Many people believe the success of bitcoin and blockchain technology is “inevitable”, and banks are now starting to come round to this point of view, according to TechStars managing director Jenny Fielding.
Speaking inside the firm’s FinTech accelerator in New York, which is run in partnership with Barclays, Fielding told CoinDesk banks are “ramping up” their engagement with the blockchain ecosystem.
“I can’t speak for them … but it seems like there is more of a willingness to embrace what a lot of the rest of us feel is inevitable,” she said.
Barclays, recently named as one of nine banks working to develop a set of common blockchain standards, is increasingly vocal in its support of the nascent technology.
Having launched the accelerator scheme with TechStars in London at the end of 2013, this summer it signed a proof-of-concept with bitcoin exchange Safello and announced it would explore opportunities with another blockchain company, diamond tracker Everledger.
While banks are becoming increasingly comfortable with bitcoin and blockchain technology, Fielding said TechStars was relatively unique in its sector, with a “wait-and-see” nervousness still common among smaller investment funds.
“It’s not in their DNA. If you haven’t built something on the blockchain you can learn about it and decide to invest in it, but it’s a different investment thesis than ‘I know how to build a business like this’.”
For this reason, funds are loathe to take a risk in an area they aren’t familiar with, she said. However, this could change in as little as three years’ time when the current crop of blockchain entrepreneurs is able to invest and advise.
With less than three weeks remaining in the New York cohort, which kicked off in July, Fielding – herself an ex-JP Morgan VP – hinted there would be a number of “significant partnerships” announced at the upcoming demo day on 13th October.
As with many of TechStars’ 17 programmes – which have been run on behalf of brands such as Nike and Disney – the firm is retaining 6% equity as common stock in each of its startups. Barclays, on the other hand, is providing non-monetary support for the 11 companies involved, including access to its data and the top minds in its business units.
For this reason, the 13-week programme presents a unique opportunity for these companies, including its two blockchain startups, Fielding said.
“[Outside the programme], it would take them three times the amount of time to get to the right people. Here, they are fast-tracked to the decision makers who are there to roll up their sleeves and help out.”
This also extends beyond Barclays and into TechStars’ wider financial network, with the managing director adding: “We want them to be working with every bank.”
A leg up
One of the two blockchain companies in the cohort, compliance firm Chainalysis, told CoinDesk the programme had given it exposure to a new market and the knowledge of experienced banking professionals.
“The US is our biggest market, coming here with the infrastructure Techstars gives you is a major leg up on coming here alone,” Jonathan Levin, of Chainalysis, said.
“The banks see financial crime on a daily basis. They understand better than the public commentators how realistic it is to catch 100% of financial crime,” he added.
Besides compliance and cyber security, Chris Adelsbach, a managing director at TechStars London, said the firm – which is taking applications for its next London cohort – is curious about fields including biometrics, mobile money and anything that can bring automation to banking.
“I don’t think a month goes by where we [don’t] learn about another innovative use of blockchain within FinTech,” he said, adding:
“At this stage of development, it’s somewhat about the idea or business, but it is everything about the people … people who want to change the fabric of financial services.”