A Look at the Mature Blockchain Startups Tackling Specific Verticals
With a flurry of blockchain startups launching seemingly everyday, we stop to look at some of the trends among projects that provide solutions to target specific verticals. We limit our scope to US companies that have raised at least $1MM (through venture or token funding) and which focus primarily on only one or two verticals.
One of the keys to understanding the usefulness of vertically-focused blockchain products is to assess whether there is a meaningful difference between a product with a blockchain versus a product with a robust database system. On one hand, you don’t particularly need a decentralized consensus in order to transact items from one side of your desk to the other. On the other hand, there’s clearly utility in such a mechanism for a public transaction network like Ethereum. But what about the applications that fall somewhere in between on this spectrum?
1. Financial use cases are the most popular. Undoubtedly, financial services use cases have seen the most attention. Blockchain startups with considerable funding in the space include many of the best known overall blockchain names, such as Digital Asset Holdings, R3, Chain, Axoni, and Symbiont, among many others. To date, the work coming from these startups has tackled assorted uses cases such as transactions of various financial instruments and B2B payments. Blockchains are especially exciting in financial services since consensus on transaction history is currently through a single (or small handful) of points: banks. Removing banks in favor of multiple points of decentralized consensus is a potentially massive and profitable disruption. Still, it is unclear whether much of the existing work in financial services requires the novel decentralization concepts that characterize blockchains.
While there is clear value in streamlining the operations and data management of our financial systems, it’s natural to think this streamlining could be achieved just by a thorough redesign of existing financial technology infrastructure. These startups are very well-funded and have published, to varying degrees, about the nuances of their platforms and the advantages that they purportedly offer. Whether or not each one of them does offer such advantages, warrants serious case-by-case scrutiny.
There are some blockchain startups that take unique approaches to the application in financial services. One that merits mention is Numerai, a hedge fund which crowdsources prediction models through data science competitions in which competitors “stake” the Numerai token in order to participate. On the whole, blockchains have both obvious and innovative applications in the financial sector, and some of the efforts in the space hold significant promise.
2. Media vertical offers creative blockchain applications. Perhaps the next most interesting set of applications comes in the media vertical. The ownership of digital content and the flow of money among users, content providers, advertisers, etc. in these ecosystems makes the media space an enticing target for blockchain projects. 2017 saw one of the earliest acquisitions in the space with Spotify’s purchase of Mediachain, a solution for connecting content and information to applications.
Among active blockchain startups, Ujo Music has received considerable attention, in part because of the involvement of British artist Imogen Heap. Ujo has a focus on creating transparency for rights owners to collect royalties via smart contracts. The fact that Ujo exists on top of the Ethereum blockchain is a promising sign, since such applications seem suited to sit on top of other more universal smart contract platforms in the long term. Props is a project launching in December from live broadcasting service YouNow that looks to achieve a similar goal on the Ethereum network. Wemark, which has raised $1MM, is tackling digital property by starting with photo-sharing, saving photographs an alleged 75% in fees vs existing stock photography agencies. Again it’s less clear whether applications merit independent solutions, but use cases are strong.
3. Supply Chain/Logistics applications are spurred by the Internet of Things. The blockchain wave has also seen birth of many startups solving problems in supply chain management and logistics. Typically, the focus of such solutions will be on the possibilities stemming from modeling items on a blockchain. Chronicled is an example of one such company, with $9MM in venture funding and an initial focus on collectible shoes. Provenance and Skuchain are two players with serious funding that have begun with a very general supply chain focus. The efforts are not as developed as those in other sectors, but could bear great fruits for a startup that manages to effectively integrate with IoT.
4. Healthcare is overdue for overhaul. Healthcare is also a popular space for blockchain applications. Much of the excitement revolves around electronic medical records (EMR) and the much-maligned digital infrastructure currently in place. HIPAA (Health Insurance Portability and Accountability Act) compliance is another key consideration in the healthcare space. Patientory is a startup with $7.2MM in token funding built on the Ethereum blockchain. Taking a slightly different approach, YouBase tackles the EMR problem with an emphasis on patient data portability. PokitDok, a startup which has seen success in offering traditional APIs for ERM, recently launched the Dokchain project with Intel, complete with a unique private distributed ledger protocol. Finally, Tierion is a general purpose blockchain solution for tracking data and business processes with an early focus on healthcare data applications in conjunction with Philips’ Blockchain Lab.
It appears broadly that the excitement in healthcare stems from an excitement over clean and transparent data management rather than transactions that would benefit dramatically from cryptographic protocols.
This summary highlights promising efforts at the surface of the increasingly rich universe of young companies applying blockchain solutions. It is unclear what form blockchain solutions will take in the long-term, and whether any of these private solutions will attain relevance. There are many obstacles to the success of private and domain-specific blockchain solutions. In a world where Ethereum or some other general purpose blockchain platform achieves wider spread adoption, there may be no utility in these domain-specific solutions. It’s also clear that many of the existing solutions need to do more to prove the usefulness of blockchains in their specific applications. Nevertheless, with innovators asking questions like, “Can blockchain replace US Social Security numbers?”, “Will banks that fail to adopt blockchain technology cease to exist?” and “Is it possible that blockchain-enabled technology will tell me exactly where the food on my table came from?”, it’s clear that there are intriguing questions on the rise for blockchains.
If you liked “A Look at the Mature Blockchain Startups Tackling Specific Verticals” and want to read more content from the Bowery Capital Team, check out other relevant posts from the Bowery Capital Blog. Special thanks to Arjun Dhillon for helping contribute to this post!