Top 7 Biggest Blockchain Startups That Are Not ICOs
Everywhere you look there’s talk of how blockchain technology is changing everything. All these new currencies are sprouting up while bitcoin continues its upwards march. All the while, Silicon Valley naysayers are praising the emergence of ICOs so they can stick it to the man and democratize the entire fundraising process without realizing just how risky a proposition that is at the moment. Then there’s blockchain itself, the technology that made all of this possible. In its simplest form, Blockchain is just a distributed ledger that keeps track of transactions with a high degree of transparency. A whole slew of startups are looking at how blockchain can be applied from real estate to marketing. We turned to the bright minds over at CB Insights to see which companies made the shortlist for their Fintech 250 list.
In order to get our top-7 list, we simply took the CB Insights blockchain startups listed above and then cross-checked the list against a query performed on Crunchbase data using the category “bitcoin”, then picked the top 7 by total funding raised without using an ICO. We apologize in advance to Anand for using the words “CB Insights” and “Crunchbase” in the same sentence. Here are the top seven blockchain startups that were not funded by an ICO.
Blockchain Building Block Provider
Founded in 2014, Canadian startup Blockstream has taken in $126 million in funding so far from a whole slew of notable investors like AXA, Khosla Ventures, and Tencent. It’s at this point that we will introduce you to the vision of blockchain that everyone’s getting so excited about. In the words of Blockstream:
Imagine a technology that makes it possible to transact securely without having to place trust in a third party. Now imagine your bank, your mortgage, and all your financial assets are built with this technology.
Not sure about you but the first thing that comes to mind when reading this “vision” is, what about privacy? That’s kind of the whole point that Blockstream is trying to address with a technical innovation they came upside chains – which are objects that interface with a cryptocurrency like bitcoin and then conduct transactions confidentially without increasing the money supply. Here is a cool looking diagram that will thoroughly confuse you – unless you have an MBA – in which case you will pretend to understand it:
In layman’s terms, you can create “confidential assets” now that allow anyone to cryptographically verify that a transaction is secure (presumably the emergence of quantum computing has been accounted for in this design). Blockstream as a company is a “blockchain building block provider” of sorts with three main offerings:
- Lightning – Bitcoin micropayment system that is “lightning fast”
- Elements – Open source community to work on various components of the platform
- Liquid – Near instant bitcoin transfers for trading (expect all this liquidity in Q1 2018)
We keep wondering just what sort of reaction this whole ecosystem is going to have if/when something blows up. Apparently, $8 million in crypto being stolen from an ICO hasn’t phased anyone, so maybe nothing will. No, we’re not referring to the $7 million that CoinDash lost, we’re referring to a second large-scale heist involving ICOs. They’re almost becoming as bad as over-the-counter OTC stocks.
Pay to Talk to People
Founded in 2013, San Francisco startup 21 Inc has taken in $121 million in funding to “make Bitcoin useful for developers”. Behind all that funding are some big names like Andreessen Horowitz, Khosla Ventures, Peter Thiel, and even Qualcomm (NASDAQ:QCOM). While they started out by selling a $400 “bitcoin computer”, they’re moving in other directions as well, like this business model which is simply fascinating.
You download their app and then depending on how important you are, people actually pay to email you. Recruiters, salespeople, and companies can now send paid messages to compensate you for your time. If they add PR people to that list then our problem is solved. How much to talk to someone like Ben Horowitz? Here’s your answer:
We’d have a smile like that too on our faces if we were getting $100 for every PR firm that emails us. What a cool business model that manages to combine LinkedIn with Amazon’s Mechanical Turk. Want to reach out to a whole bunch of important people that wouldn’t give you the time of day otherwise? Well, open up your wallet, because they’re ready to take your bitcoins:
We’re not sure why this wouldn’t work without the bitcoin/blockchain element, but who cares. 21 Inc sees this as one small step towards bitcoin becoming the next major “system resource’ for computing such that computers will soon send and receive money as part of the native operating system. Without trying to sound too excited here, we’re just going to say that this platform looks amazing.
A Place to Buy and Store Cryptocurrency
Founded in 2012, San Francisco startup Coinbase has taken in $117.21 million in funding so far to develop an online platform that allows transactions to take place between merchants, consumers and traders using digital currency. We opened an account on the platform and it was both intuitive and painless.
Of course, you’re never supposed to tell anyone where you store your crypto so we actually just made that whole thing up about using Coinbase. This Y Combinator graduate startup claims a huge number of backers including the New York Stock Exchange, Bank of Tokyo, Andreessen Horowitz, Draper Fisher Jurvetson, and BBVA. If you want to start buying cryptocurrencies, this is a good place to start.
Update 08/16/2018: Coinbase acquired Distributed Systems, a startup building identity standards for decentralized applications called Clear Protocol, today to develop a login system for Coinbase that users can use in signing up and connecting their crypto wallets.
Blockchain for International Currency Transfers
Founded in 2012, San Francisco startup Ripple has taken in $93.6 million in funding so far from big names like Google, Accenture, and Andreessen Horowitz, to develop a real-time payment platform that offers “instant, certain, low-cost international payments“. While most Americans probably can’t empathize with this use case, think about countries like the Philippines where Western Unions are as ubiquitous as 7-11s and money sent home by relatives working abroad tops 10% of GDP. For these types of transfers, the technology works well, but earlier this month Ripple made the statement that “blockchain is too slow for banks” and that they are a “few things wrong” with the classical blockchain model. They also own the world’s third-largest cryptocurrency (XRP) which is up over +3,977% this year.
Blockchain Picks and Shovels
Founded in 2012, San Francisco startup BitFury Group has taken in $90 million in funding so far to become a “large private infrastructure provider in the Blockchain ecosystem” with custom-made hardware and software. This picks and shovels play took in their last round of $30 million in January of this year from a $3 billion Chinese fintech firm that is publicly traded in Hong Kong, Credit China FinTech Holdings Ltd (HKG:8207). Just a few weeks ago, they released “enterprise-grade Blockchain software for commercial companies“. Their open-source enterprise-grade Blockchain framework can handle 3,000 transactions per second with a clearing time of 2.5 seconds. They nearly hit $100 million revenues in fiscal 2017 on a 26 percent margin.
The First Blockchain-Powered Bank
Founded in 2014, Singapore startup WB21 has taken in $79.5 million, all of which is said to come from a rich German family with the last name Gastauer. The founder and CEO, Michael Gastauer, says that this blockchain-powered bank that operates in 180 countries now has more than 1 million customers and a valuation of $2.2 billion. You won’t see them on the CB Insights unicorn list though, because none of their funding has been external so this valuation can’t be verified. An article in the Financial Times talks about fake Twitter followers and a prior track record of success that doesn’t seem to add up. Forbes pulled their “how this mogul built a $2.2 billion empire” article but you can read this article by HuffPo – which sets a new world record for the most typos you will ever see in a published article – so take it with a grain of salt. Frankly, we wouldn’t touch this thing with a ten-foot pole, but we’re risk-averse like that.
The Most Trusted Brand in Bitcoin
Founded in 2011, this London England startup has taken in $70 million in funding so far from investors that included Google and Richard Branson himself to develop the “strongest most trusted brand in Bitcoin“. Given that they managed to secure the domain www.blockchain.com, and they’ve adopted this friendly looking “IBM blue” logo, they are situated perfectly for people to just automatically associate blockchain with their company. They now have over 15 million bitcoin wallets on their platform and have conducted over 100 million transactions.
If you’re bullish on blockchain, these are some startups to watch, though you should also take note of companies like IBM (NYSE:IBM) looking to play in this space too. It’s entirely possible that we missed your incredible stealth-mode blockchain startup that raised more than $70 million before 7/27/2017 (not you Tezos or The DAO or any of your ilk, no ICOs). If that happened, drop us an email and we’ll get you squared away.
Tech stocks are volatile investments during the best of times. Here at Nanalyze, we complement our tech holdings with a dividend growth strategy that performs extremely well during recessions. Find out which 30 dividend growth stocks we're holding in our report - Quantigence - A Dividend Growth Investing Strategy - freely available to Nanalyze Premium Subscribers.