Tel Aviv-based blockchain startup Colu has raised $9.6m, a fundraising that comes amid a shift in its business model that finds it focusing on local currency issuance.
The Series A round, backed by Aleph, Spark Capital, Digital Currency Group and former Thomson Reuters CEO Tom Glocer, follows a $2.5m seed round in early 2015 that came at a time when the startup was focused on building out its underlying technology.
While Colu was formerly focused on developing colored coins technology, a top-level protocol on the bitcoin network that allows bitcoins to be augmented to represent other assets, CEO Amos Meiri said the company has now honed in on a specific use case that was the most in-demand among its users.
Meiri told CoinDesk:
“There are a lot of other use cases for colored coins, in music, in the Internet of Things, but what we saw after a while was that more than 60% of the use cases were for local currencies. This is where our market is.”
In particular, Meiri cited bitcoin startup Bitt’s use of Colu’s technology to launch a version of the Barbadian dollar on the bitcoin blockchain as a turning point in the project.
As a result of the success of this effort, Colu is now launching two similar projects in neighborhoods in Tel Aviv.
There, Colu has created local currencies on its platform that it contends are gaining traction with users and merchants, and Meiri indicated that Colu is building services for these efforts that will make its technology easier to use.
“We have the wallet and we have a control panel where the manager of the local economy can issue a distributed currency, gain access to data about the economy and manage it from one place,” he said.
The company said it will look to launch local currencies in other cities around the world, including Amsterdam and Silicon Valley.
In statements, investors suggested that this strategy would allow Colu to capitalize on trends in the “new digital economy”.
“Their scalable solution has created a way to make blockchain based currencies accessible and immediately available to the market,” Santo Politi, partner at Spark Capital, said in a statement.
Tools and services
Such a positioning may seem surprising given the recent traction shown by the alternative blockchain platform ethereum, which was developed in part to enable digital currencies to be more easily launched.
However, Meiri sought to position this project as one that wouldn’t be able to reach Colu’s target market given that it is providing tools for currency issuance “not just code”.
Meiri pointed to recent issues with the ethereum platform, including the ongoing debate about the ease with which users will be able to use the technology to create advanced smart contracts, as potential indicators that its thesis on the market is correct.
“The only blockchain you can really count on right now is the bitcoin blockchain. This is the only real solution that is working and it’s working for specific use cases,” he said.
Meiri also indicated that a combination of permissioned and public blockchains would be needed to deliver the service, which he said makes Colu a better platform for users who may want to launch local currencies.
Central bank play
The announcement also comes at a time when another set of currency issuers is beginning to demonstrate an interest in blockchain technology, national central banks.
While Meiri didn’t shy away from suggesting the project could one day scale to support even larger use cases, he said the emphasis today would be on developing its tech on a smaller scale.
“We’re not waiting for central banks. It could take three to five years,” he said.
Still, Meiri hinted that Colu has strategic partners that it is working with that could allow it to scale its local currencies from single neighborhoods to whole cities.
More immediately, Meiri said the funding will help expand the Colu team from 23 employees today to more than 30 by the end of the year as it seeks to bring its technology to more users.
“For us, the funding is all about finally bringing the technology to users.”
Disclaimer: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Colu.
Images via Colu.com