Why we invested in Centrifuge - and a short love-letter to crypto in Berlin

Published on
March 7, 2018
Toby Coppel
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Why we invested in Centrifuge - and a short love-letter to crypto in Berlin

Here at Mosaic, we have long been big believers in the power of decentralised infrastructure and applications, demonstrated by our past investments in Blockchain, Blockstream and Multichain. In parallel, we have been looking at the problems that financial supply chains cause companies, both large and small. In Centrifuge, it feels like we've found exactly the startup and founding team that we've been looking for.

Centrifuge's experienced founders are building an open, decentralised operating system that aims to unlock closed, proprietary financial supply chains. This will enable commerce that is more open, connected and data-rich. Centrifuge has the potential to reinvent how companies transact, collaborate, exchange and pay. We are excited to lead the first investment round into the company together with our friends at BlueYard.

The team behind Centrifuge has an incredibly impressive history of solving a related real business problem. The three co-founders - Maex Ament, Martin Quensel, and Philip Stehlik - have built several companies together, the latest being supply-chain-financing solution provider Taulia, which transacts with over 1.5 million suppliers from 164 countries and has provided over $100 billion of liquidity and early payments to SMBs. To fund that endeavour, over 8 years they raised $150 million from top tier VCs, so are experienced "repeat founders". We are very pleased to partner with them on this new journey.

Supply-chain finance has always been of interest to Mosaic - we are attracted to the model of aggregating existing networks of suppliers through partnering with large purchasers and business networks. Yet problems exist: large enterprises struggle with the cost to on-board and validate new business partners; transacting parties do not own or control their own data; and third parties - such as funders or insurers - find it difficult to participate due to the lack of transparency.

With Centrifuge's operating system, there will be a multitude of benefits including:

1) Easier access to funding for small suppliers from a marketplace of lenders enabled by the sharing of authenticated data across the network

2) Smart contracts that could allow payments to be triggered automatically after an order has been fulfilled, removing the need for invoices

3) Payment volume could be reduced and eliminated through a global business graph of transactions

4) Large purchasers could de-risk their supply chains through financing being available to every tier of the chain. For the crypto-geeks, their OS could even enable a supply chain to be organised as a DAO (decentralised autonomous organization)

It's worth noting the significance of Centrifuge's home-town, Berlin. The city is fast becoming a crypto hub, not just for Europe, but with global impact and ambition. The city has long been a petri-dish for experimentation in cryptocurrency, blockchain and open-banking. As early as 2012, payments were being accepted in bitcoin in record stores and cafes in edgy Kreuzberg. This fanatical early-adoption spawned a grassroots community of blockchain developers, and now a number of leading blockchain companies have significant developer teams in Berlin, including Parity, Gnosis and Consensys.

In addition, the German regulatory authority has been particularly active, engaged and permissive. BaFin published guidelines pertaining to cryptocurrency in 2013, and ruled very early on that companies didn't need a licence to transact in bitcoin or alternative currencies, which removed a huge potential growth obstacle. Since then, BaFin has been quick to produce guidance on emerging crypto trends: everything from guidelines on ICOs to requirements for exchanges.

Together, the blockchain groundswell and legislative encouragement have nurtured a thriving crypto ecosystem. Centrifuge, who are enthusiastically hiring world-class engineers in Berlin, will surely benefit from the deep, knowledgeable and passionate talent pool of developers that the city now plays host to.

Lastly, it is great to invest alongside BlueYard, whom we introduced to the company. Not many early stage funds have launched in Europe over the last few years - BlueYard and Mosaic are two of them. We are big fans of both their team and their thematic approach to investing, and we share their enthusiasm for the decentralised Internet. They, like us, exist to back very ambitious companies. With this in mind, Centrifuge was the perfect company to seed together.

We are looking forward to working with Maex, Martin and Philip.