Nasdaq Leads $20 Million Investment In Enterprise Blockchain Startup Symbiont
Nasdaq today made its largest investment in enterprise blockchain, leading a $20 million Series B in Symbiont, a startup working to bring new kinds of assets that are custodied by blockchain to mainstream adoption.
The investment, which also includes Citi Ventures, Galaxy Digital, and Raptor Group, marks the latest escalation in an arms race among traditional exchanges looking to capitalize on the technology that was once thought of as an existential threat.
Instead of being disintermediated by blockchain technology, which like bitcoin offers the potential for counterparties to move value without a trusted third party, exchanges like Nasdaq and others are partnering with those companies to study the technology and, increasingly, to use it.
As part of today’s investment, Nasdaq is also announcing a commercial integration that could see the company, which runs 26 exchanges for equities, options, bonds, derivatives and commodities in the United States, Scandinavia, the Baltic region, Armenia, and others, expand into new areas.
“We see this huge opportunity to be able to go all over the globe with Nasdaq,” said Symbiont cofounder and CEO Mark Smith. “And use this marketplace solution from origination to finality, including ways you can buy and transact new types of instruments backed by our smart-contract technology.”
The Series B investment brings the total amount raised by Symbiont to $36 million, with previous investors including Fenbushi Capital and Medici Ventures, Overstock.com’s blockchain investment arm. This is the first time investing in Symbiont for each of the Series B investors. The terms of the investment are not being disclosed.
The investment comes at a time when leading cryptocurrency startups are cutting back on staff after last year’s catastrophic drop in prices. Smith says most of the money will be spent to move out of the WeWork offices in front of the famous Wall Street bull statue that have served as the company’s home for the past five years, and to hire new blockchain engineers. Symbiont has grown quickly recently, doubling its staff to 30 employees in 2017 and doubling aging in 2018. While Smith doesn’t expect that rate of growth to continue, he says most of the recent investment will be spent on new hires.
“The overwhelming place we’ll be spending that money is continuing to grow our team,” he added.
Unlike public blockchains such as bitcoin and ethereum that anyone can build on, and permissioned blockchains developed by IBM, R3 and others and given away to the open source community, Symbiont’s blockchain and smart-contract solution, Assembly, was built for permissioned use from the beginning.
Assembly lets users originate and issue traditional securities, what Smith calls “smart instruments,” and acts as the sole custodian of the assets. By integrating with the Nasdaq Financial Framework (NFF) for building financial applications, Smith says, Assembly will help the exchange streamline the process for finding, executing and settling liquidity.
Startups and larger clients of Nasdaq—and Symbiont’s other partners—can then use Assembly to build solutions for a wide range of marketplaces, including tokenized ownership of real-estate and artwork, both of which would be new lines of business for Nasdaq. Importantly, the commercial integration between Symbiont’s Assembly and NFF is not exclusive. Both companies are free to work with competitors.
Symbiont’s existing customers include investing management giant Vanguard, financial data provider Ipreo, purchased by IHS Markit in 2018, and Ranieri Solutions, run by Lewis Ranieri, an early proponent of mortgage-backed securities. Symbiont also played a pivotal role in helping the state of Delaware pass a number of new measures designed to give companies confidence that shares they issue on a blockchain will be legally recognized.
While Delaware’s new administration has largely pivoted from its original plan and is now working with IBM on an alternative, Smith revealed today that former Delaware governor Jack Markell now serves on Symbiont’s board of directors. “The new administration took a wait-and-see approach,” said Smith, alluding to the potential impact blockchain could have on Delaware’s existing business model. “They wanted to see how it would affect their constituents.”
Nasdaq and Citi had already invested in blockchain startup Chain, a potential Symbiont competitor that was acquired by the Stellar Development Foundation, the organization behind the Lumen (XLM) cryptocurrency, currently valued at $2 billion. In turn, Chain helped Nasdaq and Citi build Linq, an early end-to-end solution for instantly settling private securities, first tested in 2015. Other Nasdaq blockchain investments include Paris-based Stratumn, which builds enterprise blockchain applications, and CFTC-regulation cryptocurrency trading platform, ErisX, which recently added ethereum cofounder Joe Lubin to its board of directors.
Showing a possible path forward for Nasdaq, which has 3,400 companies listed on its exchanges, one of its biggest competitors, the Intercontinental Exchange (ICE), recently announced it was opening its own cryptocurrency exchange, Bakkt, later this month, after making its own batch of exploratory blockchain investments.
“We are committed to discovering and investing in innovative technologies to help build our future market infrastructure,” said Gary Offner, head of Nasdaq Ventures, in a statement. “We are pleased to support this important, growing area for creating unique institutional applications of blockchain technology.”