Crypto 2.0 startup Colu has raised $2.5m as part of a seed funding round with which it seeks to advance the development of the colored coins concept.
Led by VC firms Aleph and Spark Capital, contributing investors also included VC Barry Silbert’s Bitcoin Opportunity Corp and boutique angel fund Box Group. Notably, Spark Capital’s past investments include now-famous tech startups such as Foursquare, Tumblr and Twitter, as well as fashion startup Warby Parker.
Speaking to CoinDesk, Colu framed its project as one that would strive to find everyday use cases for the more advanced applications of bitcoin’s blockchain as a record-keeping tool for online identity and the Internet of Things.
For example, co-founder and CEO Amos Meiri indicated that Colu’s first application will focus on using bitcoin tokens as a form of two-factor authentication, but that the company will more broadly seek to uncover new use cases for cryptographic tokens.
Meiri further sought to position Colu as a market leader in the crypto 2.0 space owing to the status of its assembled investors, stating:
The nine-member team has been focusing on development to date, but aims to use the funds to improve its business prospects. Meiri indicated that Colu will now seek to find partner companies, while growing its team to 12 members.
Overall, investors such as Aleph's Eden Shochat expressed enthusiasm at the potential for both Colu and colored coins technology.
"If anything, the issue with colored coins is it has too many exciting opportunities, not even just a single focus," Shochat said.
The investment is also one of the first from major VC firms in foundational crypto 2.0 technology, as similar projects in the ecosystem have largely relied on bitcoin-enabled crowdfunding.
From art to ticketing
Crucial to encouraging the wider of use of colored coins, Meiri contends is that Colu’s technology appeals to developers. This means investing in creating simple APIs and software development kits (SDKs) that allow companies to tap into bitcoin’s capabilities.
Overall, Meiri framed Colu as a Chain for colored coins, comparing his startup to the bitcoin API developer that received $9.5m in a funding round this August.
In addition to a bitcoin-based social authentication alternative, Meiri said Colu is already talking with companies that are seeking to build more specific applications of the technology without the need to become experts in the specifics of bitcoin technology.
“One example is an art app that wants to issue tokens to certificate art and have it be tradeable,” Meiri explained. “We want people to use 2.0 technology without even knowing they’re using bitcoin.”
Other examples he cited included using tokens for ticketing and as access mechanisms for connected devices.
Close to market
Shochat framed his firm's investment in Colu as the first step in what has been a long discovery process, though one that he expects to bear fruit soon.
"We’ve been tracking a few teams that are doing colored coin work, but Amos’ team got us to buy into their focus on using the technology as an access layer as opposed to a generic platform," Shochat said.
While Shochat suggested that many of the more exciting opportunities colored coins and cryptographic tokens can unlock are years away, he expects initial applications to launch in the short term.
"The initial applications are very close to what we’re seeing today," he said. "It's a period of months, not years."
Shochat added that his firm is increasingly interested in 2.0 technology as it has fewer regulatory issues, though he said his firm is still interested in the financial applications of bitcoin and blockchain technology.
He went on to cite selling tokens as access to networks or as part of crowdfunding campaigns as applications in which he is personally most interested.
Putting tech first
Meiri also sought to position the funding as evidence that the concept of colored coins, while one of the oldest in the crypto 2.0 space, can still compete with newer entrants.
Like a number of projects including the more recently prominent Counterparty and Ethereum, colored coins use the bitcoin blockchain as a transfer mechanism. While projects like Counterparty or Omni have issued new coins on the bitcoin protocol to achieve this end, colored coins is a layer that augments bitcoins to signify specific assets.
Alongside Colu’s lead developer, Meiri is also a leading influence behind the recently relaunched Colored Coins foundation, a membership body representing startups experimenting with the technology including ChromaWallet, CoinPrism and CoinSpark.
Meiri said that while Colu has ambitious mainstream goals, the project’s first priority will be to ensure that the colored coins ecosystem can continue its drive toward interoperability.
“First we want to get colored coins back up on its feet. We want to have a standard for colored coins,” Meiri said.
The Colored Coins foundation expects to publish its standard in the coming months.
Images via Colu
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