Napster Founder's IoT Startup to Go Crypto With $15 Million Series C

Helium, an internet-of-things startup founded in 2013, is adding crypto tokens to its business model with the backing of two major funders.

AccessTimeIconJun 12, 2019 at 4:00 p.m. UTC
Updated Sep 13, 2021 at 9:18 a.m. UTC

An internet-of-things (IoT) startup founded in 2013 is adding tokens to its business model with the backing of two of crypto's best-known funders.

announced Wednesday a $15 million Series C co-led by Union Square Ventures and Multicoin Capital. Investors will acquire equity in Helium as well as a share of the tokens that will accrue to the company over the next several years as they are minted, after its bespoke blockchain goes live, according to a spokesperson.

Previous investors that participated in the latest round included Khosla Ventures, GV (formerly Google Ventures), FirstMark Capital and German reinsurance giant Munich Re. The new round brings Helium's total funding so far to just under $54 million.

Helium was founded to create a low-cost data network that IoT devices could access using consumer WiFi as its backend. The company sees current ways of getting IoT data back to firms that need it as too expensive. By driving down those costs, Helium says its network could challenge traditional telecommunications infrastructure.

But the company has come to see tokens as a necessary ingredient for spurring adoption.

"When we started the business in 2013, the goal was always to try to build this big broad network that everybody could use," Helium CEO and founder Amir Haleem told CoinDesk, adding:

"We arrived at this conclusion a few years ago that crypto was the best model for what we've been building."

Last year, Helium released a white paper for a decentralized wireless network that uses publicly available radio frequency to solve the last-mile problem of connecting IoT devices and the public internet.

Haleem founded the company alongside peer-to-peer pioneer Shawn Fanning (of Napster fame, also an investor in Uber and Square) and Chris Bruce (who sold an IoT company called Sproutling to Mattel).

The company sells its Helium Hotspot for $495. The device connects to users' existing home WiFi networks and serves as a hub for IoT devices in the area to feed data back to Helium's databases. By using low-power radio waves, the device provides a low-cost way to feed small amounts of data back to a central database.

Several initial partners will be using the product. Lime, the e-bike and scooter company, will use it for tracking its devices, Agulus will use it to collect agricultural sensor data and Nestlé will use it to track inventory in vending machines.

According to telecommunications giant Ericsson, there are over 1 billion connected devices in the world as of 2018, with that number projected to quadruple in less than a decade. Most of these connected devices rely on the lowest-level cellular connection, 2G.

“Everyday things that we use shouldn’t need cellular plans,” Haleem said in a press release.

For Multicoin, it's the Austin-based venture firm's largest investment to date. Tushar Jain, a Multicoin co-founder, told CoinDesk:

"I think Helium is the most ambitious and interesting vision I've seen in the blockchain space since ethereum itself."

Token model

The Helium blockchain actually has two tokens: helium and data credits.

Data credits are only earned by burning helium. Once created, data credits can never leave the wallet that created them, except to be spent on the Helium network for transferring data. The cost of sending a data packet will always be the same in data credit terms, according to Haleem.

Helium hotspots mine helium tokens in various ways, such as by performing operations that secure the network and also by providing useful services. These operations include: proving that nodes are all located where they claim to be, proving the sequence in which data is transferred and proving the location of devices using it.

Helium also uses a structure similar to delegated proof-of-stake (DPoS), called "Proof-of-Coverage," where the nodes proven to be the most reliable over time verify blocks and earn some portion of inflation for doing so. Helium declined to estimate how long it might take for a hotspot owner to recoup the cost of a hotspot.

There's no pre-mine and no supply cap on helium, according to the company. For the first several years, a diminishing piece of the monthly supply will go to Helium as the "founder's reward," and the company can use some portion of this as a supply for its first customers. The portion starts at 10 percent and diminishes annually.

Some 50,000 new tokens are minted every month but in order to use the network helium also has to be burned – so the supply will continuously be contracted, provided it has users. Haleem foresees a future where, when the network is mature, it should reach something like an equilibrium state where tokens are burned each month at roughly the point they are created.

"The usage of the network is what creates the economics," Haleem said.


How it works

To join the network, a user needs to buy the Helium Hotspot, which is on sale now.

"We have limited quantity of these things going on sale," Haleem said. "If you're an early participant in the network, your rewards are outsized."

The hotspot connects to a user's wireless router. It then sends and receives data from IoT devices in the area. Each hotspot has a considerably greater range than a WiFi node, but the tradeoff is that it can't carry as much data. That's fine, though, for devices that just need to send small packets of data occasionally.

The company estimates that 50 to 100 hotspots can cover an entire city. Helium says it has good coverage on a current beta test in San Francisco with around 10.

As explained in the Helium white paper, the network operates in the unlicensed sub-gigahertz spectrum. The basic technology to send and receive this kind of signal is well-established and mature, with multiple vendors providing compatible equipment.

All communications use public key encryption. Helium's protocol is purpose-built for its use case. All transactions occur on-chain and settle quickly thanks to its Proof-of-Coverage architecture. There's no smart contracting language to create additional chaos on the network.


The fight ahead

Asked if Multicoin would also be buying any hotspots, Jain said, "Let's just say: Austin is covered."

He went further, adding:

"The thing that I'm really excited about here is the connectivity being permissionless. You don't need to create an account with anyone."

If an IoT device is associated with a helium wallet, it can use the network anywhere it exists in the world, which Jain pointed out makes hardware creation much easier than the status quo, where different products have to be designed for different telcos everywhere a company wants to use them.

In fact, Haleem very much sees his company as taking aim at the telecommunications giants. Once it proves out the IoT use case, Helium wants to pursue others.

"This is like a blueprint for how you might deploy an LTE network or a 5G deployment," he said. "You providing your neighbor with 5G makes more sense than the telcos doing it."

Helium is not alone in this market, however.

Telecommunications giants have their Narrowband IoT products, for example.

France's Sigfox is arguably the best-known startup for IoT devices with low data demand. It's raised €277 million, according to CrunchBase, and similarly relies on public radio spectrum. Open Garden also allows users to share their internet access with neighbors in exchange for small, automated payments.

Helium sees a competitive advantage in its architecture, however, allowing the market to determine where to deploy and permitting users to send data with per-packet pricing, as needed.

Haleem said:

"We view our pricing model as something like 1,000 times better than what the cell companies are offering."

Helium Hotspot photo via Helium


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