Blockchain payments startup Align Commerce has raised $12.5m in Series A funding led by storied Silicon Valley investment firm Kleiner Perkins Caufield & Byers (KPCB).
Rounding out the all-star cast of investors were first-time and repeat firms including Digital Currency Group, FS Venture Capital, Pantera Capital, Recruit Ventures Partners and SVB Ventures, the investment arm of Silicon Valley Bank.
Founded by Marwan Forzley, a former Western Union general manager, Align Commerce is seeking to disrupt the small business (SMB) cross-border payments market, one it believes is characterized by high costs and poor customer experience. Prior to joining Western Union, Forzley was the founder of eBillme, a payments startup acquired by the remittance giant.
Forzley told CoinDesk:
”We believe cross-border payments are broken, and using new technology to help reduce some of that friction, that’s where we use the blockchain, that’s where we get the benefits of a global payments rail.”
With this focus, Forzley asserts the product improves over traditional wire transfers for cross-border transactions as it reduces forms and fees with its solution, alongside other benefits.
"We simplify a painful experience by allowing SMBs to enter their bank account and email address and send the money to the receiver," Forzley said. "The whole experience is fundamentally different than wire, it’s designed to dumb down the whole cycle."
The new funding, which follows an undisclosed seed round in April, will be used to expand Align's service beyond the 60 countries it serves today. Forzley declined to provide details such as the current volume transacted by the company, but suggested the funding round is proof of its success in building its business.
The funding round comes amid an overall downturn in industry investments that began in Q3 but has so far extended into Q4. At $12.5m, the Series A is the largest observed since September when Abra and Chain raised $12m and $30m, respectively.
As part of the deal, KPCB general partner Randy Komisar, a founding director of TiVo and former senior counsel for Apple will join the company’s board of directors.
Early blockchain believers
Though one of a number of firms focused on applications for bitcoin and the blockchain in payments, Align is perhaps unique in its early emphasis on the blockchain, using the language as part of its public messaging as far back as January 2015.
As noted at the time, Align’s product allows SMBs to send US dollars and for a receiver to receive euros, for example. Both end users still use traditional bank accounts, however, Align converts the sender’s funds into bitcoin, selling the digital currency at an exchange for the desired currency of the recipient.
Forzley stated that the blockchain allows Align to facilitate this process with little exposure to bitcoin's price volatility due to its number of exchange partners.
In addition, he said the blockchain allows Align to offer merchant customers other benefits, such as timely information about their money transfer.
“You can track your shipment online, but you can’t track your payment on wire. The blockchain has an elegant tracking mechanism to figure out where the payment is,” he said, adding:
“Is this new tech different from existing options? Yes, it’s cheaper, faster and more trackable.”
Disrupting correspondent banking
More specifically, Align Commerce uses its technology to replace correspondent banks in the cross-border process, which it argues results in a cheaper transaction for merchant clients.
The market positioning is similar to that of distributed payment protocol provider Ripple, which recently announced a new emphasis on the cross-border payments in October, a transition that coincided with two product launches aimed at this use case.
Forzley, however, suggested the two startups are not competing for the same customer base, despite similarities in their approach to the technology.
"Ripple is going after the banks, we’re going after the small business market," Forzley explained.
He went on to state another difference was Align Commerce’s current use of the bitcoin blockchain, though he said the firm’s technology is designed to be blockchain agnostic and could use Ripple distributed ledger if required.
"We're an application layer," he continued. "We're designed so there's an API on multiple cryptos. We can swap in and out of any cryptocurrency."
Bitcoin exchange dependency
While Align is using the bitcoin blockchain today due to its scale and liquidity, Forzley said that the startup needs to help the bitcoin ecosystem grow to supports its ambitions.
To offer its services in a certain jurisdiction, Align Commerce must be able to offload the bitcoin it sells for local currency, meaning it benefits from the availability of local bitcoin exchanges.
Forzely declined to state any specific partners, but said the bank now maintains its own bank accounts for bitcoin trading in areas with no exchange coverage.
The goal, while laudable for the ecosystem may be challenging given the current difficult climate for bitcoin exchanges, which have suffered due to the digital currency's long periods of price stability, increased competition and a pressure to lower fees in 2015.
Still, Forzley was optimistic about the coming effort. "We'll be spending more time and more effort to expand exchanges," he said, concluding:
"We think that's an important development that needs to happen in the market."
World currencies image via Shutterstock