Blockchain platform’s use in financial trading services was probably NASDAQ. They have recently unveiled their private markets blockchain project called LINQ. Australian and Toronto exchanges, too, are seriously exploring deploying this technology on their platforms.
As I interview startups worldwide, I notice that many are actively exploring technology that is more cyber-secure. Blockchain technology is an option that is gaining popularity in the financial services industry. It is difficult to hack into such platforms.
I came across another startup using blockchain technology from the list of startups attending the Web Summit event in Lisbon in November 2016. Funderbeam is Estonia based – a country that emerged from the ashes of the Soviet Union. It has built an innovative trading exchange platform exclusively for startup investing. The venture focuses on angel investing and startups.
Startup founders invest a lot of time and effort hunting for investors willing to invest funds into their innovation. Talks by investors in most startup events are well attended. Event managers organize competitions for startups where founders present their creations to a panel of investors. The winner walks away with a prized investment check. Startup investing is a hot market across the globe.
Funderbeam innovation is seeking to leverage the opportunities in the startup investment market. Over the last three years since its existence, the startup has focused on building a database of startups. Mad Emil Dalsgaard of Funderbeam told me that the venture had built a database of over 150,000 startups.
I took a quick look at the startups listed on the platform. It includes unicorns and early-stage startups from Asia and the rest of the world. The database has probably been built by scrapping data off the internet. Machine learning tools may have been used to mine and aggregate information on each startup.
The database is now available for the use of investors. Investors include angel investing firms and individuals. It is a step up from crowdfunding platforms. With this substantial database of startups, I expect the platform to attract angels, other investors, and startups.
Today, Funderbeam focuses on its home market of Estonia and neighboring Finland. They probably want to test the platform, fine-tune it and then actively look outside the immediate geographic proximity.
The venture has put a chat window on its site. This simple innovation brings a human touch critical to successful deal-making. While speaking to Dalsgaard, I could overhear chatter, which gave me a sense that the interaction team was busy addressing queries.
The startup database should be a major selling point for Funderbeam. Startup investing is a particularly risky business. Only a small percentage of startups finally succeed. Investors naturally are cautious and exercise substantial due diligence before initiating a dialog with a startup.
Machine learning and analytics tools can help build a shortlist of prospects to fit into a prospective investor’s investing profile. This will lead to a substantial reduction in hunting and preliminary due diligence time. Decision-making for investors will, to that extent, become more data-driven and less gut feel-based, as is currently the case.
Funderbeam enables groups of investors to form syndicates. The lead investor is designated as the head of the trust. All conversation between a startup and an alliance takes place with this individual. This should facilitate deal-making for both investors and startups.
Perhaps the most interesting feature of the platform is its trading functionality. Angel investors seeking exit will now not have to wait for the launch of an IPO. They could begin the process by trading startup scrips (tokens) on this platform and transfer their share to others interested in the startup. Trading will help bring liquidity to the startup investing market, boosting investing.
The Funderbeam blockchain-secured trading platform enables the trading of tokens. Buyers can buy available tokens of a startup at a market-determined price. Tokens are blockchain-enabled. The market determines the currency rate of a token.
Trading on the Funderbeam blockchain platform is still in its infancy. Dalsgaard told me 400 tokens had been traded on the platform by early September 2016. But the fact that there are buyers and sellers of tokens from the few investments already made through Funderbeam indicates the concept’s soundness.
The Funderbeam blockchain platform appears to have the fundamental building blocks in place for primary investment and trading. It intends, in due course, to expand into the UK, the current major financial services global market leader. However, Brexit is looming over Europe, but that is a different debate. The startup is exploring the US market too.
The real test for the startup will come when it steps out of Estonia and Finland’s sheltered small home market and enter the competitive landscape of the big boys in the UK and the US. Competition in the financial services industry is intense.
As it happens to the business world, the big fish in the industry wait for an idea to root and for the concept to be adequately tested by the market before making their move. Funderbeam will have to learn to scale up quickly. Scaling up, though, is a completely different ball game. It will require the building of the institution and business processes. I could not explore this aspect.
Probably it is too early to comment on the future of Funderbeam. It is still early days. Funderbeam does seem to have begun well. I want to keep track of this startup.