Enterprise blockchain startup Symbiont has closed a $20 million Series-B funding round led by Nasdaq Ventures with participation from Galaxy Digital, Citi, Raptor Group and others.
The firm, which has kept a fairly low profile the last two years as the cryptocurrency market’s gyrations overshadowed the enterprise sector, previously raised a combined $15.4 million from a seed round in 2014 and Series A in 2017.
“We have been very good stewards of capital for the six years we have been in business. I think we have done more with less than anybody out there,” Smith said. “So it was time for us to do a bigger round and adding the Nasdaq as an investor and partner, and Citi as an investor and partner, really solidifies our strategy.”
As part of the investment, Nasdaq Financial Framework, a software company owned by the exchange, will integrate Symbiont’s Assembly smart contracts platform to explore new avenues involving tokenization.
Smith, a veteran of the early days of financial market matching engines, explained there has been a big movement towards combining blockchain with traditional exchange technology.
“Symbiont will give Nasdaq the ability to originate a financial instrument and the smart contract to custody it on a blockchain, to allow trading to occur with their matching engine, to allow surveillance to occur across the network using Nasdaq technology and then to perform settlement on a blockchain,” he said.
To be clear, Symbiont is not working with the Nasdaq proper, just the software arm, which sells tech to other exchanges, clearing houses and central securities depositories in about 50 countries.
As Smith put it:
“We are infrastructure people: dirt under the fingernails, digging the ditches, laying the roads.”
Win some, lose some
Indeed, Symbiont has kept a firm focus on building capital markets infrastructure using a proprietary blockchain and smart contracts architecture.
The startup has lasered in on a handful of carefully selected use cases and partners, such as index data management with investment giant Vanguard; making the mortgage market transparent and more efficient with Wall Street legend Lewis Ranieri; and optimizing the syndicated loans market with Ipreo’s Synaps platform.
However, not all its partnerships panned out. For instance, Symbiont dedicated a lot of time and effort between 2015 and 2017 helping create a blockchain technology-enabled regulatory environment in the state of Delaware, creating rules for share registry and the ability to create a whole new class of securities.
All that work, done free of charge, came to naught for Symbiont when Governor Jack Markell’s term ended, according to Smith.
“The new administration came in with less fanfare about the use of the technology and a very conservative approach,” he said. “Instead of moving forward, they took a big step back and decided to defend the incumbents against what they considered disruptive tech, then reached out to IBM and spent over $1 million replicating the exact road map we gave the state.” (The precise amount of the single-bid contract was $738,000, according to the Delaware News Journal.)
Another wrench was thrown into the works last August, when Symbiont’s partner on syndicated loans, Ipreo, was acquired by IHS Markit, which has worked with ethereum-based Quorum (developed by JPMorgan) on this use case.
Smith could not say too much about this but hinted that Symbiont’s new big-bank investor would go to bat for it on the syndicated loan front. “Certainly with Citi now in our cap table we can see how this is going to move forward,” he said. (Citi was the world’s third-largest underwriter of syndicated loans last year, running $271 billion of transactions, according to Thomson Reuters data.)
It’s common these days to view the enterprise blockchain world as consisting of Hyperedger, R3, Digital Asset and enterprise ethereum variants. Symbiont has been around for as long as any of these forks, consortiums or other proprietary solutions, and Smith is never shy about sharing his opinion of them.
“I would argue that we are the only enterprise blockchain solution,” he said. The others, he contended, either aren’t really blockchains or have privacy and security shortcomings or haven’t produced anything beyond ideas.
On the subject of corralling together large consortiums, Smith believes innovation always comes from individuals and small teams that are able to iterate quickly and nimbly.
“I think what you get in consortiums is just compromise. You end up with average tech, nothing revolutionary – sometimes barely evolutionary. Creating a back office as a service with a shared ledger is not revolutionary. That’s what a consortium will get you,” Smith said.
So what does Symbiont have to show for its work? Smith said several of its projects will enter production in 2019, starting with the Vanguard collaboration, which uses corporate action data to manage the asset manager’s passive indices. Syndicated loans and mortgages will follow.
As far as the sustained bear market for crypto assets is concerned, Smith said from day one his firm had stayed away from those sorts of “shenanigans.”
“We kept our head down and focused on what we always believed would be the marketplace, which is a regulated marketplace,” he said.
Of course, he is very sad to hear of people losing their jobs and said it was unfortunate that many people lost a lot of money. But overall, Smith said he is glad to be out of the hype cycle, concluding,
“We are in the trough of disillusionment and I am extremely excited.”