Bitcoin innovators to launch syndicated startup investment market using coloured coins

The world's first syndicated startup investment trading platform, which will use coloured coins to record trades, will be launched by Funderbeam, the provider of data intelligence on startups, and technology developer ChromaWay.

A secure and instantaneous trading environment in this area aims to eliminate costly intermediaries and address the last big anachronism in startup investing: the absence of a fast, transparent, and liquid secondary market.

Urmas Peiker, cofounder at Funderbeam told IBTimes: "There is a lot of money available to startups. The investment cycle is heavily front-loaded, however. Once you've invested in an early-stage company, but want to sell your stake, or a sliver of it, what are your options?

"There aren't many. It's cumbersome, costly, emotional, and just feels weird - because it's not yet commonplace. Or if you've missed out on an investment round and want to join in later.

"It's time to upgrade our thinking and ask how it should all happen in the future, and then go ahead and do it."

The mechanics of the market is based around coloured coins, a way of attaching meta-data to Bitcoin; in this case investments in startups can be traded and verified using the Bitcoin blockchain.

To be clear, the underlying asset is going to be a startup and the value of colored coin derives from that investment, so fluctuation in the value of Bitcoin won't have a material effect on the price of the colored coin.

ChromaWay was among the core developers of coloured coins. Henrik Hjelte, chief executive officer of ChromaWay noted that "connecting virtual tokens to real assets has a lot of subtleties".

He told IBTimes: "While the technology is based on the Bitcoin security model, there are still details about how added protocols work that affect security, and we believe ChromaWay has the best protocol for security and taking advantage of what is really good in terms of blockchain innovation.

"Most complexities are probably on the regulatory side. Funderbeam's domain expertise here is crucial to a project like this.

"We believe that existing laws in many jurisdictions are compatible with innovative technology like this. But it takes some time and know-how to get it right and communicate with relevant authorities," said Hjelte.

In May of this year ChromaWay partnered with LHV Bank to launch Cuber, a trail-blazing payment method for mobiles using value tokens representing Euros.

"LHV Bank is an extremely forward thinking bank. They want to make a new kind of payment solution for everyday purchases, and together we partnered to do a solution called Cuber.

"It is basically an alternative to cash. Instead of being dependent on Bitcoin price fluctuations, users hold reclaimable tokens representing euros. Cuber becomes a new kind of open platform that takes advantage of the blockchain innovation and Bitcoin security.

"Like Lego tiles that enables developers to build already known, but also totally new financial services," added Hjelte.

When the Funderbeam marketplace launches, users will be able to easily create or join a syndicate, and then trade the syndicate's colored coins,

Peiker of Funderbeam added: "Creating syndicates is a natural entry point for many investors, but syndication is not our end goal. It's one component in a triple play of data, syndication, and an aftermarket. In fact, we may complement our own syndication channel by partnering with existing crowdfinancing and syndication platforms.

"We take compliance and regulatory issues very seriously and will make sure that before conducting any real market transactions we have all the necessary approvals.

"We'll start in Estonia, using the legal infrastructure we know best and where we any transactions can be put to maximum use.

"The first case will most likely be our own funding round, ensuring that everything works as intended," said Peiker.