Nasdaq, Citi Invest in $20 Million Fund Raise for Smart Contracts

January 23, 2019

By Tanaya Macheel

Symbiont, a smart contracts platform for institutional applications of blockchain technology, has raised $20 million in a Series B funding round led by Nasdaq Ventures and joined by new investors Citi.

Smart contracts ー agreements in which some or all of the terms are automatically enforced by software, theoretically reducing the need for court ー are just one of blockchain technology's potential use cases, which institutions in finance and beyond have been investigating for the last five years.

The company plans to use the funds to accelerate its efforts in data management, mortgages, private equity, syndicated loans, and other verticals. Nasdaq, whose venture arm led the round, also plans to use Symbiont's enterprise blockchain and smart contract platform to reap the benefits of a shared database without relinquishing control of data or direct client relationships. Symbiont has also partnered with investing giant Vanguard to simplify the index data sharing process using its technology; Lewis Ranieri, an ex-Salomon Brothers bond trader who pioneered mortgage-backed securities, to make the mortgage market transparent and more efficient; and Ipreo’s Synaps to improve the syndicated loans market.

Unlike some of its peers, Symbiont’s focus has been on newly originated assets, rather than the tokenizing of pre-existing assets, and the ability to store user data anonymously on a blockchain without sacrificing institution-level speed. Similar products tend to store information “off-chain” somewhere, reducing blockchain’s database capability to a timestamping mechanism and requiring that multiple parties communicate over multiple channels to access that information.

"We’re not believers in tokenization," Mark Smith, CEO and co-founder told Cheddar – something that took the crypto and blockchain worlds by storm last year.

"A token represents something else that is real, so if you’re tokenizing something you're introducing an extra layer of complexity, an extra layer of systems. You’re not removing the systems because the thing you tokenize still needs to remain in the traditional system," he said.

Symbiont has been deliberately quiet for the last two years. It had worked with the state of Delaware, where more than two-thirds of Fortune 500 companies are incorporated, to integrate its records onto blockchain ledgers. In 2017, Delaware passed a law enabling corporations to use blockchains for record-keeping purposes and to keep track of stock transactions. But little has been seen or heard from Symbiont since.

The funding comes at a time when many in the industry are questioning the long-term viability of blockchain as database technology for large enterprises ー and if old-school databases might just be sufficient, after all.

“The demise of enterprise blockchain has been greatly exaggerated,” Smith said, quoting Mark Twain's quip about his own death reports. "We were very excited when things turned and went into a trough of disillusionment" – the third phase of the Gartner Hype Cycle in which interest wanes as experiments fail to deliver.

"That’s where a lot of work gets done. We were able to avoid a lot of the hype that went on to the ICO world. We avoided that bubble that happened and we put our heads down and focused on delivering."

Forrester Research estimated last year that 90 percent of enterprise blockchain experiments would never come to life or find any meaningful place in company operations. Many companies that were quick to announce internal blockchain proofs of concept realized over the last year that these tests were slower, more expensive, and more cumbersome than they had expected.

“It was because they tokenized rather than creating native instruments," Smith said. "Things that are naturally over the counter and peer-to-peer lend themselves perfectly to this technology" – like syndicated lending, private equity and asset backed securities. "Things that need low latency, high speed, focus or centralization... should be in a traditional, well-maintained centralized database."

Symbiont was founded in 2013 and has raised about $15.4 million to date to build its private blockchain solutions, including an undisclosed amount from Overstock’s Medici Ventures as well as the Jack Ma-backed tech firm Hundsun.

For full interview click here.