism until it’s live and battle-tested.

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