By Anna Irrera for Financial news
Singapore-based venture capital firm Life.Sreda has joined forces with fintech expert Chris Skinner to launch a venture fund that will invest in blockchain startups.
The Banking on Blockchain Fund is seeking to raise $50 million from banks by the end of the year, and hopes to reach $100 million in 2017.
Life.Sreda has invested $5 million in the fund which hopes to announce its first bank backer by the summer.
The fund aims to help midsize banks and other financial institutions make sense of the increasingly crowded blockchain market, said Skinner.
But “all banks are trying to get to grips with blockchain”, said Skinner, the chief executive of the new fund.
“We will also provide the banks with research outputs and consulting based on the knowledge gathered from the firms we invest in.”
Skinner, a technology, infrastructure and post-trade services veteran of more than 30 years, founded European networking group the Financial Services Club. Since 2002, he has worked as an independent consultant, advising banks including UBS and Lloyds on technological and regulatory issues.
David Brear, a former director of digital banking and IT research at advisory firm Gartner, will be a lead partner in the fund. Brear announced in April he was teaming up with Jason Bates, a co-founder of UK digital challenger bank Mondo, to launch a fintech consultancy which he said would be involved with a blockchain fund.
Thomas Labenbacher, a former executive at German digital bank Fidor Bank, will be managing director of the fund.
The fund comes as the banking sector intensifies efforts to develop blockchain-based technologies in the hope that it can drive down costs and simplify back-office processes.
Blockchain, which first rose to prominence as the technology underpinning digital currency bitcoin, is a distributed ledger of transactions maintained by a network of computers across the internet. The technology could be adapted and used to keep track of financial assets, potentially reducing clearing and settlement times to seconds, rather than days.
Despite the recent wave of excitement around blockchain, the technology is still in its early days, and some well-known fintech investors have shied away from backing startups. They complain valuations are too high and say the muddled landscape makes it unclear where the money-making opportunities lie.
Skinner said: “The blockchain dialogue is pretty complicated. In financial services, there are five main areas of early use cases: smart contracts; digital identity; clearing and settlement; asset tracking; and supply chain finance and payments. There are at least 10 or 12 interesting companies in each of those high priority areas.”
This makes it complicated for banks to decide where to invest, he said.
Fintech investor Life.Sreda was originally based in Russia and has stakes in Fidor Bank, US mobile banking app Moven, digital bank Simple and mobile point-of-sale startup SumUp. The venture capital firm is also a strategic partner of London-based fintech investment and advisory Anthemis Group.
First appeared at FN